The ITO, Ward-7(2), Ahmedabad V. Shri Ajay Hirendranath Biswas, Ahmedabad

ITA 1045/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76754 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY
• Assessee Lawyers: M K PATEL
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER ITO, WARD-7(2) AHMEDABAD (APPELLANT) VS SHRI AJAY HIRENDRANATH BISWAS, 319, ADVAIT, OPP. SOHAM TOWER, NR. SANDESH PRESS, VASTRAPUR, AHMEDABAD PAN: ADKPB8904H (RESPONDENT) REVENUE BY: SRI A.K. PANDEY, SR.D.R. ASSESSEE BY: SRI M.K. PATEL, A.R. DATE OF HEARING : 02-06-2014 DATE OF PRONOUNCEMENT : 06-06-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-XIV, AHMEDABAD DATED 11-01-2011 DELETING THE ADDITION OF RS. 33,37,951/- BEING DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. ITA NO. 1045/AHD/2011 ASSESSMENT YEAR 2007-08 I.T.A NO. 1045 /AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. SHRI AJAY HIRENDRANATH BISWAS 2 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS AO FOUND THAT ASSESSEE HAS MADE PAYMENT TOWARDS FRE IGHT AND FORWARDING EXPENSES AND TRANSPORT EXPENSES TO DIFFERENT PARTIE S AMOUNTING TO RS. 29,94,378/- AND RS. 3,43,573/- RESPECTIVELY. WHEN ASSESSEE WAS ASKED AS TO WHY ON THESE PAYMENTS TAX WAS NOT DEDUCTED, A SSESSEES CONTENTION WAS THAT THESE PAYMENTS WERE REIMBURSED BY THE RESP ECTIVE PARTY WHO WAS THE REAL OWNER OF GOODS. HENCE LIABILITY OF DE DUCTION OF TDS DID NOT ARISE AS THEY WERE NOT ASSESSEES EXPENSES. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION OBSERVING THAT ASSESSEE HAS S HOWN INCOME FROM REIMBURSEMENT OF EXPENSES OF RS. 2,82,414/- WHICH I S NETTING OF THE RECEIPT AND PAYMENT. THE GROSS RECEIPT DURING THE YEAR WAS RS. 1,62,49,168/- AND PAYMENT MADE OUT OF WHICH WAS RS. 1,59,66,754/- . THE AO ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT HE WAS NOT LIABLE TO TAX AUDIT U/S. 44AB. HE FURTHER OBSERVED THAT IF THE ASSESSE E WANTED TO FOLLOW THE VARIOUS PROVISIONS UNDER THE ACT, HE MIGHT HAVE DED UCTED TDS ON THESE PAYMENTS AND GOT IT REIMBURSED THROUGH HIS CLIENT A LONG WITH THE AMOUNT OF TDS SINCE AS PER THE PROVISION OF SECTION 194C OF T HE ACT, ASSESSEE WAS LIABLE TO TAX ON PAYMENTS TOWARDS FREIGHT AND FORWA RDING EXPENSES AND TRANSPORT EXPENSES TO DIFFERENT PARTIES AMOUNTING T O RS. 29,94,378 AND RS. 3,43,573/-. THE AO ACCORDINGLY DISALLOWED THESE AM OUNTS UNDER SECTION 40(A)(IA) OF THE ACT IN CONTRAVENTION OF PROVISIONS OF SECTION 194C OF THE ACT. LD. CIT(A) AFTER TAKING INTO CONSIDERATION TH E SUBMISSIONS OF THE ASSESSEE WHICH HAVE BEEN REPRODUCED BY HIM IN HIS O RDER DELETED THIS ADDITION BY OBSERVING AS UNDER:- 2.