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Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice-(KZ) & Shri S.S. Viswanethra Ravi
Per Shri P.M. Jagtap, Vice-President (KZ):- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-1, Kolkata dated 04.04.2016 and the solitary issue involved therein relates to the disallowance of Rs.7,59,836/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 40(a)(ia) of the Income Tax Act, 1961 on account of freight charges paid by the assessee allegedly for non- deduction of tax at source.
The assessee in the present case is a Company, which is engaged in the business of manufacturing of detergent powders. The return of income for the year under consideration was filed by it on 30.09.2008 declaring a loss of Rs.33,73,539/-. During the course of assessment
M/s. Jumac Detergents (P) Limited proceedings, it was found by the Assessing Officer that the assessee has paid freight charges of Rs.7,59,836/- without deducting tax at source as required by the provisions of section 194C. He, therefore, invoked the provisions of section 40(a)(ia) and made a disallowance of Rs.7,59,836/- in the assessment completed under section 143(3) vide an order dated 30.12.2010.
Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) and it was submitted on behalf of the assessee before the ld. CIT(Appeals) that the amount of freight paid was part and parcel of material cost charged by the supplier and the same being not for any work as per the contract, the provisions of section 194C were not attracted. The ld. CIT(Appeals), however, did not find merit in this contention raised on behalf of the assessee and proceeded to confirm the disallowance made by the Assessing Officer under section 40(a)(ia) holding that there was a failure on the part of the assessee to deduct tax at source from the payment of freight as required by the provisions of section 194C. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assessee has contended that the freight charges in question were paid by the assessee to the supplier of goods namely ‘Tata’ as the part of material cost charged by the said supplier. He has contended that the said freight charges thus were incurred and paid by the supplier and since the same were merely reimbursed by the assessee to the supplier, there was no requirement of deduction of tax at source under section 194C and no disallowance under section 40(a)(ia) was warranted. In support of the contention, he has relied on the decision of the Hon’ble Calcutta High Court in the case of Hightension Switchgears Private Limited –vs. CIT [385 ITR 575], wherein
M/s. Jumac Detergents (P) Limited it was held that when the supplier had made the payment of transportation charges to the Transporters and the assessee as a buyer had reimbursed the said expenses to the supplier, there was no liability on the assessee to deduct tax at source and the disallowance under section 40(a)(ia) was not attracted. The ld. D.R., on the other hand, has contended that this argument now being raised by the ld. Counsel for the assessee was not raised specifically either before the Assessing Officer or the ld. CIT(Appeals). He has contended that this matter may, therefore, be sent back to the Assessing Officer for considering and examining this new argument raised by the assessee in the light of the decision of the Hon’ble Calcutta High Court in the case of Hightension Switchgears Private Limited (supra). We find merit in this contention of the ld. D.R. and since the ld. Counsel for the assessee has also not raised any objection for sending the matter back to the Assessing Officer for verification, we set aside the impugned order of the ld. CIT(Appeals) on the issue under consideration and restore the matter to the file of the Assessing Officer for deciding the same afresh after considering the new argument specifically raised by the assessee for the first time before the Tribunal in the light of the decision of the Hon’ble Jurisdictional High Court in the case of Hightension Switchgears Private Limited (supra).
In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on March 4, 2019.