RATIKA P KHURANA, V. ITO 25(3)(3),

CO 86/MUM/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0421 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Retrospective amendment
• Section: 43B; 194C; 201(1); 6; 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D B ENCH, MUMBAI , , , BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ./ I.T.A. NO.2481/MUM/2012 ( / ASSESSMENT YEAR : 2008-09) ITO 25(3)(3) ROOM NO.304, 3 RD FLOOR,BLDG. NO. C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI-400 051. / VS. SMT. RATIKA P. KHURANA R-1401, PANCHSHEEL GARDENS MAHAVIR NAGAR, KANDIVALI(W) MUMBAI-400 067. ./ ./PAN/GIR NO. : AGVPK 8112 E ( /APPELLANT ) .. ( / RESPONDENT ) /C.O. NO.86/MUM/2013 ARISING OUT OF I.T.A. NO.2481/MUM/2012 ( / ASSESSMENT YEAR : 2008-09) SMT. RATIKA P. K HURANA R-1401, PANCHSHEEL GARDENS MAHAVIR NAGAR, KANDIVALI(W) MUMBAI-400 067. / VS. ITO 25(3)(3) ROOM NO.304, 3 RD FLOOR,BLDG. NO. C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI-400 051. ./ ./PAN/GIR NO. : AGVPK 8112 E ( / CROSS OBJECTOR .. ( / RESPONDENT ) REVENUE BY : SHRI LOVE KUMAR - DR ASSESSEE BY : SHRI NISHIT GANDHI - AR ! ' # $ / DATE OF HEARING : 29 /01/2015 %&' # $ / DATE OF PRONOUNCEMENT : 12 /02 /2015 2 ITA NO.2481/M/12 & C.O. NO.86/M/13 ( / O R D E R PER VIJAY PAL RAO, JM : THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 04/1/2012 FOR THE ASSESSMEN T YEAR 2008-09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- (I). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S. 40(A)(IA) TOWARDS FREIGHT CHARGES OF RS. 6,58,588/- PAID TO AGENT OF FOREIGN SHIPPING COMPAN IES, EVEN THOUGH THE ASSESSEE FAILED TO DEDUCT TDS ON IT. THE PROVISIONS OF SECTION 172 ARE NOT OVERRIDING TO PROVISIONS OF SECTION 194, AND THEREFORE, ASSESSEE WAS LIABLE TO DEDUCT TDS AND THE NATURE OF EXPENSE IS TDS DEDUCTIBLE.. (II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S 40(A)(IA) BEING TRANSPORT CHARGES OF RS. 2,94,192/- WITHOUT APPRECIATING THE FACT THAT IN THE CASE OF M /S PATIL TRANSPORT SERVICES (RS 2,12,775/-) THE LIABILITY TO DEDUCT TDS IS ON THE A SSESSEE AND THE ACT OF DECLARING THE RECEIPTS PROPERLY BY THE RECIPIENT IS SECONDARY WHI CH IS INDEPENDENT OF LIABILITY OF DEDUCTION OF TDS BY THE PAYER AND ALSO IN CASE OF M /S SHREENATH ROADWAYS (RS 90,881/-) THAT THERE NEED NOT BE AN OFFICIAL CONTRA CT. AS PER SECTION 194C THE NATURE OF EXPENSE IS TDS DEDUCTIBLE AS IT IS AKIN TO CONTRACT AND ALSO GROSS PAYMENT HAS EXCEEDED RS. 50,000/-. (III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S 40 A(IA) BEING MAC HINERY MAINTENANCE CHARGES PAID TO M/S. URNA ENGG. CO. FOR RS. 92,700/-,WITHOUT APPRECIATIN G THE FACT THAT THE AGGREGATE PAYMENT HAS EXCEEDED RS. 50,000/- 2. GROUND NO.1 REGARDING DISALLOWANCE UNDER SECTION 40(A)(IA) IN RESPECT OF FREIGHT CHARGES PAID TO AGENT OF FOREIGN SHIPPING COMPANIES . 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS MADE THE VARIOUS PAYMENTS INCLUDING FREIGHT CHA RGES OF RS.6,58,588/- FOR WHICH NO TDS HAS BEEN DEDUCTED. ACCORDINGLY THE AO DISALLOWE D THE EXPENSES ON ACCOUNT OF FREIGHT CHARGES OF RS.6,58,588/- UNDER SECTION 40(A )(IA) OF THE INCOME TAX ACT FOR WANT OF TDS. ON APPEAL, THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT THE PAYMENT WAS MADE TO THE AGENT OF FOREIGN SHIPPING COMPANIES TO WHOM SECTION 172 ARE APPLICABLE AND FOR CALCULATION OF THEIR BUSINESS IN COME IN INDIA SECTION 28 TO 43 ARE NOT APPLICABLE. FURTHER, THE TAX ON THE EXPENDITURE BY THE ASSESSEE WHICH CAN BE INCOME FOR 3 ITA NO.2481/M/12 & C.O. NO.86/M/13 THE RESPONDENT HAS BEEN ALREADY PAID UNDER SECTION 172. THEREFORE, TDS OF SUCH INCOME IS NOT REQUIRED. 