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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Hon’ble Shri Waseem Ahmed & Shri K.Narasimha Chary
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:- This appeal by the revenue is against the order of Commissioner of Income Tax (Appeals)-Asansol dated 13.08.2013. Assessment was framed by D.C.I.T., Circle-3, Asansol u/s 143(3) of the Income tax Act, 1961 (hereinafter referred to as ‘the Act ‘) vide his order dated 03-11-2010 for assessment year 2008-09. The grounds raised by the revenue are as under :
ACIT.Cir.3.Asansol Vs M/s.Sukh Chain Ispat Inds.P.Ltd. 2
“1. That, the Ld. CIT(A), Asansol has erred in law and on facts by deleting the addition of Rs.44,65,966/- on A/c of non-deduction of tax at source as per provisions of Section 194C of the I.T.Act, 1961. It has been observed during the course of assessment that the payment to M/s. S.S.Raisers Pvt. Ltd. Is not directly payment made to railways (Govt.) and hence the assessee’s contention of not making TDS just because of payment-head is railway freight is not correct. As Sec.194C applies on carriage of goods/passenger by any mode of transport other than railway, assessee’s contention was not accepted in course of assessment proceedings and invoking the provisions of Section 40(a)(ia) of the I.T.Act, 1961 addition made.”
Brief facts of the case as per the record are that the assessee in the present case is a private limited company and engaged in the trading business of iron ore, coal and bricks. The assessee has filed its return of income showing total income of Rs. 21,040.00 under the head business and profession on 29/09/2008 for the year under consideration. The case was selected for scrutiny assessment under section 143(3) of the Act and accordingly notices under section 143(2) and 142(1) were duly served upon the assessee. The assessment was completed at an income of Rs. 44,87,010 by disallowing the transportation charges of Rs. 44,87,006.00.
The solitary issue raised by the Revenue is that ld. CIT(A) erred in deletion the addition made by the AO for Rs. 44,65,966.00 under section 194C of the Act on account of payment made to M/s S.S. Raisers Pvt. Ltd for railway freight without the deduction of TDS.
The assessee during the year has purchased Iron Ores from Deepak Steel & Power Ltd. which was transported from Orissa to West Bengal through railway rake. The assessee was to bear railway freight which was paid by S.S. Raiser Pvt. Ltd. The assessee subsequently reimbursed the railway freight to S.S. Raiser Pvt. Ltd. It was observed by the AO during assessment proceedings that assessee has not paid the railway freight directly but the same was paid by S.S. Raisers Pvt. Ltd. So the AO asked the explanation from assessee regarding the non deduction of TDS for the amount paid to S.S. Raisers Pvt. Ltd. It was submitted by the assessee that the amount paid to S.S. Raisers Pvt. Ltd. is in the nature of reimbursement of freight charges paid on its behalf. As the railways mode of transportation is excluded from the applicability of sec 194C the assessee has not deducted TDS from the payment paid to S.S. Raisers Pvt. Ltd. However the AO has disregarded the plea of the ACIT.Cir.3.Asansol Vs M/s.Sukh Chain Ispat Inds.P.Ltd. 3 assessee by observing that the payment has not been made directly to the railways. The middleman was managing the transportation as well as payment activity. So provision of sec 194C is applicable. The AO disallowed the expenditure amounting to Rs. 44,65,966.00 under sec 40(a)(ia) on account of payment made for transportation of goods without deduction of TDS as per sec 194C of the Act.
Aggrieved assessee preferred an appeal before ld. CIT(A). It was submitted before ld. CIT(A) that on the Railway receipts the name of the assessee i.e. Sukh Chain Ispat Pvt. Ltd is appearing and not of S.S. Raisers Pvt. Ltd. The assessee on a later date has reimbursed the amount to S.S. Raisers Pvt. Ltd. through account payee cheque. Accordingly the Ld. CIT(A) deleted the addition made by the AO by observing as under:
“I find from record and analysis of facts that the payment to M/s R.R. Raisers Pvt.Ltd.is not one attracting TDS because they had not carried out any work. They merely facilitated payment to Indian Railways on behalf of the appellant. Hence the disallowance made by Assessing Officer is not in order. Accordingly I direct the Assessing Officer to delete the addition of Rs.44,65,966/-“ Being aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. The ld. DR before us submitted that the services were rendered by S.S. Raisers Pvt. Ltd. to the assessee. Therefore there has to be some amount of profit element in the payment made by the assessee to S.S. Raisers Pvt. Ltd. which will attract the TDS provisions. The ld. DR vehemently supported the order of the AO. On the other hand the ld. AR submitted that it was purely the reimbursement of the freight charges paid to the railways on behalf of the assessee and therefore out of the purview of TDS provisions. The ld. AR supported the order of ld. CIT(A)
We have heard the rival contentions of both the parties and perused the materials and information before us on record. From the foregoing discussion we find that the assessee in the present case paid the railway freight charges to Railways through M/s S.S. Raiser Pvt. Ltd without deduction of TDS on the presumption that the provisions of section 194C of the Act are not applicable. The AO contention is that railway charges were paid by M/s S.S. Raiser Pvt. Ltd and not by the assessee, therefore TDS Provisions are applicable. Now the question before us arises so as to whether the TDS provisions are applicable in the instant case in the aforesaid facts & circumstances. At this juncture we would like to reproduce the relevant provisions of section 194 C of the Act which reads as under :
ACIT.Cir.3.Asansol Vs M/s.Sukh Chain Ispat Inds.P.Ltd. 4
“Payments to contractors. 194C. Explanation : For the purpose of this section,- (i)...................... (ii).................... (iii)................ (iv).”work “ shall include (a).............. (b)................ (c) carriage of goods or passengers by any mode of transport other than by railways; “ From the above provisions it is clear that the TDS is to be deducted for the execution of the work other than railway freight. In the case on hand we find that the middleman has paid the railway freight on behalf of the assessee which subsequently reimbursed to it. The ld. AR in support of his claim has also submitted the railway receipt where the name of the assessee was appearing. So in our considered view we find that the railway freight was paid by middleman which was subsequently reimbursed. There was no extra charge paid to M/s S.S. Raiser Pvt. Ltd. The ld. DR failed to bring anything on record that any payment was made by the assessee over and above the amount of railway freight. Therefore we find no reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of Revenue is dismissed.
In the result, revenue’s appeal stands dismissed.