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUB MISSIONS. THE EVIDENCES PLACED ON RECORD BY THE LEARNED A.R. AND THE LEGAL POSITION HAVE ALSO BEEN CONSIDERED AND PERUSED. ON PERUSAL OF THE SAME , I FIND THAT THE FACT THAT SINCE THE APPELLANT IS A CLEARING AND FORWARDI NG AGENT IT HAS TO MAKE VARIOUS EXPENSES FOR CLEARING THE GOODS FOR/ON BEHA LF OF THE CLIENTS, WHICH EXPENSES ARE THEN REIMBURSED BY THE CLIENTS AND DO NOT FORM PART OF APPELLANT'S PROFIT IS NOT IN DISPUTE. THE FACT THAT THE EXPENSES ARE INCURRED ON BEHALF OF THE CLIENTS AND THE SAME ARE REIMBURSE D IS ALSO NOT IN DOUBT I.T.A NO. 1045 /AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. SHRI AJAY HIRENDRANATH BISWAS 3 AS EVIDENT FROM THE COPY OF ACCOUNT OF THE EXPENSES AND PARTY ACCOUNTS AS FURNISHED BEFORE ME. IT FURTHER APPEARS ON PERUS AL OF THE OBSERVATIONS OF THE A.O, THAT HE WAS OF THE OPINION THAT THE APP ELLANT OUGHT TO HAVE DEDUCTED THE TDS FROM THE GROSS PAYMENT AND THEN RE COVERED THE EXPENSES FROM CLIENTS ALONG WITH TDS. IN THIS RESPE CT, I AGREE WITH THE CONTENTION OF THE A.R. THAT THE SAID OBSERVATION OF THE A.O. IS NOT IN CONSONANCE WITH THE PROVISIONS OF SECTION 194C SINC E THE APPELLANT IS NOT THE 'PERSON RESPONSIBLE' FOR DEDUCTING TDS AS PER T HE PROVISIONS OF SECTION 194C OF THE ACT, I FURTHER AGREE THAT THE L IABILITY TO TAX AT BEST CAN BE ONLY IN RESPECT OF THE PAYMENTS MADE TO THE AGEN CY WHICH IS SEPARATELY SHOWN IN THE BILLS AND NOT ON THE REIMBU RSEMENT OF EXPENSES. THE ARGUMENT OF THE A,R, THAT 'WHEN A C & F AGENT I NCURS EXPENSES LIKE THE CUSTOM DUTY, PORT DUES AND SUNDRY OTHER CHARGES , HE'S MERELY ACTING AS A FRONT MAN OF THE COMPANY. THESE EXPENSES HAVE NO NEXUS WITH THE COMMISSION HE IS SUPPOSED TO GET FOR HIS WORK. THE BILLS PRODUCED BY HIM BEAR THE NAME OF THE CONSIGNOR COMPANY. A BILL OR A RECEIPT BACKS UP EACH OF THE REIMBURSEMENTS HE SEEKS. SO IN A WAY WE CAN SAY THAT THE C & F AGENT DOES NOT INCUR THESE EXPENSES ON BEHALF OF TH E COMPANY; RATHER IT IS THE COMPANY THAT INCURS THESE EXPENSES THROUGH HIM' APPEARS TO BE PLAUSIBLE. THE LEARNED A,R, HAS ALSO POINTED OUT TH AT THE REIMBURSEMENTS IN NO WAY CONSTITUTE TRADING RECEIPT OF THE C & F A GENT, WHICH IS SUPPORTED BY THE DEFINITION OF 'GROSS RECEIPTS' OF BUSINESS I N TERMS OF WHAT IS TO BE INCLUDED AND WHAT IS TO BE EXCLUDED AS LAID CLOWN BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IN PARA 5.11 OF THE GUIDANCE NOTE ON TAX AUDIT FRAMED BY ICAI WHICH CLEARLY AND CATEGORICALL Y SAYS THAT IN CASE OF A CLEARING AGENT, 'REIMBURSEMENT OF CUSTOMS DUTY AND OTHER CHARGES COLLECTED BY A CLEARING AGENT' WOULD NOT FORM PART OF HIS GROSS RECEIPTS IN BUSINESS. THE DECISIONS RELIED UPON BY THE LEARNED A.R, ALSO REITERATE THE SAID POSITION OF LAW THAT REIMBURSEMENTS MADE TO C & F AGENTS ARE NOT LIABLE TO TDS. IN THE LIGHT OF FOREGOING DISCUSSION , I AM IN AGREEMENT WITH THE LEARNED A.R. THAT NO TDS IS REQUIRED TO BE DEDU CTED IN RESPECT OF REIMBURSEMENT OF EXPENSES. ACCORDINGLY, THE ADDITIO N OF RS.33,37,951/- IS HEREBY DELETED. 