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TMI Blog2016 (3) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... The first issue to be decided in this appeal is with regard to disallowance made u/s. 40(a)(ia) of the Act in respect of freight charges amounting to Rs. 12,87,328/-. 3. The brief facts of this issue are that the ld.AO had made an addition of Rs. 12,87,328/- u/s. 40(a)(ia) of the Act on the premise that tax is not deducted at source(TDS) in terms of provisions of section 194C of the Act. The break up of the said addition is as below:- 1) Shri Gurudutt Industries(Transport Agent) Rs. 6,39,883/- 2a) M/s. Sangam Transport Rs. 32,440/- b) M/s. Ganpati Road Lines Rs. 25,000/- Rs. 57,440/- 3) Shri Gautom Majee (Transport Agent) Rs. 3,94,045/- 4) Against Shri Gautam Majee Rs. 1,96,000/- &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al available on record including the details filed in the paper book before us. We find that the assessee had only made purchase of goods and there was no freight charges incurred by the assessee on these purchases, which is evident from the ledger account as filed at pages 33-39 of the paper book. We also verified the sample invoices, that are kept at pages 40-47 of the paper book containing the freight charges and the details of the freight charges payable by the assessee on behalf of the said supplier. Hence, we are satisfied that the provisions of section 194C are not at all attracted to the present facts of the case and consequently, the disallowances/additions made u/s. 40(a)(ia) is not warranted. 7. In respect of freight charges pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision rendered thereon is as under:- Question: The issue that arose before the High Court was- "Whether the second proviso to Section 40(a)(ia)( inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not ?" Held : "Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of said decision of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd (supra). The assessee is at liberty to adduce fresh evidences, if any, to substantiate its contentions. Accordingly, this portion of the addition u/s 40(a)(ia) amounting to Rs. 3,94,045/- raised by the assessee is allowed for statistical purpose. 12. In respect of freight charges of Rs. 1,96,000/- paid to Shri Gautom Majee, we find from the pages 32-32A of the assessee's paper book containing the ledger account of carriage inwards shown in the books of account of the assessee that sum of Rs. 1,96,000/- was indeed recovered from Shri Gautom Majee and the same is in the nature of income of the assessee. Accordingly, no expenditure towards freigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case ld. Commissioner (Appeals) erred in confirming disallowance of rs. 67, 652/0 under Section 37(1) of the Income Tax Act, 1961." We find from pages 52-55 of the paper book containing personal balance sheet and the business balance sheet of the assessee, that the assessee has borrowed monies from said two private individuals (supra) on his personal account in the assessment year 2004-05 and invested the same in his proprietary concern of the assessee, which is evident from the pages 53-55 of the paper book. Hence, it is proved beyond doubt that borrowings made by the assessee are only for the purpose of his business. Accordingly, interest thereon is squarely allowable as deduction. There is no reason to disa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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