2.2 BEFORE US, THE LD. DR HAS SUBMITTED THAT SECTIO N 172 DOES NOT AFFECT THE APPLICABILITY OF SECTION 40(A)(IA) OF THE INCOME T AX ACT AND THEREFORE, THE FINDING OF THE CIT(A) IS NOT SUSTAINABLE UNDER LAW. IN SUPPORT OF HIS CONTENTIONS HE HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. M/S. ORIENT GOA PVT. LTD. TAX APPEAL NO. 7/2005 ORDER DATED OCTOBER 16, 2009 AND SUBMITTED THAT THE HON'BLE HIGH COURT AFTER CONSIDERING THE ISSUE OF APPLICABILITY OF SECTION 172 AS WELL AS THE CBDT CIRCULAR NO.723OF 1995 HELD THAT THE DISAL LOWANCE UNDER SECTION 40(A)(IA) FOR NON DEDUCTION OF TDS BY THE AO IS LEGAL AND PRO PER. THUS, THE LD. DR HAS SUBMITTED THAT THE PROVISIONS OF SECTION 172 ARE NOT OVERRIDI NG PROVISIONS OF SECTION 194 AND THEREFORE, THE AO IS JUSTIFIED IN DISALLOWING THIS AMOUNT PAID TO FOREIGN SHIPPING COMPANIES UNDER SECTION 40(A)(IA) . 2.3 ON THE OTHER HAND THE LD. AR OF THE ASSESSEE HA S SUBMITTED THAT IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF THI S TRIBUNAL IN THE CASE OF RAMU S. DEORA VS. DCIT VIDE ITA NO.1704/MUM/12 ORDER DATED 17/04/2014 FOR THE ASSESSMENT YEAR 2008-09 WHEREBY IT WAS HELD THAT AS PER CIRCULAR NO.723 OF 1995 DATED 19/9/1995 THE PROVISIONS OF SECTION 194C AND 195 WILL NOT APP LY IN THE CASE WHERE RECIPIENT IS ASSESSED UNDER SECTION 172 OF THE INCOME TAX ACT. H E HAS FURTHER CONTENDED THAT EVEN OTHERWISE WHEN THE RECIPIENT HAS PAID THE TAX FOR T HE SAID AMOUNT, THEREFORE, A DISALLOWANCE UNDER SECTION 40(A)(IA) IS NOT JUST IFIED. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA-COLA BREWERIES (P) LTD. VS. CIT (293 ITR 226) . 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND REL EVANT MATERIAL AVAILABLE ON RECORD. AS FAR AS THE BINDING NATURE OF CIRCULAR IS SUED BY CBDT CIR. NO.723 DATED 19/9/1995 IS CONCERNED IT IS PERTINENT TO NOTE THAT THE CIRCULAR AND INSTRUCTIONS ISSUED BY THE BOARD ARE BINDING ON THE TAXING AUTHORITIES AND NOT ON THE COURTS. FURTHER, IF THE HON'BLE SUPREME COURT OR HON'BLE HIGH COURT DECLAR ES THE LAW ON THE QUESTION ARISING 4 ITA NO.2481/M/12 & C.O. NO.86/M/13 FOR CONSIDERATION THEN, IT WOULD NOT BE APPROPRIATE FOR THE COURT OR THIS TRIBUNAL TO DIRECT THE TAXING AUTHORITY TO GIVE EFFECT TO THE C IRCULAR AND NOT THE VIEW ACCEPTED IN THE DECISIONS OF THE COURTS. THUS, IF UNDER A PARTICULA R PROVISION, A LEGAL QUESTION ARISES, AND HAS BEEN ANSWERED AND EXPLAINED BY THE HON'BLE HIGH COURT OR HON'BLE SUPREME COURT THEN, THE SAID EXPLANATION IN THE DECISIONS O F HON'BLE SUPREME COURT OR HON'BLE HIGH COURT WILL BE BINDING AND NOT THE CIRCULAR IS SUED BY THE CBDT AS HELD BY THE LARGER BENCH OF HON'BLE SUPREME COURT IN THE CASE O F COMMISSIONER OF CENTRAL EXCISE VS. RATTAN MELTING & WIRE INDUSTRY (2008)13 SSC-1. 3.1 AS REGARDS THE ALTERNATIVE PLEA IT IS TO BE NOT ED THAT THE HON'BLE SUPREME COURT IN CASE OF HINDUSTAN COCA-COLA BREWERIES (P) LTD. (SUPRA), WHILE CONSIDERING THE ISSUE OF DEDUCTION OF TAX UNDER SECTION 194C, 194I AND CONSE QUENTIAL TAX LIABILITY UNDER SECTION 201 AND 201A HAS HELD IN PARA-10 AS UNDER :- 10. BE THAT AS IT MAY, CIRCULAR NO.275/201/95-IT(B ) DATED JANUARY 29, 1997, ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, IN OUR CONSID ERED OPINION, SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES NO DEMAND V IZUALIZED UNDER SECTION 201(1) OF THE INCOME TAX ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE. HOWEVER, THIS WILL NOT ALTER THE LIABILITY TO CHARG E INTEREST UNDER SECTION 201(A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCT EE-ASSESSEE OR THE LIABILITY FOR PENALTY UNDER SECTION 271C OF THE INCOME TAX ACT. 3.1.1 THE FINDING OF THE HON'BLE SUPREME COURT IN THE SAID CASE IS ONLY ISSUE OF LIABILITY UNDER SECTION 201(1) AND 201(1A). HOWEVER , BY THE SUBSEQUENT AMENDMENT UNDER THE PROVISIONS OF SECTION 40(A)(IA) BY FINANC E ACT, 2012 W.E.F 01/04/2013 WHEREBY A 2 ND PROVISO HAS BEEN INSERTED AS UNDER :- SECTION 40(A)(IA) . 1 ST PROVISO . 