122 taxmann.com 124 (Bombay)/ 428 ITR 398 (Bombay)
Short overview of the case:
– Section 194C of the Income-tax Act, 1961
– Deduction of tax at source
– Contractors/sub-contractors, payments to (Reimbursement)
– Assessment years 2009-10 and 2010-11
– Assessee-company made payment of certain amount to its Forwarding & Clearing agent (C&F agent) towards
(i) reimbursement of freight charges paid by C & F agent to carriers and
(ii) actual service charges of C&F agent
– C&F agent had raised seperate bills for both these payments
– Assessee had deducted TDS on payment towards bills raised for services rendered by C&F agents
– Assessing Officer disallowed an amount paid towards reimbursement of freight charges under section 40(a)(ia) on which TDS was not deducted
– Issue before the court was as to whether since payment towards reimbursement of freight charges to C & F agent had no income element embedded in it, assessee was not liable to deduct tax at source on same
– Court held it as yes and so the matter was decided in favour of assessee.
The court concluded as under :
Where assessee-company made payment of certain amount to its Forwarding & Clearing agent (C&F agent) towards reimbursement of freight charges paid by them to carriers, since such payment towards reimbursement had no income element embedded in it, assessee was not liable to deduct tax at source on same.