TMI Blog2019 (10) TMI 1129X X X X Extracts X X X X X X X X Extracts X X X X ..... which undisputedly, has been offered to tax. The payment received by the petitioner as freight charges represents the direct cost incurred as charges for cargo or cost of ticket purchased. Such payment constitutes a direct cost and hence would not fall within the sweep of income upon the tax is liable to be deducted. - Decided in favour of assessee - W.P.No.8496 of 2011 And M.P.No.1 of 2011 - - - Dated:- 20-9-2019 - Dr. Justice Anita Sumanth For the Petitioner : Mr.R.Sivaraman For the Respondents : Mrs.Hema Murali Krishnan Senior Standing Counsel ORDER Heard the detailed submissions of Mr.R.Sivaraman, learned counsel for the petitioner and Mrs.Hema Mura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.In respect of assessment year 2006-2007, an order of assessment dated 31.12.2008 has been passed in terms of Section 143(3) of the Income Tax Act 1961 (in short Act). A disallowance was effected in terms of Section 40(a)(ia) in respect of the freight payment that had been effected without deduction of tax at source (in short TDS). 6. The petitioner challenged the assessment by way of revision under Section 264 of the Act. After consideration of matter as well as a remand report received from the Assessing Officer, the revisional authority, arrayed as respondent No.2 before me, rejects the same in the following terms: 7.After carefully going through the facts of the case and the relevant recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tune of ₹ 1,75,76,637/-. It is for carriage of goods by the online courier services promoted by the various airlines. Those courier services are working on behalf of the appellant. Hence, it will come under the work contract and TDS is applicable under Chapter XVII-B. Board s Circular No.713 is not applicable in the assessee s case as the courier services are accepting the goods of other parties also. And assessee, is not only reimbursing the ticket expenses. It is also making the full payment for the work contract for carriage of goods. In view of the aforesaid discussion, the application filed by the appellant is rejected and the addition made by the learned AO is confirmed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax under the head Profits and gains of business or profession includes the profits and gains of any business or profession carried on by the assessee. The relevant provisions are Sec. 28 The following income shall be chargeable to income tax under the Head Profits and gains of business or profession - (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year; Thus what is to be included in the sec. 28 as Income under the head Profits and gains of business or profession is Profits and gains of business or profession carried on by the assessee . The word Profits and Gains of the business means the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressly or by necessary implication by those provisions, it can be allowed under section 28(i) provided, on ordinary commercial principles, it is a proper item to be debited against the incomings in ascertaining the profits and gains properly so called. While delivering the judgement, the Hon ble court also relied on Badridas Daga vs. Commissioner of Income tax (1958) 34 ITR 10 (SC) and Commissioner of Income tax vs. Mysore Sugar Co. Ltd. (1962) 46 ITR 649 (SC). 5.4 The Supreme Court in the case of Badridas Daga v. CIT (1958) 34 ITR 10(SC), held that ordinary commercial principles should be applied. Profits and gains which are liable to be taxed under section 10(1) of the 1922 Act [corresponding to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self. The only expense specified u/s 30 to 38 alone are subjected to the provisions of sec.40(a)(ia) of the Act before allowance. In the instant case the payment of freight being direct expenses, are allowable u/s 28 itself and not under the provisions of sec. 30 to 38. However, the AO has not considered that this expenditure is allowable u/s 28 of the Act being the direct cost, and the provisions of Sec. 40 of the Act are not applicable for the deduction allowable u/s 28. In other words, the AO has treated the freight payments as allowable expenditure u/s 30 to 38 of the Act and hence applied the provisions u/s 40 for making the above disallowance of ₹ 3,23,34,423/-. 5.8 Therefore, the payments of freight are not w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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