26 PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART TO THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTE R XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE F IRST PROVISO TO SUB-SECTION (1)OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-CLAU SE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 5 ITA NO.2481/M/12 & C.O. NO.86/M/13 3.1.2 AS PER THE 2 ND PROVISO IF THE ASSESSEE FAILED TO DEDUCT THE TAX I N ACCORDANCE WITH CHAPTER XVII-B ON ANY PAYMENT BUT I S NOT DEEMED TO BE AN ASSESSEE IN DEFAULT AS PER THE FIRST PROVISO TO SECTION 201( 1) THEN FOR THE PURPOSE ON THIS SUB- CLAUSE IT SHALL BE DEEMED THAT THE ASSESSEE HAS DED UCTED AND PAID TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE R ESIDENT ASSESSEE. THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA-COLA BREWERIES (P) LTD. (SUPRA), WAS IN RESPECT OF THE PAYMENT TO THE RESIDENT PAYEE AND ONLY ON THE POINT OF LIABILITY UNDER SECTION 201(1) WHEN THE PAYEE ALREADY PAID TH E TAX ON SUCH AMOUNT. THE 2 ND PROVISO TO SECTION 40(A)(IA) HAS MADE IT CLEAR T HAT THE BENEFIT OF PAYEE HAVING PAID TAX ON SUCH INCOME IS AVAILABLE ONLY WHEN THE PAYE E IS RESIDENT. IN THE CASE IN HAND THE PAYEE IS A NON-RESIDENT, BEING A FOREIGN SHIPPI NG COMPANY, THEREFORE, THE 2 ND PROVISO TO SECTION 40(A)(IA) AS WELL AS THE FIRS T PROVISO TO SECTION 201(1) AND 201(1A) ARE NOT APPLICABLE IN SUCH PAYMENTS. ACCORDINGLY WE DO NOT AGREE WITH THE ALTERNATIVE PLEA OF THE LD. AR. 3.2 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. ORIENT GOA PVT. LTD. (SUPRA), WHILE CONSIDERING AN IDENTICAL ISSUE HAS H ELD IN PARA-8 AS UNDER :- 8. SECTION 172 OF THE ACT 1961 IS CAREFULLY CONSID ERED BY US. CHAPTER XV TITLES AS 'LIABILITY IN SPECIAL CASES'. WE HAVE NO CONCERN WITH SECTIONS, STARTING FROM SECTION 159, TILL SECTION 1 71 FROM THIS CHAPTER XV. SECTION 172 COMES UNDER SUB-TITLE 'H-PROFITS OF NON -RESIDENTS FROM OCCASIONAL SHIPPING BUSINESS'. TITLE OF SECTION 172 IS 'SHIPPING BUSINESS OF NON-RESIDENTS.' FOR BRINGING A CASE UNDER CHAPTER X V, H OF THE ACT 1961, ONE HAS TO ESTABLISH A CASE OF PROFITS OF NON-RESID ENTS FROM OCCASIONAL SHIPPING BUSINESS. 'NONRESIDENT' IS DEFINED UNDER S ECTION 2(30), AS A PERSON WHO IS NOT A 'RESIDENT' AND FOR THE PURPOSE OF SECT IONS 92, 93 AND 168, INCLUDES A PERSON WHO IS NOT ORDINARILY RESIDENT WI THIN THE MEANING OF CLAUSE (6) OF SECTION 6. THE RESPONDENT ASSESSEE IS A COMP ANY, INCORPORATED UNDER THE PROVISIONS OF INDIAN COMPANIES ACT, 1956, IS FAIRLY AN ADMITTED POSITION. THE ASSESSEE CANNOT BE SAID TO BE NON-RES IDENT. WE HAVE ALSO TAKEN NOTICE OF SECTION 6 I.E. 'RESIDENCE IN INDIA' . IN SHORT, RESPONDENT ASSESSEE CANNOT BE SAID TO BE NONRESIDENT. THE PRES ENT APPEAL PERTAINS TO THE RESPONDENT ASSESSEE. IN OUR VIEW, IN THE FACTS OF THE PRESENT CASE, THE RESPONDENT ASSESSEE CANNOT LAY FINGERS ON SECTION 1 72, SINCE WE ARE NOT DEALING WITH PROFITS OF NON-RESIDENTS. THE OTHER AS PECT IS THAT SUCH PROFITS OF NON-RESIDENTS SHOULD BE FROM OCCASIONAL SHIPPING BUSINESS. IT IS NOT THE CASE THAT THE RESPONDENT ASSESSEE HAS EA RNED SOME PROFIT FROM 6 ITA NO.2481/M/12 & C.O. NO.86/M/13 OCCASIONAL SHIPPING AND IS A NON-RESIDENT. IN OUR V IEW, SECTION 172 DOES NOT HAVE APPLICATION IN RELATION TO THE RESPONDENT ASSE SSEE AND IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE COMPANY FROM JAPAN VIZ. MITSUI & CO. LTD., JAPAN, RECIPIENT OF DEMURRAGE AM OUNT IS NOT BEFORE US. IN OTHER WORDS, WE ARE NOT EXAMINING THE TAX LIABIL ITY OF THE FOREIGN COMPANY I.E. MITSUI & CO. LTD., JAPAN. ON OUR QUERY TO THE LEARNED SENIOR ADVOCATE SHRI USGAONKAR AS TO MATERIAL ON RECORD FO R OCCASIONAL SHIPPING, PART OF PARA 3 FROM THE JUDGMENT OF THE LEARNED COM MISSIONER OF INCOME- TAX HAS BEEN POINTED OUT TO US. HIS OBSERVATIONS AR E IN VERY FEW LINES. WE MAY REPRODUCE THE SAID PORTION HEREIN BELOW. '3. WE HAVE HEARD THE RIVAL SUBMISSIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. ASSESSEE CLAIMED DEDUCTION OF RS. 1,08,53,980/- BEING THE AMOUNT OF DEMURRAGE PAY ABLE TO MITSUI CO. LTD., JAPAN. THE ASSESSING OFFICER OPINED THAT SINCE THE ASSESSE E DID NOT DEDUCT TAX AT SOURCE, AS SUCH THE CASE OF THE ASSESSEE FALLS WITHIN THE MISC HIEF OF SECTION 40(A)(I) OF THE INCOME TAX ACT, 1961.' PROVISIONS OF SECTION 172 AR E TO APPLY NOTWITHSTANDING ANYTHING CONTAINED