CHANDRA PRAKASH SACHDEVA,,VIJAYAWADA vs. THE CIT (A), KURNOOL

Ground Nos. 1, 5, 6, 7 and 8 are general in nature which does not require specific adjudication.

Ground No.2 is combined ground pertaining to freight inward and freight outward which is separately raised by the assessee in this appeal in Ground No.3 and 4. Since Ground No. 3 and 4 are independently adjudicated, Ground No.2 is considered not necessary to adjudicate separately.

Ground No.3 is related to the freight inward paid to the tune of Rs.6,68,954/- to M/s Gill Sandhu Cargo Movers. During the assessment proceedings, the Assessing Officer (AO) found that the assessee has paid inward freight of Rs.6,86,954/- to M/s Gill Sandhu Cargo Movers(transporter) but not deducted the tax at source. Therefore, the AO disallowed a sum of Rs.6,86,954/- u/s 40(a)(ia) of the Income Tax Act, 1961 (hereinafter called as ‘Act’).

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition made by the AO. Hence, the assessee preferred appeal before this Tribunal.

During the appeal hearing, the Ld.AR submitted that the assessee has purchased the raw materials from the suppliers and the suppliers engaged the transporter and supplied the goods through their transporter. The assessee has made the payment to transporter as per ‘to pay bill’ sent by the suppliers. Since the assessee has not engaged the transporter, there is no implied or express contract, hence argued that there is no case for deduction of tax at source u/s 194C of the Act. Thus, the Ld.AR contended that since there is no liability to deduct the tax at source, there is no question of the disallowance u/s 40(a)(ia) of the Act.

On the other hand, the Ld.DR supported the orders of the lower authorities and argued that there is implied contract and the assessee is required to deduct the tax at source. The AO has rightly made the addition u/s 40(a)(ia) of the Act, hence argued that no interference is called for in the order of the Ld.CIT(A).

We have heard both the parties and perused the material placed on record. In this case, the assessee submitted that the assessee is engaged in manufacture and trading of varieties of footwear products. The assessee has purchased the raw material from the suppliers who engaged the

Ground No.4 is related to the payment of outward freight. In this case, the assessee has paid an amount of Rs.5,62,425/- to the following transporters, but the assessee has not deducted the tax at source. S.No. Name of the Person Amount (Rs.) 1. Sri Ravi Kaleswari Lorry Service 3,27,040 2. Sri Sai Krishna Travels 91,000 3. Kesineni Travels 1,44,385 Total 5,62,425

Aggrieved by the order of the AO, the assessee carried the matter to the Tribunal. During the appeal hearing, the Ld.AR argued that the assessee has transported the goods through various transporters and the purchasers have the made the payments to the transporters, thus, there is no express or implied contract for deduction of tax at source, hence, there is no requirement for disallowance u/s 40(a)(ia) of the Act.

On the other hand, the Ld.DR supported the orders of the lower authorities.

We have heard both the parties and perused the material placed on record. In this case, the assessee has made the payments to the transporters for carrying the goods to the various destinations. For supplying the goods the assessee has to engage the services of transporters and in case the purchaser or the distributor has engaged the transporter the assessee must establish that he has not engaged the transporter. During the appeal hearing, the Ld.AR did not place any evidence to support his argument that the purchasers have engaged the transporters. The Ld.AR

In the result, appeal of the assessee is partly allowed.