Case Law Details
Cargo Handling Corporation Vs ITO (ITAT Kolkata)
The case of Cargo Handling Corporation Vs ITO revolves around the disallowance made under section 40(a)(ia) of the Income Tax Act for non-deduction of TDS on transportation charges. The appellant, Cargo Handling Corporation, filed an appeal before ITAT Kolkata challenging the disallowance imposed by the Assessing Officer (AO). This article provides an analysis of the ITAT’s order and its interpretation of the provisions of section 40(a)(ia).
Analysis: The appellant paid transportation charges to various parties, and the Assessing Officer disallowed the expenses under section 40(a)(ia) for non-deduction of TDS. The appellant argued that two of the parties had already offered the alleged sum as revenue in their income tax returns and paid taxes on the same. They provided supporting documents, including income tax returns, balance sheets, and bank statements of the parties, to substantiate their claim.
The ITAT considered the appellant’s arguments and referred to the judgment of the Supreme Court in Hindustan Coca Cola Beverage (P.) Ltd. vs. CIT. The Supreme Court had held that if the deductee has already paid taxes on the amount received, the Department cannot recover tax from the deductor for the same income. Based on this principle, the ITAT concluded that no disallowance was necessary for the transportation charges paid to the two parties who had already paid taxes on the amounts received.
However, the ITAT noted that the appellant failed to provide sufficient details regarding the third party. As a result, the disallowance for the transportation charges paid to that party was confirmed.
Conclusion: In the case of Cargo Handling Corporation Vs ITO, ITAT Kolkata partially allowed the appeal filed by the appellant. The ITAT deleted the disallowance for transportation charges paid to parties who had already paid taxes on the amounts received. However, the disallowance for charges paid to the third party was confirmed due to a lack of supporting details. This ruling emphasizes the importance of considering whether the deductee has already paid taxes on the income before imposing a disallowance under section 40(a)(ia) of the Income Tax Act.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee pertaining to the Assessment Year (in short ‘AY’) 2007-08 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the ‘Act’) by Commissioner of Income Tax (Appeals)-NFAC, Delhi [in short ld. ‘CIT(A)’] dated 20.02.2023 which is arising out of the assessment order framed u/s 143(3) of the Act dated 2 1.03.2014.
2. The assessee has raised the following grounds of appeal:
“1. For that on the facts of the case, the order passed by the Ld. C.I.T.(A) on 20.02.2023 which is completely arbitrary, unjustified and illegal.
2. For that on the facts and in the circumstances of the case, the Ld. I.T.(A) is not justified to make addition of Rs. 13,01,240/- u/s. 40(a) (ia) of the Income Tax Act on account of transportation charges without mentioning the reasons for his satisfaction, thus suffering from perversity making his order as liable to be cancelled.
3. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in confirming the addition u/s. 40(a)(ia) of the LT. Act amounting to Rs. 13,01,240/- as the assessee was not liable to deduct TDS on payment made for transport charges, therefore, the said disallowance u/s. 40(a)(ia) is completely arbitrary, unjustified and illegal.
4. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in holding that the assessee was covered by Section 194C of the Income Tax Act, therefore, the disallowance made u/s. 40(a)(ia) amounting to 1 3,01,240/- by the Ld. CIT(A) is completely arbitrary, unjustified and illegal.
5. For that the Ld. CIT(A) was wrong in not considering the facts that there is no agreement between the parties, the provision of TDS does not attract to the expenses of transport charges. Pursuant to insertion to the second proviso to section 40(a)(ia) of the Act by the Finance Act, 2012 w.e.f. 1.4.2013, the payees have shown the receipt of amount in their income tax return then the provisions of section 40(a)(ia) does not apply, as such his finding is completely arbitrary, unjustified and
6. For that the interest u/s. 234B & 234D charged mechanically are wrong & illegal.
7. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.”
3. Though the assessee has raised seven grounds of appeal but the effective issue raised in ground no. 1 to 5 is against the finding of ld. CIT(A) confirming the disallowance made by ld. AO u/s 40(a)(ia) of the Act for non-deduction of tax at source on the transportation charges of Rs. 13,01,240/-.
4. At the outset, ld. Counsel for the assessee submitted that out of the alleged sum which has been paid to three parties, two parties namely M/s. Hooghly Traders and M/s. ME Enterprise have already offered the alleged sum as revenue in the regular return of income and paid due taxes thereon and therefore, there is no loss to the Revenue. As far as the third party i.e. M/s. HT Enterprise to which sum of Rs. 59,000/- was paid, assessee failed to place any detail in support of the claim that the said sum has been offered to tax. Further, ld. Counsel for the assessee referred to the detailed paperbook containing 77 pages filed on 04.02.2023 and also referred to plethora of decisions stated in the case law paperbook containing 68 pages. In support of the contention that ld. AO erred in invoking the provisions of Section 1 94C of the Act.
5. On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities.
6. We have heard rival contentions and perused the records placed before us. The issue before us is u/s 40(a)(ia) of the Act at 13,01,240/-. The said sum was paid by the assessee towards transportation charges to the following parties:
1. M/s. Hooghly Traders 1,60,800/-
2. M/s. ME Enterprise 10,81,440/-
3. M/s. HT Enterprise Rs. 59,000/-
Total Rs. 13,01,240/-
6.1. The assessee failed to deduct tax at source on the above stated transportation charges due to which ld. AO during the course of assessment proceedings invoked the provisions of Section 40(a)(ia) of the Act and made the alleged disallowance. The assessee failed to get any relief before ld. CIT(A).
7. Before us, ld. Counsel for the assessee has referred to the judgment of Hon’ble Supreme Court of India in the case of Hindustan Coca Cola Beverage (P.) Ltd. vs. CIT reported in [2007] 163 Taxman 355 (SC) wherein Hon’ble Apex Court laid down the ratio that where the deductee, recipient of income has already paid taxes on amount received from the deductor, the Department once again cannot recover tax from the deductor on same income by treating the deductor to be the assessee in default for shortfall in its amount of tax deducted at source. Examining the facts of the case in light of the above ratio laid down by Hon’ble Apex Court we notice that the assessee has filed the details of M/s. Hooghly Traders and M/s. ME Enterprise which includes the income tax return, balance sheet, profit & loss account, ledger account and bank balance which prima facie are sufficient to indicate that both these parties are regularly assessed to tax. Further, the ledger account balance of the assessee as appearing in their books are same as those appearing in the balance sheet of payees and therefore, the sum received by these two parties from the assessee towards transportation charges have been included in their gross turnover. We also notice that the gross turnover of M/s. HT Enterprise is Rs. 77,70,240/- and that of M/s. Hooghly Traders is Rs. 1,02,27,240/- which are much more than the sum paid to the assessee.
8. So far as the third concern M/s. HT Enterprise is concerned, the assessee failed to file sufficient details which could prove that the transportation charges of Rs. 59,000/- has been shown as revenue by the said concern.
9. We, therefore, under the given facts and circumstances of the case, are of the considered view that no disallowance is called for on the transportation charges paid to M/s. Hooghly Traders at Rs. 1,60,800/- and M/s. ME Enterprise at Rs. 10,81,440/- as the alleged sum is offered as revenue in their Income Tax Returns. Thus, the assessee gets relief of Rs. 12,42,240/- and the disallowance u/s 40(a)(ia) of the Act at Rs. 59,000/- paid to M/s. HT Enterprise is confirmed.
10. In the result, the appeal filed by the assessee is partly allowed as per terms indicated above.
Kolkata, the 14th June, 2023
