Sri. B. Raghavendra, Hospet V. D.C.I.T., Bellary

ITA 665/BANG/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8549 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 29-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS; Set aside
• Section: 40(a)(ia)

Judgement Text

ITA No.665/Bang/2016 Sri B. Raghavendra, Hospete IN THE INCOME TAX APPELLATE TRIBUNAL “A’’BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA No.665/Bang/2016 AssessmentYear: 2007-08 Sri B. Raghavendra, Upstairs Srinivasa TV House Station Road Near Bus Stand Hospete PAN NO :ADGPR7911L Vs. Deputy Commissioner of Income-tax Circle-1 Ballari APPELLANT RESPONDENT Appellant by : N O N E Respondent by : Shri Sankar Ganesh K., DR Date of Hearing : 15.02.2022 Date of Pronouncement : 21.02.2022 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the order dated 27.1.2016 passed by Ld. CIT(A), Gulbarga and it relates to assessment year 2007-08. None appeared on behalf of the assessee, even though the adjournment was granted on the earlier occasion at the specific request of the counsel of the assessee. Accordingly, we proceeded to dispose of the appeal ex-parte, without presence of the assessee. ITA No.665/Bang/2016 Sri B. Raghavendra, Hospete Page 2 of 5 2. The solitary issue urged in this appeal relates to disallowance made u/s 40(a)(ia) of the Income-tax Act,1961 ['the Act' for short] in respect of freight charges paid. 3. The facts relating to the case are stated in brief. The assessee carries on different type of activities which includes trading in steel rods under the name and style “M/s. Srikant Traders”. During the year under consideration, the assessee has reported turnover of Rs.9.47 crores and shown purchases of Rs.9.09 crores. The assessee has also claimed a sum of Rs.34,63,085/- as carriage outward expenditure. The A.O. noticed that the assessee has claimed above said expenditure by debiting carriage outward account and crediting M/s. Rukmini Rama Steel Rollings Pvt. Ltd. The A.O. asked the assessee with regard to the deduction of tax at source from the freight charges so debited. The assessee explained that the selling price by the supplier included cost, freight, taxes and other duties. It was submitted that the freight was shown separately in order to avoid litigation with the excise authorities. Accordingly, it was submitted that though the freight was shown separately in the books of accounts, it forms part of cost of purchases. It was also submitted that freight charges was actually paid by M/s. Rukmini Rama Steel Rollings Pvt. Ltd. and in most of the cases, the actual freight paid by the above said company does not tally with the amount collected from the party. It was submitted that the business model of the assessee is that it places order with M/s. Rukmini Rama Steel Rollings Pvt. Ltd. and request them to supply the materials directly to its customers. Hence, the materials go directly to the customer’s place and accordingly, the freight charges are actually paid by M/s. Rukmini Rama Steel Rollings Pvt. Ltd. Accordingly, it was submitted that the above said company has taken responsibility to identify the transporter and ITA No.665/Bang/2016 Sri B. Raghavendra, Hospete Page 3 of 5 pay freight charges. Further, the selling price charged to the assessee included freight charges. Accordingly, it was submitted that there is no requirement for the assessee to deduct TDS. In support of the above said contentions, the assessee also filed a letter obtained from M/s. Rukmini Rama Steel Rollings Pvt. Ltd. stating that the prices charged by them to the assessee are inclusive of all duties and freight. 4. The A.O. however did not accept the explanations of the assessee. He took the view that the supplier is showing freight charges separately only to avoid payment of excise duty thereon. Accordingly, he took the view that the freight charges are paid by the supplier on behalf of the assessee and hence TDS would have been deducted therefrom. Since the assessee has not deducted tax at source from the freight payments, the A.O. disallowed the claim of Rs.34,63,085/- u/s 40(a)(ia) of the Act. The Ld CIT(A) also confirmed the same. 5. We heard rival contentions and perused the record. It is the submission of the assessee that selling price charged to it by M/s. Rukmini Rama Steel Rollings Pvt. Ltd. includes cost, freight, taxes and other duties. We notice that the assessee has furnished a letter from the above said company confirming the above fact. It is stated that the business model of the assessee is that order placed by the assessee is directly dispatched by the above said company to the assessee’s customer place. Accordingly, when the goods are forwarded, it is the supplier i.e. M/s. Rukmini Rama Steel Rollings Pvt. Ltd. which books the lorry and forward the goods to the customer place of the assessee. So there should not be any doubt that it is the above said company which engages the lorry and not the assessee. The question that arises is whether M/s. Rukmini ITA No.665/Bang/2016 Sri B. Raghavendra, Hospete Page 4 of 5 Rama Steel Rollings Pvt. Ltd. engages the lorry on its own account or on behalf of the assessee. The A.O. has taken the view that the lorry freight is paid on behalf of the assessee. However, M/s. Rukmini Rama Steel Rollings Pvt. Ltd. have also confirmed the submission of the assessee that the sales price charged to the assessee includes cost, freight, taxes and other duties, meaning thereby, the lorry freight is paid by M/s. Rukmini Rama Steel Rollings Pvt. Ltd. on its own account and not on behalf of the assessee. In these facts, we are of the view that it cannot be said that the liability to deduct tax at source would fall upon the assessee, merely for the reason that the assessee has disclosed freight charges separately. Accordingly, we are unable to agree with the view expressed by the Ld. CIT(A). Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete the disallowance made u/s 40(a)(ia) of the Act during the year under consideration. 6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 21 st Feb, 2022. Sd/- (N.V. Vasudevan) Vice President Sd/- (B.R. Baskaran) Accountant Member Bangalore, Dated 21 st Feb, 2022. VG/SPS ITA No.665/Bang/2016 Sri B. Raghavendra, Hospete Page 5 of 5 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.