IN THE OTHER PRO VISIONS OF THE ACT. THEREFORE, IN SUCH CASES, THE PROVISIONS OF SECTION 194C AND 195 RELATING TO TAX DEDUCTION AT SOURCE, ARE NOT APPLICABLE. THE RE COVERY OF TAX IS TO BE REGULATED FOR VOYAGE UNDERTAKEN FROM ANY PORT IN IN DIA BY A SHIP, UNDER THE PROVISIONS OF SECTION 172. IN THIS VIEW, THESE OBSE RVATIONS OF THE LEARNED VICE PRESIDENT OF INCOME TAX APPELLATE TRIBUNAL HAV E NO CONCERN WITH THE FACTUAL ASPECT THAT IT IS A CASE OF OCCASIONAL SHIP PING, PLEADED OR RAISED BY ASSESSEE. THERE IS NO DISPUTE ABOUT INTERPRETATION OF SECTION 172 OR SECTION 195. CRUCIAL POINT IS AS TO HOW SECTION 172 APPLIES TO THE FACTS OF THE PRESENT CAS E WHEREIN THE RESPONDENT ASSESSEE IS AN INDIAN COMPANY, INCOR PORATED UNDER THE PROVISIONS OF INDIAN COMPANIES ACT. 1956. IN OUR VIEW, THE LEARNE D VICE PRESIDENT OF THE ITAT HAS RECORDED A PERVERSE OBSERVATION/FINDING IN PARA-3 R EGARDING APPLICATION OF SECTION 44B AND 172 OF THE ACT, 1961. 3.2.1 ACCORDINGLY, FOLLOWING THE DECISIONS OF HON' BLE JURISDICTIONAL HIGH COURT WE SET ASIDE THE ORDER OF CIT(A) QUA THIS ISSUE AND RESTORE THE ORDER OF THE AO. THE DISALLOWANCE IS CONFIRMED. 4. GROUND NO.2 IS REGARDING THE DISALLOWANCE OF TRA NSPORTATION CHARGES UNDER SECTION 40(A)(IA). THE AO HAS DISALLOWED TRANSPORTA TION CHARGES PAID TO M/S. PATIL TRANSPORT SERVICES AND M/S. SHREENATH ROADWAYS TOTA L AMOUNTING TO RS.2,94,194/- UNDER SECTION 40(A)(IA) FOR WANT OF TDS. ON APPE AL, CIT(A) DELETED THE DISALLOWANCE ON THE GROUND THAT THE RECIPIENTS HAVE PAID THE TAX ON THE TRANSPORTATION CHARGES COLLECTED FROM THE ASSESSEE AND THEREFORE, NO TDS W AS REQUIRED TO BE DEDUCTED ON THE 7 ITA NO.2481/M/12 & C.O. NO.86/M/13 SAME PAYMENT. THE CIT(A) HAS FOLLOWED THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA-COLA BREWERIES (P) LTD. (SUPRA). 4.1 WE HAVE HEARD THE LD. DR AS WELL AS THE LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE RE SIDENT TRANSPORTERS HAVE PAID THE TAX FOR TRANSPORTATION CHARGES COLLECTED FROM THE ASSES SEE. THEREFORE, WE DONOT FIND ANY ERROR IN THE ORDER OF CIT(A) IN DELETING THE DISALL OWANCE BY FOLLOWING THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF HINDUSTAN COCA-COLA BREWERIES (P) LTD. (SUPRA). IT IS PERTINENT TO NOTE THAT AS PER THE 2 ND PROVISO TO SECTION 40(A)(IA) NO DISALLOWANCE CAN BE MADE IN CASE WHERE THE PAYEE HAS PAID THE TAX ON THE SAID AMOUNT. THOUGH, THE SAID PROVISO IS APPLICABLE W.E.F. 01/04/2013 HOWEVE R, IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT WE FIND THAT THIS AMENDMENT I S REMEDIAL IN NATURE AND SIMILAR TO THE AMENDMENT UNDER SECTION 43B. THE HONBLE DELHI HIGH COURT IN CIT VS. NARESH KUMAR (362 ITR 256) WHILE CONSIDERING THE AMENDED PROVISO TO SECTION 40 (A)(IA) HAS HELD IN PARA 26 TO 29 AS UNDER :- 26. PRINCIPLE OF MATCHING WHICH IS DISTURBED BY SECTION 40(A)(IA) OF THE ACT, MAY NOT MATERIALLY BE OF CONSEQUENCE TO THE REVENUE WHEN TH E TAX RATES ARE STABLE AND UNIFORM OR IN CASES OF BIG ASSESSEES HAVING SUBSTANTIAL TUR NOVER AND EQUALLY HUGE EXPENSES AS THEY HAVE NECESSARY CUSHION TO ABSORB THE EFFECT. H OWEVER, MARGINAL AND MEDIUM TAXPAYERS, WHO WORK AT LOW G.P. RATE AND WHEN EXPEN DITURE WHICH BECOMES SUBJECT MATTER OF AN ORDER UNDER SECTION 40(A)(IA) IS SUBST ANTIAL, CAN SUFFER SEVERE ADVERSE CONSEQUENCES AS IS APPARENT FROM THE CASE OF NARESH KUMAR. TRANSFERRING OR SHIFTING EXPENSES TO A SUBSEQUENT YEAR, IN SUCH CASES, WILL NOT WIPE OFF THE ADVERSE EFFECT AND THE FINANCIAL STRESS. NEVERTHELESS THE SECTION 40(A )(IA) HAS TO BE GIVEN FULL PLAY KEEPING IN MIND THE OBJECT AND PURPOSE BEHIND THE SECTION. AT THE SAME TIME, THE PROVISION CAN BE AND SHOULD BE INTERPRETED LIBERALLY AND EQUITABL E SO THAT AN ASSESSEE SHOULD NOT SUFFER UNINTENDED AND DELETERIOUS CONSEQUENCES BEYO ND WHAT THE OBJECT AND PURPOSE OF THE PROVISION MANDATES. CASE OF NARESH KUMAR IS NOT ONE OF RARE CASES, BUT ONE OF SEVERAL CASES AS WE FIND THAT SECTION 40(A)(IA) IS INVOKED IN LARGE NUMBER OF CASES. 