CIT Vs. Bhagwati Steels -(Punjab & Haryana HC)- In the instant case, it was held that the payment of freight charges by the assessee to the truck drivers was based on individual GRs which represented individual and separate contracts and there was no single contract for carriage or transportation of goods referred to between assessee and the impugned parties which would make the assessee liable for deduction of tax at source under section 194C of the Act.
It is evident that the expenses of freight incurred by M/s Tata Steel, which have been shown separately in the invoices raised on the assessee, cannot be construed to infer that the assessee has paid any amount for transportation of goods separately than the cost of the goods purchased by it. Ostensibly, in such circumstances, there would not arise any necessity of deduction of tax at source on the freight amount separately shown in the Invoices, in terms of section 194C of the Act. Therefore, following the parity of reasoning laid down by the Hon’ble Jurisdictional in the case of Food Corporation of India (supra) the amount raised by M/s Tata Steel in the invoices shown as freight did not create an obligation on the assessee to deduct tax on such amounts as per section 194C of the Act. In our view, if the freight expenses incurred by M/s Tata Steel are added to the cost of goods in the invoice raised, it cannot be inferred that the assessee has paid any amount of freight separately because the same is part of the cost of product purchased. The assessee could not be said to be an assessee in default for non deduction of tax at source in terms of section 194C of the Act on the amount of freight billed separately by M/s Tata Steel. As a consequence, it follows that the provisions of section 40(a) (ia) of the Act cannot be applied to disallow the amount of such freight amounting to Rs.2,01,81,428/-. Following the aforesaid discussion, we set-aside the order of the Commissioner of Income-tax (A) and direct the Assessing Officer to delete the impugned addition. The assessee accordingly, succeeds on this Ground.
HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Income Tax Appeal No. 693 of 2009
Date of decision : 21-01-2010
The Commissioner of Income tax-I Chandigarh.
VERSUS
M/s Bhagwati Steels
ORDER
