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TMI Blog2014 (1) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... by admitting total income of Rs.1,14,34,299/-. The return filed by the assessee was processed under section143(1) of the Income Tax Act, 1961, and after following due process, the assessment was completed under section 143(3) of the Act by disallowing an amount of Rs.54,23,203/- under section 40(a)(ia) and Rs.5,21,493/- under section 36(1)(iii) of the Act and the total income of the assessee was assessed at Rs.1,73,78,995/-. 3. The first ground of appeal relating to disallowance under section 40a(ia) of the Act. During the course of assessment proceedings, the Assessing Officer has observed that the assessee has purchased paddy from various parties. The assessee also pays lorry freight charges for that paddy purchased. The assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He further observed that the assessee has paid all the payments in cash, the entire amount is liable to be disallowed under section 40A(3) of the Act. 5. Aggrieved, the assessee carried the matter before the CIT(Appeals). 6. It was submitted before the CIT(Appeals) that the assessee had entered into an agreement with the suppliers of paddy that the supplier has to deliver the goods at the factory premises of the assessee. As the payment in respect of the same is to be made to the lorry operator, the suppliers raised the freight wherein they mentioned the charges to be paid to the lorry operator and in the same memo, details of TDS wherever applicable were also mentioned. The ld. Counsel for the assessee, before the CIT(Appeals) submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vouchers. The TDS was deducted @ 3% which is clear from the lorry freight vouchers /letters filed by the appellant. In majority of these lorry freight vouchers, the total freight payment on each bill did not exceed Rs.20,000/-. Wherever there was liability to deduct TDS, the supplier has deducted the TDS and has asked the appellant to pay the balance amount to the lorry driver. Hence, the provisions of Section 40a(ia) was not applicable to the appellant's case. The Assessing Officer is directed to delete the addition." Being aggrieved, the Revenue preferred appeal before the Tribunal. 7. The ld. DR submitted that the assessee has not deducted the TDS on freight charges. Therefore, the Assessing Officer by invoking section 40(a)(ia) right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were reimbursed by the suppliers. It is not the case of the assessee that the assessee has not acted as an agent of the suppliers and thus submitted that the assessee is not in obligation to deduct the TDS as she has to pay only freight charges as per the agreement. The ld. CIT(Appeals) examined the details filed by the assessee and observed that the freight details submitted by the lorry operators 'hamali' is nothing but TDS. In some of the vouchers, the 'hamali' was replaced by TDS and each were written as freight vouchers and TDS was deducted at 3% and are clear from the lorry freight vouchers/letters filed by the assessee. In majority of these lorry freight vouchers, the total freight payment on each bill did not exceed Rs.20,000/- an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the sister concern was purely on commercial reasons and funds were routed through banking channel and interest paid on the borrowed capital cannot be disallowed. 13. The ld. CIT(Appeals), after considering the submissions of the assessee and observed that the assessee could establish that the advances were made out of own funds to the sister concern on commercial expediency and therefore, directed the Assessing Officer to delete the addition. On being aggrieved, the Revenue preferred appeal before the Tribunal. 14. The ld. DR strongly supported the order passed by the Assessing Officer. 15. On the other hand, the ld. Counsel for the assessee submitted that the advances were given to the sister concern only on commercial expediency. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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