Adarsh Marine Enterprises Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 1093/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64530 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R GANESANC A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI (BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ) .. I.T.A. NO. 1093/MDS/12 ASSESSMENT YEAR : 2007-08 M/S.ADARSH MARINE ENTERPRISES PRIVATE LIMITED, NO.2,NAGALINGAM STREET, SIVAGAMI NAGAR, GOWRIWAKKAM, CHENNAI 600 073. PAN : AAFCA 6734 H (APPELLANT) V. DCIT, COMPANY CIRCLE I(1) CHENNAI.600 034 (RESPONDENT) APPELLANT BY : SHRI R.GANESAN,C.A. RESPONDENT BY : SHRI GURU B ASHYAM DATE OF HEARING : 07.11.12 DATE OF PRONOUNCEMENT : 08.11.12 O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-III, CHENNAI DATED 06.02.2012. ITA NO. 1093/MDS/12 2 2. THE A.R. SUBMITTED THAT ALTHOUGH THE ASSESSEE HAS TAKEN SEVEN GROUNDS OF APPEAL, WHICH ARE INTER-RELATED AN D PERTAINED TO ONLY ONE ISSUE OF DISALLOWANCE OF TRAINING EXPENSES OF RS.16,96,081/- AND COMMISSION PAYMENT OF ` 15,88,140/- UNDER SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS. THE A.R SUBMITT ED THAT MOST OF THE SHIPPING COMPANIES WERE SITUATED IN MUMBAI. TH E SHIPPING COMPANIES ARE FOREIGN SHIPPING COMPANIES. THE ASSE SSEE HAD ARRANGED FOR SUITABLE PLACEMENT OF YOUNG ASPIRANTS. THE COMPANY MAKES EFFORTS TO LINK THE REQUIREMENTS OF BOTH THE ASPIRANTS AND SHIPPING COMPANY AND ULTIMATELY GETS SUITABLE PLACE MENTS FOR THE ASPIRANTS IN FOREIGN SHIPPING COMPANIES. THE COMPA NY COLLECTS REQUIRED AMOUNT ON IMPREST ACCOUNT FROM ASPIRANTS P LACED FOR THE EXPENSES SUCH AS AIR-TICKET, VISA, MEDICAL EXAMINAT ION AND OTHER INCIDENTAL EXPENSES ON BEHALF OF THE ASPIRANTS AS T HEY CANNOT HANDLE SUCH MATTERS AT THEIR OWN. THE COMPANY TAKES SERVI CE CHARGES FOR THE INTERMEDIATING FACILITATING SERVICE PROVIDED BY IT TO THE ASPIRANTS. THE SERVICE CHARGE EARNED BY THE COMPANY ALONE CONS TITUTED THE TURNOVER OF THE COMPANY OUT OF WHICH IT MEETS THE A DMINISTRATIVE EXPENSES. THE TRAINING EXPENSES REPRESENTS FEES PA ID TO THE ITA NO. 1093/MDS/12 3 ACADEMY OF MARITIME EDUCATION AND TRAINING AND SA ILORS MARITIME ACADEMY, THAT TRAINING FEES PAID BY THE ASSESSEE CO MPANY, IS NOT LIABLE TO TDS AS THE ASSESSEE HAS COLLECTED THE AMO UNT AS AN AGENT. HE SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED THE TRAINING EXPENSES AND COMMISSION EXPENSES AS A DEDUCTION IN THE PROFIT AND LOSS ACCOUNT AND THEREFORE, IS NOT LIABLE FOR DISAL LOWANCE OF THE EXPENSES UNDER SECTION 40(A)(IA) OF THE ACT FOR NON -DEDUCTION OF TDS. STILL FURTHER IT WAS THE SUBMISSION OF THE A.R THAT IT WILL BE SEEN THAT AS AT THE YEAR END THERE IS NO OUTSTANDING LIABILITY I N THE BALANCE SHEET OF THE COMPANY TOWARDS PAYMENT OF TRAINING EXPENSES AN D COMMISSION AND THEREFORE, IN VIEW OF THE DECISION OF THE VISAK APATANAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPI NG & TRANSPORTS IN [2012] 20 TAXMANN.COM 244(VISAKHAPATNAM), NO DIS ALLOWANCE OF THE EXPENSES CAN BE MADE FOR NON-DEDUCTION OF TDS 3. ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE S UPPORTED THE ORDERS OF THE LOWER AUTHORITIES. ITA NO. 1093/MDS/12 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD . IN THE INSTANT CASE, THE UNDISPUTED FACTS ARE THAT THE ASSESSEE C OMPANY RUNS A PLACEMENT AGENCY, IT ACTS AS A INTERMEDIARY AND FAC ILITATOR BETWEEN CANDIDATES SEEKING PLACEMENT IN SHIPS AND SHIPPING COMPANIES LOOKING FOR SUITABLE PERSONNEL FOR SHIPS. THE ASS ESSEE MADE PAYMENT FOR TRAINING EXPENSES OF ` 16,96,081/- AND COMMISSION OF ` 15,88,140/- AS FEES TO ACADEMY OF MARITIME EDUCATI ON AND TRAINING AND SAILORS MARITIME ACADEMY. THE ASSESSEE DID NOT DEDUCT ANY TDS ON THESE PAYMENTS. ACCORDING TO A.O, THE ASSES SEE COMPANY SHOULD HAVE SUBJECTED THESE PAYMENTS TO TDS UNDER THE PROVISIONS OF CHAPTER-XVIIB OF THE ACT. SINCE THE ASSESSEE HA S NOT DEDUCTED THE TDS ON THE ABOVE EXPENSES, THEREFORE, HE MADE D ISALLOWANCE OF THE SAME BY INVOKING THE PROVISIONS OF SEC.40(A)(IA ) OF THE ACT. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. BOTH THE PARTIES BEFORE US AGREED THAT THERE WERE N O PAYMENTS OUTSTANDING AS AT THE END OF THE YEAR ON ACCOUNT OF TRAINING EXPENSES AND COMMISSION. THEREFORE, THE CASE OF THE ASSESS EE IS SQUARELY COVERED BY THE DECISION OF THE VISAKAPATANAM SPECIA L BENCH OF ITA NO. 1093/MDS/12 5 TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPOR TS(SUPRA) WHEREIN IT WAS HELD THAT PROVISIONS OF SEC.40(A)(IA) ARE A PPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS AT TH E END OF THE YEAR AND IT CANNOT BE INVOKED TO DISALLOW THE EXPENDITUR E, WHICH HAS BEEN ACTUALLY PAID DURING THE PREVIOUS YEAR WITHOUT DEDU CTION OF TDS. RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE O RDERS OF THE LOWER AUTHORITIES AND DELETE THE DISALLOWANCE OF TRAINING EXPENDITURE OF ` 16,96,081/- AND COMMISSION OF ` 15,88,140/- AND ALLOW THE GROUNDS OF APPEAL OF ASSESSEE. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON THURSDAY , THE 08 TH NOVEMBER, 2012 AT CHENNAI. SD/- SD/- (S.S.GODARA) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 08 TH NOVEMBER, 2012. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE ITA NO. 1093/MDS/12 6