2018 (2) TMI 1511 - AT - Income Tax

TDS u/s 194C - addition u/s 40(a)(ia) - payment of carriage inward charges and transport charges without deduction of tax at source - Held that - A specific contention was raised on behalf of the assessee before the Assessing Officer during the course of assessment proceedings itself that the transport charges in question were paid by the suppliers and the same were subsequently reimbursed by the assessee. The stand that there being no contract between the assessee and the concerned transporters, the provisions of section 194C were not applicable, was taken by the assessee before the Assessing Officer and the onus to rebut the same was shifted to the AO. He, however, failed to discharge the said onus and proceeded to make a disallowance under section 40(a)(ia) on the ground that the relevant freight charges were finally debited in the assessee s account. In these facts and circumstances, if the matter is restored to the file of the Assessing Officer for giving an opportunity to the Assessing Officer to rebut the stand of the assessee as sought by the ld. D.R., it will result in giving a second innings to the Assessing Officer, which is not permissible. The assessee that the transport charges were initially paid by the suppliers and the same were subsequently reimbursed by the assessee is duly supported by the relevant documentary evidence in the form of bills raised by the suppliers, wherein the transport charges are separately charged by the suppliers to the assessee. It is thus duly established by the assessee on evidence that there was no contract between him and the concerned transporters and there was no requirement of deduction of tax at source as per the provisions of section 194C. No infirmity in the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the AO u/s 40(a)(ia) on account of transport charges by holding that the provisions of section 194C are not applicable and upholding the same, we dismiss this appeal filed by the Revenue. - Decided against revenue.

Summary

Issues:
1. Disallowance of expenses under section 40(a)(ia) for non-deduction of tax at source.
2. Existence of a contractual relationship between the payer and the payee under section 194C.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) concerning the disallowance of expenses totaling &8377; 35,64,445 under section 40(a)(ia) due to non-deduction of tax at source. The assessee, engaged in wholesale trading, claimed that the provisions of section 194C were not applicable as there was no contractual relationship between the assessee and the transporters. The Assessing Officer disallowed the expenses, but the Commissioner (Appeals) deleted the disallowance. The Commissioner emphasized the necessity of a contractual relationship for section 194C to apply and shifted the burden of proof to the Assessing Officer to establish the applicability of the section. The Commissioner found that the Assessing Officer failed to prove the existence of a contractual relationship, leading to the deletion of the disallowance.

2. The Tribunal heard arguments from both sides and reviewed the material on record. The Revenue contended that the Assessing Officer should have been given the opportunity to establish a contractual relationship between the assessee and the transporters as per section 194C. However, the Tribunal rejected this contention, noting that the onus was on the Assessing Officer to disprove the claim made by the assessee regarding the absence of a contract. The Tribunal found that the assessee had provided documentary evidence showing that the transport charges were initially paid by the suppliers and later reimbursed by the assessee, indicating no direct contract with the transporters. Therefore, the Tribunal upheld the Commissioner's decision to delete the disallowance under section 40(a)(ia) based on the absence of a contractual relationship and dismissed the Revenue's appeal.

In conclusion, the Tribunal upheld the Commissioner's decision to delete the disallowance of expenses under section 40(a)(ia) due to the absence of a contractual relationship between the assessee and the transporters, as required by section 194C, thereby dismissing the Revenue's appeal.