2011 (5) TMI 990 - AT - Income Tax

Summary

Issues involved: Departmental appeal against deletion of addition u/s 40(a)(ia) of the IT Act for assessment year 2007-08.

Summary:
The departmental appeal challenged the deletion of addition of Rs. 10,47,748/- made on account of disallowance u/s 40(a)(ia) of the IT Act for not deducting tax at source from freight expenses paid to transporters. The AO observed that the assessee did not deduct any tax at source from the freight expenses paid to transporters exceeding Rs. 20,000/-. The assessee contended that there was no contract with the transporters for delivery of goods and relied on various Tribunal decisions. The learned CIT(A) accepted the contention that there was no contract between the assessee and the transporters, and the amount had already been paid, leading to the deletion of the addition.

Upon considering the submissions, it was found that there was no merit in the departmental appeal. The payments were made for building materials as well as transportation, with no oral or written contract between the assessee and the contractors. The AO's disallowance was based on the auditor's remarks without verifying the facts. The learned CIT(A) relied on Tribunal decisions to support the assessee's case. The departmental appeal was dismissed as no infirmity was found in the CIT(A)'s order.

The Cross Objection filed by the assessee was dismissed as it was merely in support of the CIT(A)'s order. Consequently, both the departmental appeal and the Cross Objection were dismissed.