2018 (6) TMI 752 - AT - Income Tax

TDS u/s 194C - non deduction of tds on C&F transportation charges - addition u/s. 40(a)(ia) - Held that - the amount in question is a reimbursement on principal to principal basis as per assessee s profit and loss account - the same has also gone unrebutted from Revenue s side during the course of hearing wherein it has failed to dispute that assessee had first paid the dealers concerned followed by its reimbursement from the concerned principal - thus revenue s ground is declined - Decided in favor of assessee. Section 40(a)(ia) disallowance pertaining to secondary freight charges - Held that - Both learned representatives are very fair in informing us the issue is covered by our discussion in preceding assessment year upholding the CIT(A) similar findings. We thus reject Revenue s instant latter appeal as well.

Summary

Issues Involved:
1. Disallowance of C&F transportation charges for non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act, 1961.
2. Disallowance of secondary freight charges for non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Disallowance of C&F transportation charges for non-deduction of TDS under Section 40(a)(ia)
The Revenue sought to revive the Assessing Officer's (AO) action of disallowing ?64,84,134/- on account of C&F transportation charges due to non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act, 1961. The appellant, a C&F agent for Ultratech Cement Ltd, handled cement from the railway rake point to the dealer's godown, incurring expenses reimbursed by the principal company. The AO contended that these payments were made under contractual obligations and thus attracted TDS under Section 194C. However, the appellant argued that the payments were reimbursements and not made to any contractor or sub-contractor. The CIT(A) found that the appellant was merely facilitating payments on behalf of the principal company and was not liable to deduct TDS. The Tribunal upheld this view, noting that the appellant's role was limited to facilitating payments and that the principal company had already deducted TDS on payments made to the appellant. Therefore, the disallowance of ?64,84,134/- was not upheld.

Issue 2: Disallowance of secondary freight charges for non-deduction of TDS under Section 40(a)(ia)
The AO disallowed ?95,05,125/- on account of secondary freight charges, arguing that the payments were made under contractual obligations and thus attracted TDS under Section 194C. The appellant contended that these were reimbursements for expenses initially borne by the dealers and later reimbursed by the appellant on behalf of the principal company. The CIT(A) found that the appellant's role was to facilitate payments and that the expenses were reimbursed on an actual basis by the principal company. The Tribunal upheld this view, noting that the payments were reimbursements and not made to any contractor or sub-contractor. Therefore, the disallowance of ?95,05,125/- was not upheld.

Conclusion:
The Tribunal dismissed the Revenue's appeals for both assessment years, upholding the CIT(A)'s findings that the appellant was not liable to deduct TDS on the C&F transportation charges and secondary freight charges, as these were reimbursements made on behalf of the principal company. The Tribunal emphasized that the appellant's role was limited to facilitating payments and that the principal company had already deducted TDS on payments made to the appellant.