Citation:
Before ITAT "C" Bench, Ahemdabad, in the case 
of Kalpesh Ganpatlal Patel.

Issue: 
Obligation of TDS u/s 194C on freight paid on purchases through the supplier of goods, though debited to the profit and loss account to freight inward account and not included in purchases.

Facts
(1) Assessee made purchases of goods.
(2) As per contract the supplier paid freight and transportation charges and included the sake in his invoices by  charging the same separately.
(3) In the financial statement the assessee disclosed the value of purchases under the head purchases and amount of freight paid on such purchases thorough the supplier separately under the head freight inward.
(4) AO made disallowance u/s 40(a)(ia) alleging that the assessee had failed to deduct tax at source u/s 194C on the amount of freight inward, as the same has been debited to the profit and loss account separately to freight inward account.

First appeal:
CIT(A) confirmed the disallowance.

ITAT
(1) ITAT deleted the addition.
(2) despite the fact that the amount of freight was debited and disclosed in the profit and loss account to freight inward account, the facts remains that-
(a) the freight was paid in relation to purchases,
(b) the freight was paid by the supplier of goods,
(c) the amount of freight was charged in the invoice raised by the supplier along with the cost of purchases. 
(d) there was no contract between the assessee who had purchased the goods and the transporter to whom freight was paid by the supplier.
ITAT held:
Since there was no contract between the assessee and the transporter, the assessee who had purchased the goods, has no obligation to deduct tax at source u/s 194C on the amount of such freight. Therefore, question of making disallowance u/s 40(a)(ia) is unwarranted