TRIMURTI POLYMERS,MUMBAI vs. ADDL CIT RG 17(3), MUMBAI

Effective ground of appeal is about confirming the addition of Rs.9.58 lakhs under section 40(a)(ia) of the Act. During the assessment proceedings, the AO found that as per the audit report for Unit number-I transport charges, amounting Rs.8.66 lakhs and professional fees of Rs.33,672/- had been credited/paid to various parties, that tax was not deducted at source, that same was not paid on or before specified dates.He further found that in case of unit – II, the assessee had not deducted taxes for transport charges or the professional charges of Rs.90,780/-and Rs.22,448/-respectively. Invoking the provisions of section 40(a)(ia),the AO disallowed the amounts of transportation charges and professional charges for both the units.

4321/M/12(06-07) M/s. Trimurti Polymers 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA).Before him, it was argued that payments were part of the reimbursement expenses incurred on behalf of the assessee, that taxes could be directed only if service charges were received, that provisions of section 40(a)(ia) were applicable for Rs.2,915/-only and not for Rs. 9.85 lakhs. It filed further details during the appellate proceedings. After considering the same, the FAA held that the tax audit report clearly mentioned that assessee had not deducted tax at source on the amount in dispute, that out of the total expenses of Rs.9.58 lakhs an amount of Rs.3.79 lakhs was on account of miscellaneous expenses, that the assessee was claiming the same under the head, hamali charges, that the total amount on account of freight charges was Rs.5.78 lakhs, that the assessee had not shown as to how it was reimbursement,that the perusal of simple bills revealed that same were not reimbursement but were freight charges, that the provisions of section 194C of the Act were applicable to the facts of the case. He finally held that the assessee had not provided details of hamali charges of Rs.3.79 lakhs, that it was supposed to deduct tax at source, that the AO had rightly made a disallowance of Rs.10.13 lakhs under section 40(a)(ia) of the Act.