Income-tax Act, 1961 — Section 40(a)(ia), section 194C — The provisions of section 194C are not applicable to a case where the transporters are hired by the vendors of the goods, who directly made supplies to the factory of the assessee and charged the am

The assessee purchased raw material consisting of hide and
chemicals with the understanding that goods will be delivered at the factory of
the assessee by the supplier. Freight charges were to be paid by the assessee in
some cases against bill raised by the supplier of goods along with the value of
goods and in some cases separately on production of bills by the transporters.
There was no agreement between the assessee and the transporters as the
transporters were arranged by the suppliers themselves. The Assessing Officer
(AO) disallowed, u/s.40(a)(ia), a sum of Rs.23,70,881 out of freight charges on
the ground that the assessee failed to deduct TDS u/s.194C.

Aggrieved the assessee preferred an appeal to the CIT(A) who
dismissed the appeal filed by the assessee.

Aggrieved the assessee preferred an appeal to the Tribunal.

The Tribunal found that the submissions of the assessee viz.
that the goods were supplied by the suppliers at the factory of the assessee was
not disputed by the Revenue. The Tribunal held that there could not have been
any agreement either written or oral between the assessee and the transporters
as transporters were arranged by the suppliers themselves to bring the goods at
destination. The Revenue did not bring anything on record to suggest the
contrary. Since there was no contract between the assessee and the transporters,
provisions of section 194C of the Act were held to be not applicable and
consequently the assessee was held to be not liable to deduct tax on such
payments u/s.194C. The addition made by the AO and sustained by the CIT(A) was
deleted.

The appeal filed by the assessee was allowed.