27. ONE IMPORTANT CONSIDERATION IN CONSTRUING A MAC HINERY SECTION IS THAT IT MUST BE SO CONSTRUED SO AS TO EFFECTUATE THE LIABILITY IMPOSED BY THE CHARGING SECTION AND TO MAKE THE MACHINERY WORKABLE. HOWEVER, WHEN THE MACHINERY SECTION RESULTS IN UNINTENDED OR HARSH CONSEQUENCES WHICH WERE NOT INTENDED, THE REM EDIAL OR CORRECTION ACTION TAKEN IS NOT TO BE DISREGARDED BUT GIVEN DUE REGARD. 28. IT IS, IN THIS CONTEXT, THAT WE HAD IN RAJINDER KUMARS CASE (SUPRA) OBSERVED AS UNDER ( PAGE 252 OF 362 ITR ) : 8 ITA NO.2481/M/12 & C.O. NO.86/M/13 NOW, WE REFER TO THE AMENDMENTS WHICH HAVE BEEN M ADE BY THE FINANCE ACT, 2010 AND THE EFFECT THEREOF. WE HAVE ALREADY QUOTED THE DECISION OF THE CALCUTTA HIGH COURT IN VIRGIN CREATIONS (SUPRA). THE SAID DECISION REFERS TO THE EARLIER DECISION OF THE SUPREME COURT IN THE CASE OF ALLIED MOTORS (P) LIMITED (SUPRA) AN D COMMISSIONER OF INCOME TAX VERSUS ALOM EXTRUSIONS LIMITED, (2009) 319 ITR 306 (SC). IN THE CASE OF ALLIED MOTORS (P) LIMITED (SUPRA), THE SUPREME COURT WAS EXAMINING THE FIRST PROVISO T O SECTION 43B AND WHETHER IT WAS RETROSPECTIVE. SECTION 43B WAS INSERTED IN THE ACT WITH EFFECT FROM 1ST APRIL 1984 FOR CURBING CLAIMS OF TAXPAYERS WHO DID NOT DISCHARGE OR PAY ST ATUTORY LIABILITIES BUT CLAIMED DEDUCTIONS ON THE GROUND THAT THE STATUTORY LIABILITY HAD ACCR UED. SECTION 43B STATES THAT THE STATUTORY LIABILITY WOULD BE ALLOWED AS A DEDUCTION OR AS AN EXPENSE IN THE YEAR IN WHICH THE PAYMENT WAS MADE AND WOULD NOT BE ALLOWED, EVEN IN CASES OF MERCANTILE SYSTEM OF ACCOUNTANCY, IN THE YEAR OF ACCRUAL. IT WAS NOTICED THAT IN SOME CA SES HARDSHIP WOULD BE CAUSED TO ASSESSEES, WHO PAID THE STATUTORY DUES WITHIN THE PRESCRIBED P ERIOD THOUGH THE PAYMENTS SO MADE WOULD NOT FALL WITHIN THE RELEVANT PREVIOUS YEAR. A CCORDINGLY, A PROVISO WAS ADDED BY FINANCE ACT, 1987 APPLICABLE WITH EFFECT FROM 1ST APRIL, 19 88. THE PROVISO STIPULATED THAT WHEN STATUTORY DUES COVERED BY SECTION 43B WERE PAID ON OR BEFORE THE DUE DATE FOR FURNISHING OF THE RETURN UNDER SECTION 139(1), THE DEDUCTION/EXPE NSE, EQUAL TO THE AMOUNT PAID WOULD BE ALLOWED. THE SUPREME COURT NOTICED THE PURPOSE BEHI ND THE PROVISO AND THE REMEDIAL NATURE OF THE INSERTION MADE. OF COURSE, THE SUPREME COURT ALSO REFERRED TO EXPLANATION 2 WHICH WAS INSERTED BY FINANCE ACT, 1989 WHICH WAS MADE RETROS PECTIVE AND WAS TO TAKE EFFECT FROM 1ST APRIL, 1984. HIGHLIGHTING THE OBJECT BEHIND SECTION 43B, IT WAS OBSERVED THAT THE PROVISO MAKES THE PROVISION WORKABLE, GIVES IT A REASONABLE INTERPRETATION. IT WAS ELUCIDATED(PAGE 686 OF 224 ITR): IN THE CASE OF GOODYEAR INDIA LTD. V. STATE OF HARYANA(1991) 188 I TR 402 (SC) , THIS COURT SAID THAT THE RULE OF REASONABLE CONSTRUCTION MUST BE APPLIED WHILE CONSTRUING A STATUTE. LITERAL CONSTRUCTION SHOULD BE AVOIDED IF IT DEFEAT S THE MANIFEST OBJECT AND PURPOSE OF THE ACT. THEREFORE, IN THE WELL-KNOWN WORDS OF JUDGE LEARNED HAND, ONE CANNOT MAKE A FORTRESS OUT OF THE DICTIONARY; AND SHOULD REMEMBER THAT STATUTES HAVE SOME PURPOSE AND OBJECT TO ACCOMPLISH WHOSE SYMPATHETIC AND IMAGINAT IVE DISCOVERY IS THE SUREST GUIDE TO THEIR MEANING. IN THE CASE OF R.B. JODHAMAL KUTHIALA V. CIT (1971) 82 ITR 570 (SC ) , THIS COURT SAID THAT ONE SHOULD APPLY THE RULE OF REASONABLE INTERP RETATION. A PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROV ISION WORKABLE, A PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION IN THE SECTION AND IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SECTION A REASONABLE INTERPRETATION, REQUIRES T O BE TREATED AS RETROSPECTIVE IN OPERATION SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO TH E SECTION AS A WHOLE. THIS VIEW HAS BEEN ACCEPTED BY A NUMBER OF HIGH CO URTS. IN THE CASE OF CIT V. CHANDULAL VENICHAND, (1994) 209 ITR 7 (GUJ.) , THE GUJARAT HIGH COURT HAS HELD THAT THE FIRST PROVISO TO SECTION 43-B IS RETROSPECTIVE AND SALES TAX FOR THE LAST QUARTER PAID BEFORE THE FILING OF THE RETURN FOR THE ASSESSMENT YEAR IS DEDUCTIBLE . THIS DECISION DEALS WITH ASSESSMENT YEAR 1985-85. THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. SRI JAGANNATH STEEL CORPN.