Case Law Details
Kalpesh Ganpatlal Patel Vs ITO (ITAT Ahmedabad)
Introduction: The case of Kalpesh Ganpatlal Patel Vs ITO (ITAT Ahmedabad) revolves around the applicability of TDS (Tax Deducted at Source) under section 194C of the Income Tax Act in the context of freight charges incurred during the purchase of goods. Specifically, the dispute centers on whether TDS should be deducted when freight charges are considered an integral part of the purchase of materials.
Detailed Analysis: Kalpesh Ganpatlal Patel, the assessee, operates a trading business specializing in Gypsum Board. The Assessing Officer (AO) raised concerns about the non-deduction of TDS under section 194C along with section 40(a)(ia) of the Act. This non-deduction of TDS led to the disallowance of inward freight expenses amounting to Rs. 16,15,291, which was subsequently added to the total income of the assessee.
The matter was appealed before the Commissioner of Income Tax (CIT-A), who upheld the AO’s decision. The CIT(A) justified this by highlighting that the assessee had presented expenses for purchases and inward freight expenses separately in their financial statements. Consequently, the CIT(A) rejected the argument that the inward freight expenses were an integral part of the materials’ purchase.
In response, the appellant approached the Tribunal with a crucial argument. They contended that the inward freight expenses were indeed an inherent component of the goods’ purchase. While the purchase bills displayed transportation charges separately, the appellant emphasized that this did not establish an independent contract between them and the transporters.
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Though the decision is in favour of the assessee, this scan be used as a defence when TDS is not deducted. As a matter of caution, in TDS matters it is always advisable to err on the revenue side and deduct TDS to avoid litigation.