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Issues: Whether disallowance under section 40(a)(ia) was rightly made for freight payments to clearing and forwarding agents without tax deduction at source under section 194C, and whether the disallowance could be restricted only to amounts payable at the year end.
Analysis: The payments were held not to be proved as mere reimbursements because the assessee did not establish that the amounts paid to the clearing and forwarding agents represented only freight reimbursed on behalf of the assessee. Circular No. 715 was applied to hold that payments to clearing and forwarding agents for carriage of goods are subject to tax deduction at source under section 194C. The alternate plea based on the distinction between amounts "paid" and "payable" was rejected, as the decisions relied upon by the assessee were distinguished and the view that section 40(a)(ia) applies only to year-end payables was not accepted.
Conclusion: The disallowance under section 40(a)(ia) was upheld and the assessee's objections were rejected.
Final Conclusion: The Revenue succeeded in all the appeals and the disallowance made by the Assessing Officer was restored.
Ratio Decidendi: Payments to clearing and forwarding agents for carriage of goods attract tax deduction at source under section 194C, and a claim of reimbursement must be proved by the assessee before disallowance under section 40(a)(ia) can be denied.
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