(1991) 191 ITR 676 (CAL.) HAS TAKEN A SIMILAR VIEW HOLDING THAT THE STATUTOR Y LIABILITY FOR SALES TAX ACTUALLY DISCHARGED AFTER THE EXPIRY OF THE ACCOUNTING YEAR IN COMPLIANCE WITH THE RELEVANT STATUTE IS ENTITLED TO DEDUCTION UNDER SECTION 43-B. THE HIGH COURT HAS HELD THE AMENDMENT TO BE CLARIFICATORY AND, THEREFORE, RETROSPECTIVE. THE GU JARAT HIGH COURT IN THE ABOVE CASE HELD THE AMENDMENT TO BE CURATIVE AND EXPLANATORY AND HENCE RETROSPECTIVE. THE PATNA HIGH COURT HAS ALSO HELD THE AMENDMENT INSERTING THE FIRST PRO VISO TO BE EXPLANATORY IN THE CASE OF JAMSHEDPUR MOTOR ACCESSORIES STORES V. UNION OF IND IA. (1991) 189 ITR 70 (PATNA) . THE SPECIAL LEAVE PETITION FROM THIS DECISION OF THE PA TNA HIGH COURT WAS DISMISSED. THE VIEW OF THE DELHI HIGH COURT, THEREFORE, THAT THE FIRST PRO VISO TO SECTION 43-B WILL BE AVAILABLE ONLY PROSPECTIVELY DOES NOT APPEAR TO BE CORRECT. AS OBS ERVED BY G.P. SINGH IN HIS PRINCIPLES OF STATUTORY INTERPRETATION, 4TH EDN. AT P. 291: IT I S WELL -SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIV E OPERATION IS GENERALLY INTENDED. IN FACT 9 ITA NO.2481/M/12 & C.O. NO.86/M/13 THE AMENDMENT WOULD NOT SERVE ITS OBJECT IN SUCH A SITUATION UNLESS IT IS CONSTRUED AS RETROSPECTIVE. THE VIEW, THEREFORE, TAKEN BY THE DE LHI HIGH COURT CANNOT BE SUSTAINED.. SECTION 43B DEALS WITH STATUTORY DUES AND STIPULAT ES THAT THE YEAR IN WHICH THE PAYMENT IS MADE THE SAME WOULD BE ALLOWED AS A DEDU CTION EVEN IF THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTANCY. THE PROVISO, HOWEVER, STIPULATES THAT DEDUCTION WOULD BE ALLOWED WHERE THE STATUTORY DUES COVERED BY SECT ION 43B STAND PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. SECTION 40(A)(I A) IS APPLICABLE TO CASES WHERE AN ASSESSEE IS REQUIRED TO DEDUCT TAX AT SOURCE AND FAILS TO DEDUC T OR DOES NOT MAKE PAYMENT OF THE TDS BEFORE THE DUE DATE, IN SUCH CASES, NOTWITHSTANDING SECTIONS 30 TO 38 OF THE ACT, DEDUCTION IS TO BE ALLOWED AS AN EXPENDITURE IN THE YEAR OF PAYM ENT UNLESS A CASE IS COVERED UNDER THE EXCEPTIONS CARVED OUT. THE AMENDED PROVISO AS INSER TED BY FINANCE ACT, 2010 STATES WHERE AN ASSESSEE HAS MADE PAYMENT OF THE TDS ON OR BEFOR E THE DUE DATE OF FILING OF THE RETURN UNDER SECTION 139(1), THE SUM SHALL BE ALLOWED AS A N EXPENSE IN COMPUTING THE INCOME OF THE PREVIOUS YEAR. THE TWO PROVISIONS ARE AKIN AND THE PROVISOS TO SECTIONS 40(A)(IA) AND 43B ARE TO THE SAME EFFECT AND FOR THE SAME PURPOSE. IN PODAR CEMENT PRIVATE LIMITED (1997) 226 ITR 625(SC) , THE SUPREME COURT CONSIDERED WHETHER TERM OWNER WOULD INCLUDE UNREG ISTERED OWNERS WHO HAD PAID SALE CONSIDERATION AND WERE COVERED BY SECTION 53A OF TH E TRANSFER OF PROPERTY ACT. THE CONTENTION OF THE ASSESSEES WAS THAT THE AMENDMENTS MADE TO THE DEFINITION OF TERM OWNER BY FINANCE BILL, 1987 SHOULD BE GIVEN RETROSPECTIVE EFFECT. IT WAS HELD THAT THE AMENDMENTS WERE RETROSPECTIVE IN NATURE AS THEY RATIONALISE AN D CLEAR THE EXISTING AMBIGUITIES AND DOUBTS. REFERENCE WAS MADE TO CRAWFORD: STATUTORY CONSTRUC TION AND THE PRINCIPLE OF DECLARATORY STATUTES, FRANCIS BENNION: STATUTORY INTERPRETATI ON, JUSTICE G.P. SINGHS PRINCIPLES OF STATUTORY INTERPRETATION, IT WAS OBSERVED THAT SOM ETIMES AMENDMENTS ARE MADE TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE ME ANING OF THE PREVIOUS PROVISION. THE ISSUE WAS ACCORDINGLY DECIDED HOLDING THAT IN SUCH CASES THE AMENDMENTS WERE RETROSPECTIVE THOUGH IT WAS NOTICED THAT AS PER TRANSFER OF PROPE RTY ACT, REGISTRATION ACT, ETC. A LEGAL OWNER MUST HAVE A REGISTERED DOCUMENT. IN VIEW OF THE AFORESAID DISCUSSION IN PARAS 18,19 AND 20, IT IS APPARENT THAT THE RESPONDENT ASSESSE DID NOT VIOLATE THE UNAMENDED SE CTION 40(A)(IA) OF THE ACT. WE HAVE NOTED THE AMBIGUITY AND REFERRED THEIR CONTENTION O F REVENUE AND REJECTED THE INTERPRETATION