ALL KOSHYS ALL SPICES V. COMMISSIONER OF INCOME TAX

ITA/23/2021

AI Insights

The case involves All Koshys All Spices, a partnership firm engaged in processing and marketing spices, which appealed against the orders of the Income Tax Appellate Tribunal and the Commissioner of Income Tax. The dispute centered on the disallowance of Rs.18,14,139/- paid to M/s.Seven Ocean Shipping Company as shipping charges for the assessment year 2010-11. The initial disallowance was due to non-deduction of TDS under section 194C of the Income Tax Act, 1960. The Commissioner later reclassified the payment as hire charges under section 194I, leading to the dismissal of the appeal. The Tribunal upheld this decision, prompting the firm to appeal to the High Court, which found procedural errors in the consideration of the case and remanded it for a fresh assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 750014 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 12-12-2022
• Assessment Year: misc
• Other Referred Cases: Municipal Corpn., Thane v. Vidyut Metallics Ltd. (2007) 8 SCC 688, M/s.Maharana Mills (Private) Ltd. v. Income Tax Officer, Porbander (AIR 1959 SC 881)
• Laws Referred To: Income Tax Act, 1860
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAVNEETH NATH
• Assessee Lawyers: S RAJ
• Keywords: Assessment Year; Disallowance; Income tax appeal; Shipping Charges; TDS
• Section: 40(a)(ia); 194C; 194I

