2017 (3) TMI 949 - AT - Income Tax

Tds u/s 194A - interest for late payment to IOCL on which tax was not deducted at source - disallowance u/s 40(a)(ia) - Held that - As decided in the case of CIT vs. Krishak Bharati Co-op. Ltd.(2012 (10) TMI 655 - GUJARAT HIGH COURT ) that the transportation charges for transporting the gas by the seller to its buyer was inter alia in furtherance of contract of sale of goods and such transportation charges cannot be covered u/s 194C of the Act. It was further held that transportation charges do not depend on the consumption of quantity of gas but a fixed monthly charges to be borne by the assessee as part of the agreement between the parties and, therefore, the application of section 194C does not arise. Analyzing the facts in the light of above judgment of Hon. Jurisdictional High Court we find substance in the case relied on by the ld. counsel that such interest was not actually in the nature of interest which was paid on the loan taken but actually it is of nature of purchase cost of asphalt (bitumen) as the impugned amount has been paid in the course of making purchases. Therefore, the issue is raised in this appeal of not charging tax deducted at source u/s 194A of the Act on the interest amount of ₹ 9,00,832/- is squarely covered by the judgment of Hon. High Court in the case of CIT vs. Krishak Bharati Co-op Ltd. (supra). - Decided in favour of assessee Disallowance u/s 40A(3) - cash payment towards purchase of stamp papers - Held that - under rule 6DD(b) refers to such circumstances where the payment is made to the Government and under the rules framed by it, such payment is required to be made in legal tender. It is an admitted fact that stamp papers are issued by State Government only and they are sold through various agents appointed by the Government. We are of the confirm view that such payments for purchase of Govt. Stamp Papers is covered under the exception provided under rule 6DD(b) of the IT Rules and, therefore, no disallowance is called for u/s 40A(3) of the Act and, we therefore, allow this ground of assessee.

Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of ?9,00,832/- under Section 40(a)(ia) for non-compliance with Section 194A.
3. Addition of ?30,000/- based on estimation for transportation expenses.
4. Disallowance of ?1,36,960/- under Section 40A(3) for cash payment towards stamp papers.
5. Levy of interest under Sections 234A/B/C.
6. Initiation of penalty under Section 271(1)(c).

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was time-barred by 63 days. An affidavit from the Assistant Accountant of the assessee firm explained that the delay was due to an inadvertent mistake by the employee who forgot to pass the order to the counsel. The Tribunal, in the interest of natural justice, condoned the delay and proceeded to adjudicate the appeal on merits.

2. Disallowance of ?9,00,832/- under Section 40(a)(ia) for Non-Compliance with Section 194A:
The assessee challenged the disallowance of ?9,00,832/- for interest on late payment to IOCL, arguing that Section 194A was not applicable. The Tribunal noted that the interest was charged as late payment charges for not paying for bitumen on agreed dates, not as interest on a loan. The Tribunal relied on the jurisdictional High Court's decision in CIT vs. Krishak Bharati Co-op. Ltd., which held that such charges are part of the purchase cost and not subject to TDS under Section 194A. Consequently, the Tribunal allowed this ground of appeal.

3. Addition of ?30,000/- Based on Estimation for Transportation Expenses:
The assessee did not press this ground during the hearing due to the small amount involved. Therefore, the Tribunal dismissed this ground as not pressed.

4. Disallowance of ?1,36,960/- under Section 40A(3) for Cash Payment Towards Stamp Papers:
The assessee argued that the cash payment for stamp papers should not be disallowed under Section 40A(3) as it was a payment of duty to the government. The Tribunal observed that stamp papers are issued by the State Government and sold through agents. Payments for such government duties fall under the exception provided in Rule 6DD(b) of the IT Rules. Therefore, the Tribunal allowed this ground of appeal, holding that no disallowance was warranted under Section 40A(3).

5. Levy of Interest under Sections 234A/B/C:
This issue was not specifically addressed in the detailed analysis, implying that it was not a focal point of the Tribunal's decision. Thus, no separate adjudication was provided for this ground.

6. Initiation of Penalty under Section 271(1)(c):
Similar to the interest levy issue, this ground was not specifically adjudicated by the Tribunal, indicating it was not a primary concern in the appeal's outcome.

Conclusion:
The Tribunal partly allowed the appeal, condoning the delay, and ruled in favor of the assessee on the major issues of disallowance under Sections 40(a)(ia) and 40A(3). The minor addition based on estimation was dismissed as not pressed, and other general grounds were deemed not requiring adjudication. The order was pronounced in open court on March 16, 2017.

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