PLACED BY THEM. THE AMENDED PROVISIONS ARE CLEAR AN D FREE FROM ANY AMBIGUITY AND DOUBT. THEY WILL HELP CURTAIL LITIGATION. THE AMENDED PROV ISION CLEARLY SUPPORT VIEW TAKEN IN PARAGRAPHS 17 20 THAT THE EXPRESSION SAID DUE DA TE USED IN CLAUSE A OF PROVISO TO UNAMENDED SECTION REFERS TO TIME SPECIFIED IN SECTI ON 139(1) OF THE ACT. THE AMENDED SECTION 40(A)(IA) EXPANDS AND FURTHER LIBERALISES THE STATU E WHEN IT STIPULATES THAT DEDUCTIONS MADE IN THE FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR BUT PA ID BEFORE THE DUE DATE OF FILING OF THE RETURN, WILL CONSTITUTE SUFFICIENT COMPLIANCE. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. 5. GROUND NO.3 IS REGARDING DISALLOWANCE UNDER SECT ION 40(A)(IA) IN RESPECT OF MAINTENANCE CHARGES. WE HAVE HEARD THE LD. DR AS WE LL AS THE LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE CLAIM ED MACHINERY MAINTENANCE EXPENSES OF RS.92,700/-. THE AO DISALLOWED THE SAID AMOUNT UNDER SECTION 40(A)(IA) FOR WANT OF TDS. ON APPEAL CIT(A) HAS NOTED THAT OUT OF TOTAL AMOUNT OF RS.92,700/- A SUM OF RS.51,000/- RELATES TO PURCHASE OF DYE PLATS AND PUNCHES AND BALANCE AMOUNT 10 ITA NO.2481/M/12 & C.O. NO.86/M/13 CONSISTED OF EXPENSES ON ACCOUNT OF REPAIR AND MAIN TENANCE NOT EXCEEDING RS.20,000/- OF INDIVIDUAL BILLS. ACCORDINGLY CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE AO. WE NOTE THAT OUT OF TOTAL EXPENDITURE OF RS.92,700/- R S.51,000/- RELATES TO THE PURCHASE OF MACHINERY PARTS, THEREFORE, PROVISIONS OF CHAPTER X VII-B ARE NOT APPLICABLE SO FAR AS THE EXPENDITURE RELATES TO PURCHASE OF MACHINERY PARTS. THE REMAINING EXPENDITURE IS COMPRISING OF SEVERAL BILLS AND THE AMOUNT OF ONE I NDIVIDUAL BILLS DOES NOT EXCEED RS.20,000/-. ACCORDINGLY WE DO NOT FIND ANY ERROR O R ILLEGALITY IN THE IMPUGNED ORDER OF CIT(A). THIS GROUND OF THE REVENUE IS DISALLOWED. 6. REVENUE APPEAL IS PARTLY ALLOWED. 7. CROSS OBJECTION NO. 86/MUM/2013 7.1 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) - 35. MUMHAI ['THE ID. CIT (A)'] ERRED IN CONFIRMING THE ACTION OF THE INCOME TAX OFFICER - 25 (3) (3), MUMBAL ['THE A.O.'] IN DISALLOWING RS. 1,10,964/- [ PART OF TOTAL CLEARING AND FORWARDING EXPENSES OF RS. 5,40,469/-] U/S. 40(A) (IA) OF THE INCOME TAX ACT. 1961 [THE ACT']. 1.2 WHILE DOING SO, THE A.O. FAILED TO APPRECIATE THAT: (I) THE CASE OF THE APPELLANT DID NOT FALL WITHIN T HE PURVIEW OF SECTION 40 (A) (IA) OF THE ACT; AND (II) IN ANY CASE, NO SUCH DISALLOWAN CE WAS CALLED FOR. 7.2 THE AO HAS DISALLOWED A SUM OF RS.5,30,469/- ON ACCOUNT OF CLEARING AND FORWARDING EXPENSES UNDER SECTION 40(A)(IA) FOR WA NT OF DEDUCTION OF TAX. BEFORE CIT(A) THE ASSESSEE HAS SUBMITTED THAT THE ENTIRE E XPENSES DOES NOT CONSIST OF AGENCY COMMISSION BUT IT INCLUDES AN AMOUNT OF RS.4,19,505 /- TOWARDS REIMBURSEMENT OF EXPENSES. THE ASSESSEE ALSO POINTED OUT THAT THE BI LLS FOR SUCH EXPENSES INCURRED BY C&F AGENTS WERE SEPARATELY RAISED BY THE ASSESSEE I N ADDITION TO THE BILLS FOR AGENCY CHARGES PAYABLE. THE ASSESSEE THEREFORE, RELIED UPO N THE CBDT CIRCULAR NO.715 DATED 08/08/1995 IN SUPPORT OF ITS CLAIM THAT THE REIMBUR SEMENT OF ACTUAL EXPENDITURE HAVING NO ELEMENT OF PROFIT INVOLVED CANNOT BE SUBJECT TO TDS. ACCORDINGLY THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF RE IMBURSEMENT OF EXPENSES 11 ITA NO.2481/M/12 & C.O. NO.86/M/13 AMOUNTING TO RS.4,19,505/- AND CONFIRMED THE DISALL OWANCE OF THE BALANCE AMOUNT OF RS.1,10,964/-. THE ASSESSEE HAS RAISED THIS ISSUE I N CROSS OBJECTION. 7.3 BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMI TTED THAT THE PAYMENT MADE TOWARDS CLEARING AND FORWARDING EXPENSES DOES NOT F ALL UNDER SECTION 40(A)(IA) AS THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE AGENCY. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE SERVICE AVAILED BY THE AS SESSEE FROM THE C&F AGENCY IS UNDER THE AGENCY CONTRACT AND EVEN IF THERE IS NO W RITTEN CONTRACT THERE EXISTS ORAL CONTRACT BETWEEN THE TWO PARTIES. 7.