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 12TH DAY OF DECEMBER 2022 / 21ST AGRAHAYANA, 1944 ITA NO. 23 OF 2021 AGAINST THE ORDER IN ITA 340/Coch/2018 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/APPELLANT/ASSESSEE: ALL KOSHYS ALL SPICES BLOCK NO.18/609/6, PAKKIL P.O., NATTAKOM, KOTTAYAM-686102. BY ADV S.ARUN RAJ RESPONDENT/RESPONDENT/REVENUE: COMMISSIONER OF INCOME TAX PUBLIC LIBRARY BUILDING, LAL BAHADUR SASTRI ROAD, KOTTAYAM-686001. BY ADVS. SRI.NAVNEETH N.NATH SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 12.12.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No.23/2021 -:2:- JUDGMENT Dated this the 12th day of December, 2022 Bechu Kurian Thomas , J. Appellant is a partnership firm engaged in the business of processing and marketing of spices and is an assessee under the Income Tax Act, 1860 (for short 'the Act'). For the assessment year 2010-11, the assessee returned a total income of Rs.8,27,980/- and the assessment was completed by order dated 14.03.2013 disallowing an amount of Rs.18,14,139/- paid to M/s.Seven Ocean Shipping Company as shipping charges. The reason for disallowance was stated to be non-deduction of TDS under section 194(c) of the Act and hence the said amount was disallowed under section 40(a)(1a) of the Act. 2. The assessing officer held that the payment made to M/s.Seven Ocean Shipping Company as shipping charges came under the purview of section 194C of the Act. In appeal, at the behest of the assessee, the Commissioner of Income Tax held that the payment to M/s.Seven Ocean Shipping Company was in the nature of hire charges covered under section 194I of the Act since, in ITA No.23/2021 -:3:- respect of an earlier assessment year (2008-09), the Income Tax Appellate Tribunal had held that payment made to the very same shipping company was in the nature of hire charges. Thus, by treating the payment as hire charges, covered under section 194I of the Act, the appeal of the assessee for the assessment year 2010-11 was dismissed. 3. Appellant again challenged the order of the First Appellate Authority before the Income Tax Appellate Tribunal. According to the appellant, despite providing sufficient evidence to show that the payment made to M/s.Seven Ocean Shipping Company fell neither under section 194C nor under section 194I, the Tribunal, by relying solely upon its earlier decision in I.T.A No.461/2013, confirmed the order of CIT Appeals and dismissed the appeal. Thus, the assessee has preferred this appeal on the following substantial questions of law: (1) Whether the Tribunal is correct in law and in the facts of the case in confirming the disallowance of Rs.18,14,139/- under section 40(a) (ia) of the Act holding that the amount paid towards shipping charges attract TDS under section 194(i) of the Act and that the assessee has failed to make TDS on the said payment. ITA No.23/2021 -:4:- (2) Whether the Tribunal is correct in law and in the facts of the case in holding that the amount of Rs.18,14,139/- paid/reimbursed by the assessee to M/s.Seven Ocean Shipping Company towards shipping charges attract TDS under section 194I of the Act? (3) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was correct in holding that the assessee/appellant took the machinery (ship) on lease and paid hire charges for the same and therefore the provisions of section 194I are attracted? Is not such a finding illegal, erroneous and perverse? 4. We have heard Sri.Arun Raj S., learned counsel for the appellant and Sri.Navneeth N.Nath, the learned Standing Counsel for the department. 5. It is trite law that an assessment has to be decided on a year-to-year basis and the findings in respect of an allowance or a disallowance on an earlier assessment year cannot bind the assessee's claim for the subsequent years. In the decision in Municipal Corpn., Thane v. Vidyut Metallics Ltd. (2007) 8 SCC 688, it was observed that as a general rule, each years assessment is final only for that year and does not govern later years because it determines the tax for a particular period”. A decision taken by the ITA No.23/2021 -:5:- authorities in the previous year would not estop or operate a res judicata for a subsequent year as held in the decision in M/s.Maharana Mills (Private) Ltd. v. Income Tax Officer, Porbander (AIR 1959 SC 881). 6. The First Appellate Authority as well as the Income Tax Appellate Tribunal proceeded solely on the basis of the earlier order in ITA No.461/2013 dated 24.9.2014 in respect of payments made by the assessee to M/s.Seven Ocean Shipping Company itself, to come to the conclusion that the payment made by the petitioner is covered under section 194I of the Act and therefore the assessee was liable to deduct the tax on such payment. It is noticed that the assessee's specific claim before the First Appellate Authority as well as the Tribunal was that the payment made to M/s.Seven Ocean Shipping Company did not form either a rent under section 194I nor did it fall under the purview of section 194C, and therefore it was not bound to deduct TDS as per the provisions of the statute. 7. The CIT(Appeals) in Annexure B order proceeded on the basis of the earlier order of ITAT for assessment year 2008-09 and held that payments to M/s.Seven Ocean Shipping Company ought to have been subjected to tax deduction at source. None of the specific ITA No.23/2021 -:6:- contentions raised are seen adhered to or considered. The principle that each year's assessment is peculiar to that year, was not borne in mind by the said authority. 8. The Tribunal also failed to apply its mind independently to the circumstances of the case and merely proceeded on the basis of the finding in the earlier appeal ITA No.461/2013. There was no independent consideration on whether the payment for services of clearing and forwarding agents for clearing goods from the exporters' dock would fall within the purview of rent under section 194I or, payment to contractors under section 194C or not falling under either of the two clauses mentioned above. 9. We notice that the First Appellate Authority as well as the Tribunal failed to consider the contentions of the petitioner in the right perspective and merely proceeded on the basis of the earlier order in ITA No.461/2013. The procedure adopted by the First Appellate Authority as well as the Tribunal, according to us, was not proper. The payment made to M/s.Seven Ocean Shipping Company is alleged to be in the nature of payment towards clearing and forwarding of the goods sent up for carriage by sea. The said payment, according to the learned counsel for the petitioner, does not ITA No.23/2021 -:7:- even fall under the purview of section 194C of the Act. Since, as mentioned earlier, there has not been an independent consideration of the contentions raised by the petitioner, we are of the view that this is a matter which requires to be remanded back to the First Appellate Authority for fresh consideration in accordance with the law. 10. Accordingly, we set aside the order of the First Appellate Authority in Annexure B as well as that of the Income Tax Appellate Tribunal in Annexure C and remand the same to the First Appellate Authority for a de novo consideration. This appeal is allowed as above. S.V.BHATTI JUDGE BECHU KURIAN THOMAS JUDGE vps "