ASST. COMMISSIONER OF INCOME TAX (TDS) - 2(1), MUMBAI vs. PA INDIA FOOD SOLUTIONS PVT. LTD., MUMBAI

Shri Jayesh L Dadia, appearing on behalf of the assessee submitted that the assessee is running a retail chain of restaurants. The assessee has been making purchases for its restaurant business from various suppliers under rate contract agreement. The assessee has been making payments of material on the basis of invoice raised by suppliers. For the impugned assessment years the Dy. Commissioner of Income Tax (TDS) [ in short ‘the DCIT(TDS)’] issued show cause notice dated 22/03/2016 under section 201(1)/201(1A) of the Act to treat the assessee as ‘assessee in default’in case the assessee failes to give break-up of transport cost and the material purchased. The assessee in reply to show cause notice explained that the assessee has arrangement/understanding with suppliers of material to deliver goods at work place of assessee. The cost of material includes cost of transportation, therefore, no separate transportation cost is paid b y the assessee . The DCIT (TDS) vide order dated 30/03/2016 passed under section 201(1)/201(1A) of the Act treated the entire cost on material as cost of transportation and computed TDS on same and held the assessee as ‘assessee in default’ under section 201(1) of the Act. The DCIT(TDS) further charged interest under section 201(1A) of the Act on the said amount. The ld.Authorized Representative of the assessee submitted that it was explained to DCIT that payments were made to suppliers as per invoice. The break-up of material supplied and the cost of transportation is not available. The cost of materials is inclusive of transportation cost. Hence, no TDS was deducted in respect of transportation cost. The assessee challenged the order of DCIT(TDS) before CIT(A). The CIT(A) after examining facts and the submissions of assessee held that no TDS was deductible as no separate transportation cost was charged.

Per contra, Shri Udol Raj Singh, representing the Department vehemently defended the order of DCIT(TDS) in holding the assessee as ‘assessee in default’ for non-deduction of tax at source on the payment of transportation charges to the suppliers of the materials. The ld.Departmental Representative submitted that the DCIT(TDS) had given opportunity to the assessee to furnish break-up of material supplied and the cost of transportation. However, the assessee failed to comply with the directions of DCIT(TDS). The ld.Departmental Representative further pointed that the DCIT(TDS) after examining rate contract agreement observed that there was specific mention that the nature of contract between the assessee and the suppliers of the material is in the nature of ‘works contract’ which includes transportation charges. The transportation charges are liable for TDS under section 194C of the Act, hence, the assessee was duty bound to deduct TDS on the payment of transportation charges. The ld.Departmental Representative vehemently defended the order passed under section 201(1) and 201(1A) of the Act and prayed for reversing the findings of the CIT(A) on this issue.

We have heard the submissions made by rival sides and have examined the orders of authorities below. The Revenue has assailed the order of CIT(A) in deleting the TDS liability on cost of transportation raised under section 201(1) and interest thereon under section 201(1A) of the Act. The assessee has been held to be deemed ‘assessee in default’ for non-deduction of TDS on cost of transportation. The assessee is running retail chain of restaurants. The assessee is receiving material from suppliers under rate contract. The invoice for supply of material does not give separate break-up of cost of transportation. The contention of the assessee is that the cost of materials supplied includes cost of transportation. The ld.Authorized Representative of the assessee has made statement at Bar that no separate transportation cost for supply of material was made and hence, no TDS was deducted for the same.

It is an undisputed fact that the invoices issued by suppliers of material does not separately mention cost on transportation of material. Since the assessee is not making any payments for the transportation of material separately, there is no question of deducting tax at source on such payments. In any case the entire cost on material cannot be considered as cost of transportation. The DCIT(TDS) has erred in treating the entire cost of material supplied as cost of transportation for the purpose of section 201(1) and 201(1A) of the Act. We see no error in the findings of CIT(A) in deleting the TDS liability fastened by the DCIT(TDS) by holding the assessee as ‘assessee in default’ for alleged violation of section 194C for non-deduction of tax at source on cost of transportation. The findings of CIT(A) on the issue are upheld and the appeal of Revenue is dismissed sans-merit.

In the result, the impugned order is upheld and the appeal of Revenue is dismissed. to 7309/Mum/2019 – A.Ys 2010-11 to 2015-16:

The ld.Authorized Representative of the assessee submitted that the facts in all the appeals are identical and the grounds raised by the Revenue are also identical, therefore, the submissions made in would hold good for other appeals as well.

The ld.Departmental Representative admitted that the facts and grounds of appeal in all these appeals are identical.

In the result, all seven appeals by the Revenue are dismissed.