- (1.) The appeal is directed against a judgment and order dated 19th March, 2010 passed by the Income Tax Appellate Tribunal 'C' Bench, Kolkata in ITA No. 2053/Kol/2009 pertaining to the assessment year 2006 -07. The assessee has come up in appeal. The assessee is aggrieved by the following finding of the learned Tribunal : "We are of the considered view that the assessee was liable to deduct TDS as per Section 194C of the Act in respect of freight charges paid; and since the assessee had failed to deduct TDS in respect thereof, there is no infirmity in the order of the learned CIT(A) in confirming the action of the Assessing Officer to make the disallowance of the said amount Rs. 69,57,975 as per Section 40(a)(ia) r.w.s. 194C of the Income Tax Act, 1961."
(2.) The reasons which weighed with the learned Tribunal in arriving at the aforesaid conclusion are as follows : "On perusal of invoices/bills placed at pages 20 to 30 of the PB, there is no dispute to the fact that freight charges payable by the assessee are separately shown in the said bills/invoices. The assessee has also paid the said freight charges as per invoices to the suppliers namely, M/s. Reliance Industries Ltd., and M/s. Gulshan Sugars and Chemicals Ltd. We also observe on perusal of the said bills/invoices that the name of the transporters are also stated through which the goods have been transported to the assessee. As per Section 194C of the Act, any person responsible for paying any sum to any resident for carrying out any work i.e., inter alia carrying of goods by any mode of transport other than by railways, is required to deduct TDS at the time of payment in cash or by issue of cheques or draft or by any other mode @ 2 % of such amount as income tax on income comprising therein. We are of the considered view that the said suppliers have supplied the goods to the assessee and as far as the transport of the said goods, the goods were transported to the assessee by acting as an agent on behalf of the assessee and the assessee has reimbursed the freight charges to the suppliers, who in turn have paid to the concerned transporters. The assessee has admittedly not deducted TDS in respect of freight charges reimbursed to the suppliers of goods. During the course of hearing, the learned AR of the assessee submitted that the said suppliers have deducted TDS and referred to pages 9 to 13 of the PB to substantiate his submission. However, in this regard we consider it relevant to mention the finding of the learned CIT(A) given at pages 5 and 6 of the impugned order. 'The appellant submitted that M/s. Reliance Industries Ltd. (IPCL) had reimbursed total freight charges of Rs. 66,15,675/ - in their invoices from him and paid to the transporter M/s. Reliance Logistics Ltd. during the F.Yr. 2005 -06, after making necessary TDS deduction which have been deposited under TAN No. BRDIOO275C. I have gone through the documents furnished before me. As seen from the invoice produced before me for the months of April, 2005 and May, 2005, the transporter's name is mentioned as Delhi, Assam Roadways Corporation Ltd. and not M/s. Reliance Logistics Ltd. This was pointed out to the Ld. Authorized Representative. However, no explanation in this regard was given by him. The objective of TDS provisions is to ensure that there is proper tax compliance by the assessees. Similarly, in the case of M/s. Gulshan Sugars and Chemicals Ltd. the freight charges have been reimbursed through sale invoices to M/s. Limra Roadways. As seen from Form No. 16A filed by the appellant PAN/GIR no. of the payee Limra Roadways is not available. The details of payment made by M/s. Guishan Sugars and Chemicals Ltd. to Limra Roadways cannot be correlated to the reimbursement from the appellant. The Ld. AR also could not relate the payments. In this situation it is very difficult to accept the contention of the appellant that freight charges were paid by him to the suppliers and they deducted TDS from the payments made to Transport Contractors. The appellant cannot take a plea that he does not have the scope of deduction of tax at source. The appellant could not also provide sufficient proof, that legitimate taxes due to the State have been paid..........."
(3.) Although a number of questions were formulated on 24th December, 2010, there is consensus between the learned Advocates appearing before us that the substantial question is question no. 1 which is as follows : "Whether on a true and proper interpretation of sections 40(a)(ia) and 194C of the Income Tax Act, 1961, the Tribunal was justified in law in holding that the appellant was liable to deduct tax at source in respect of the freight component included in the suppliers' invoices for the goods and in upholding the disallowance of Rs. 69,57,975/ - under section 40(a)(ia) of the Act - Mr. Khaitan has produced before us a price list issued by Indian Petro Chemicals Corporation Limited dated 30th December, 2006 which contains the following stipulations as regards freight : i) Freight : I) For Ex -factory sales : Freight to customers' destination will be paid to the GTA on their behalf and collected in the supply invoices. II)The freight ra t e s are Exclusive of Unloading charges at Customers' end. Unloading charges at Customers' end will be extra and will have to borne by the Customers. III) For Ex -stock point sales, freight from Depot to the customers' location will be arranged and paid by the customers themselves. IV) Octroi charges or any other local levy will be borne by customers. ;