2023 (9) TMI 1341 - AT - Income Tax

Additions for non deduction of TDS u/s 194C r.w.s. 40(a)(ia) - non-deduction of inward freight expenses - HELD THAT - We note that the contention of the assessee that the inward freight charges were part of purchase of materials was nowhere doubted by the authorities below. Besides the above, we have also perused copies of the invoices placed in the paper book and note that the party (supplier of the materials) has given the break-up of the gross sale bill raised to the assessee which is inter-alia comprising of purchase cost as well as transportation charges. From the invoice, it becomes crystal clear that the freight inward charges were part and parcel of the purchase of the goods. It is settled law that the provisions of the TDS cannot be attracted on the transaction of purchase and sale of the goods. Thus, in the absence of any contract between the assessee and the transporter, we hold that the assessee was not under the obligation to deduct TDS of inward freight expenses incurred under the provisions of section 194C - Accordingly, the question of making the disallowance under the provisions of section 40(a)(ia) is not warranted. Hence, we set aside the order of ld. CIT(A) and direct the Assessing Officer to delete the addition made by him. Thus, the grounds of appeal of assessee are allowed.

Issues involved: Appeal against order of CIT(A) regarding disallowance of expenses for non-deduction of TDS u/s 194C r.w.s. 40(a)(ia) of the Act for assessment year 2009-10.

Summary:
The appeal was filed by the assessee against the order of the ld. Commissioner of Income Tax, CIT(A)-10, Ahmedabad, pertaining to the disallowance of Rs. 16,15,291/- on account of non-deduction of TDS u/s 194C r.w.s. 40(a)(ia) of the Act. The assessee, engaged in trading business, had inward freight expenses added to their total income due to non-deduction of TDS. The ld. CIT(A) confirmed the Assessing Officer's decision, stating that the inward freight expenses were not part of the purchase of materials. However, the assessee contended that the freight charges were indeed part of the purchase cost, supported by invoices showing the breakdown of expenses. The ITAT Ahmedabad noted that there was no separate contract for freight charges, and as per law, TDS provisions do not apply to purchase and sale transactions. Therefore, the disallowance under section 40(a)(ia) was deemed unwarranted, and the Assessing Officer was directed to delete the addition. Grounds of appeal by the assessee were allowed.

In ground Nos. 1 to 4, the validity of assessment framed u/s 144 r.w.s. 147 of the Act was challenged by the assessee, but no arguments were presented during the hearing, leading to the dismissal of these grounds as infructuous. The issue raised in ground No. 6 was deemed premature and unnecessary for a decision at that stage, thus also dismissed as infructuous. Consequently, the appeal by the assessee was partly allowed.

*Order pronounced in the open court on 27-09-2023*

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