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THIS PLEA OF HAVING NO CONT RACT BETWEEN ASSESSEE AND C&F AGENCY HAS BEEN RAISED BY THE ASSESSEE FOR THE FIRS T TIME BEFORE US. BEFORE THE CIT(A) THE ASSESSEE MADE THE SUBMISSIONS WHICH HAS BEEN RE PRODUCED FROM PARA 5.1 OF THE ORDER OF CIT(A):- 5.1 THE AUTHORISED REPRESENTATIVE OF THE APPELLANT HAS FILED THE, FOLLOWING WRITTEN SUBMISSIONS. CLEARING & FORWARDING EXPENSES AMOUNTING TO RS. 5, 30,469/- HAS BEEN DISALLOWED BY LEARNED A.0. BUT THE ENTIRE EXPENSE DOES NOT CON STITUTE AGENCY COMMISSION, AND INCLUDED IN THE ABOVE AMOUNT IS RE IMBURSEMENT OF EXPENSES AMOUNTING TO RS.4,19,505/-. IT HAS BEEN AG REED BETWEEN ASSESSEE AND R P PATEL SHIPPING AND LOGISTICS PVT. LTD. (CUSTOMS HOU SE AGENTS) THAT VARIOUS EXPENDITURE SUCH AS TRANSPORTATION CHARGES, DOCUMEN TATION CHARGES, UNLOADING CHARGES ETC. WILL BE INITIALLY PAID BY C.H.A. ON B EHALF THE ASSESSEE AND SUBSEQUENTLY BE REIMBURSED BY THE ASSESSEE AS AND W HEN THE C.H.A. WILL RAISE A SEPARATE BILL FOR REIMBURSEMENT OF ACTUAL EXPENDITU RE INCURRED. BILLS FOR SUCH EXPENSE INCURRED BY C H A WERE SE PARATELY RAISED BY THEM ON ASSESSEE IN ADDITION TO BILLS FOR AGENCY CHARGES PAYABLE AND SINCE THE AMOUNT OF BILLS SO RAISED WAS TOWARDS THE ACTUAL EXPENSES INC URRED BY THEM, THERE IS NO ELEMENT OF PROFIT INVOLVED IN THE SAID BILLS. IT IS A CLEAR CASE OF REIMBURSEMENT OF ACTUAL EXPENSES OF THE ASSESSEE AND THE SAME, THEREFORE WA S NOT OF THE NATURE OF PAYMENT COVERED BY SECTION 194C/J REQUIRING THE ASSESSEE TO DEDUCT TAX THERE FROM. THE ABOVE CONTENTION IS BEEN SUPPORTED BY C'BDT CI RCULAR NO. 715 DATED 8-8-1995, WHEREIN IF IS STATED THAT WHERE THE BILLS ARE RAISED FOR THE GROSS AMOUNT INCLUSIVE OF CHARGES/FEES AS WELL AS REIMBURSEMENT OF ACTUAL EXPENSES, REIMBURSEMENTS CANNOT BE DEDUCTED OUT OF THE BILL AMOUNT FOR THE PURPOSE OF TDS. CONVERSELY PUT IF THERE IS NO C OMPOSITE BILL BUT SEPARATE BILL HAS BEEN RAISED FOR CHARGES/FEES AND REIMBURSEMENT OF ACTUAL 12 ITA NO.2481/M/12 & C.O. NO.86/M/13 EXPENDITURE BORNE, THE SAME CANNOT BE SUBJECT TO TD S AS A PART OF GROSS BILL AS THERE BEING NO INCOME INCLUDED IN THE AMOUNT OF REIMBURSE MENT WHICH WAS ON THE BASIS OF ACTUAL EXPENSES INCURRED. SAME POSITION OF LAW IS A LSO BEEN CLARIFIED IN BOARDS CIRCULAR NO. 714 DATED 3.8-1995. AS SUCH THE A. 0. IS NOT JUSTIFIED IN TREATING AS SESSEE AS 'ASSESSEE IN DEFAULT' FOR NON DEDUCTION OF TDS ON THE REIMBURSED AMOUNT A ND ALSO IN CHARGING INTEREST U/S.234B. HENCE THE EXPENDITURE SHOULD BE DISALLOWE D.' 7.5 THUS IT IS CLEAR THAT THE GRIEVANCE OF THE ASS ESSEE BEFORE CIT(A) IS ONLY IN RESPECT OF THE AMOUNT OF RS.4,19,505/- CLAIMED TO BE REIMBU RSEMENT OF EXPENSES. THE CIT(A) HAS ACCEPTED THE SAID CONTENTION OF THE ASSESSEE AN D ALLOWED TO THE EXTENT OF SAID AMOUNT OF RS.4,19,505/-. ACCORDINGLY, THE BALANCE A MOUNT OF RS.1,10,964/- WAS CONFIRMED BY CIT(A). AS IT IS MANIFEST FROM THE REC ORD, THAT NO SUCH GRIEVANCE WAS RAISED BEFORE CIT(A), AND FURTHER, THE FRESH PLEA R AISED BEFORE THIS TRIBUNAL REQUIRED THE FINDING OF FACT, WHETHER ANY CONTRACT BETWEEN THE P ARTIES DID EXIST OR NOT. EVEN OTHERWISE THE PAYMENT OF SERVICE CHARGES TO C&F AGE NT IS BASED ON AGREED RATE/CHARGES WHICH CONSTITUTE AN AGREEMENT BETWEEN THE PARTIES. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY MERIT OR SUBSTANCE IN THE CROSS OBJECTION OF THE ASSESSEE HENCE, THE SAME IS DISMIS SED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED AND THE CROSS OBJECTION RAISED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/ 02/2015 ( # %&' ) *! + 11/02//2015 # ,' SD/- SD/- ( SANJAY ARORA ) ( VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER -' MUMBAI; *! DATED 11/02 /2015 . ! . ./ JV, SR. PS 13 ITA NO.2481/M/12 & C.O. NO.86/M/13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , !' / DR, ITAT, MUMBAI 6. #$ %' / GUARD FILE. ' ' ' ' / BY ORDER, ' //TRUE COPY// ( ( ( ( / ') ') ') ') * * * * (DY./ASSTT. REGISTRAR) , !' / ITAT, MUMBAI.