3. AGGRIEVED BY THIS ORDER OF LD. CIT(A) NOW THE RE VENUE IS IN APPEAL BEFORE US. 4. LD. DR RELIED ON THE ORDER OF AO WHILE LEARNED C OUNSEL OF THE ASSESSEE RELIED ON THE ORDER OF LD. CIT(A) AND FURT HER SUBMITTED THAT VIEW TAKEN BY LD. CIT(A) IS IN LINE OF THE DECISION OF T HIS BENCH IN THE CASE OF PRAYAS ENGINEERING LTD VS. ACIT VIDE ITA NO. 2825/A HD/2007 DATED I.T.A NO. 1045 /AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. SHRI AJAY HIRENDRANATH BISWAS 4 29/04/2014 WHEREIN ON SIMILAR FACTS ADDITION MADE I N RESPECT OF REIMBURSEMENT OF EXPENSES HAS BEEN DELETED BY THE T RIBUNAL. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT ADDITION OF RS. 33,37,951/- HAS BEEN MADE BY THE AO BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT IN RESPECT OF REIMBURSED EXPENSES. ON THESE FACTS RATI O OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GU JARAT NARMADA FERTILIZER COM. IS SQUARELY APPLICABLE FOLLOWING WHICH THE AHM EDABAD BENCH OF THE TRIBUNAL IN THE CASE OF PRAYAS ENGINEERING LTD VS. ACIT (SUPRA) HAS HELD AS UNDER:- 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT ON THE COMM ISSION PAID BY THE ASSESSEE TO THE AGENT FOR CLEARING AND FORWARDING T AX WAS DUTY DEDUCTED. THE ONLY DISPUTE BEFORE US IS REGARDING TDS ON EXPE NSES INCURRED BY THE AGENT ON BEHALF OF THE ASSESSEE-COMPANY WHICH WERE SUBSEQUENTLY REIMBURSED BY THE ASSESSEE-COMPANY TO THE AGENCY. T HE ISSUE IS NOW COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVEN UE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS GUJARAT NARMADA VALLEY FERTILIZERS CO WHEREIN ON SIMILAR FA CTS HON'BLE HIGH COURT HAS HELD THAT NO PART OF AMOUNT REIMBURSED WAS TO B E DISALLOWED U/S, 40(A){IA) IF TAX HAS NOT BEEN DEDUCTED WHICH IS CLE AR FROM THE HEAD NOTES OF JUDGMENT WHICH READS AS UNDER:- 'SECTION 40(A)(IA) OF THE INCOME-TAX ACT 1961-BUSIN ESS DISALLOWANCE-INTEREST ETC., PAID TO RESIDENT WITHOU T DEDUCTION OF TAX {REIMBURSEMENT TO EXPENSES]-EXPENSES WERE INCURRED BY AGENT ON BEHALF OF ASSESSEE-PRINCIPAL FOR TRANSPORTATION AND OTHER CHARGES, WHICH HAD BEEN SPELT OUT IN BILL ITSELF-SO FAR AS O BLIGATION TO DEDUCT TAX AT SOURCE FORM PAYMENT OF TRANSPORT CHARGES AND OTHER CHARGES WAS CONCERNED, SAME WAS COMPLIED WITH BY AGENT, WHO HAD MADE PAYMENT ON ITS BEHALF -WHETHER NO PART OF AMOUNT RE IMBURSED WAS TO BE DISALLOWED-HELD, YES [PARA 3] [IN FAVOUR OF A SSESSEE]' IN VIEW OF THE ABOVE, THIS GROUND OF ASSESSEE IS AL LOWED. IN VIEW OF THE ABOVE, WE FEEL THAT NO NEED TO INTER FERE WITH THE ORDER OF LD. CIT(A) AND THE SAME IS HEREBY UPHELD. I.T.A NO. 1045 /AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. SHRI AJAY HIRENDRANATH BISWAS 5 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 06/06/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,