Jakir Hossain Mondal (Calcutta High Court)

CIT vs. Md.

The assessee incurred expenditure of Rs. 31 lakhs on freight but did not deduct TDS thereon u/s 194C. The AO held that as there was a failure to deduct TDS, the expenditure could not be allowed as a deduction u/s 40(a)(ia). However, the CIT(A) allowed the claim on the ground that the freight charge was a part of the price of the goods and there was no contract between the assessee and the transporter. On appeal by the department, the Tribunal dismissed the appeal by relying on the Special Bench verdict in Merilyn Shipping 146 TTJ 1 (Viz) (SB) where it was held (by a majority) that s. 40(a)(ia) had no application to amounts that were already “paid” during the year but it was confined to amounts remaining “payable” as at the end of the year. On further appeal by the department, HELD reversing the Tribunal:

We already have delivered a judgment on 3rd April, 2013 in ITAT No. 20 of 2013, G.A. No. 190 of 2013 (CIT, Kolkata-XI Vs. Crescent Export Syndicates) holding that the views expressed in the case of Merilyn Shipping & Transports (ITA.477/Viz./2008 dated 20.3.2012) were not acceptable. That is one reason why the matter should be remanded to the Tribunal. Another reason for remanding the matter to the Tribunal is that the finding of facts recorded by the CIT (Appeal) was not tested by the Tribunal. For the aforesaid reasons, the order under challenge is set aside and the matter is remanded to the Tribunal for a decision de novo.

Note: In Thane Electricity 206 ITR 727 (Bom) & Mahindra & Mahindra 313 ITR 263 (AT)(SB), 308 it was held that the verdict of a non-jurisdictional High Court is not binding. Though Merilyn Shipping has already been “suspended” by the AP High Court, for the effect of that see Article