M.S. Nirmala L/R of Late M.B. Sivanandam, Hindupur V. Income Tax Officer, Ward-2, Hindupur

ITA 1223/Hyd/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2992 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-06-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 13-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: K A SAI PRASAD
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD BENCHES CIRCUIT BENCH A AT TIRUPATI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA. NOS. 1223/HYD/2017 (A.Y.2008 - 2009) SMT. M.S. NIRMALA L/R OF LATE M.B. SIVANANDAM, PROP: ANDHRA STARCH MANUFACTURING COMPANY, D.NO. 5 - 7 - 2, RLY GOODS SHED ROAD, HINDUPUR 515201. PAN: AACHS 8351 N VS THE INCOME TAX OFFICER, WARD - 2, HINDUPUR. APPELLANT RESPONDENT ASSESSEE BY SHRI K.A. SAI PRASAD REVENUE BY SMT. KOMALI KRISHNA, DR DATE OF HEARING 17.05.2018 DATE OF PRONOUNCEMENT 23 .05.2018 ORDER PER D. MANMOHAN, VP: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A), KURNOOL AND IT PERTAINS TO ASSESSMENT YEAR 2008 - 2009. 2. ASSESSMENT MADE BY THE A.O. U/S 143(3) R.W.S 263 OF THE ACT , HAVING BEEN CONFIRMED BY THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF TAMARIND SEEDS AND SEED POWER. ASSESSEE PAID EXPORT AND SHIPPING CHARGES TO THE CARGO HANDLING AGENTS, WHO INCURRED THE EXPENSES ON BEHALF OF THE ASSESSEE. ACCORDING TO THE ASSESSEE, IT IS A C OMMON PRACTICE IN THIS LINE OF BUSINESS THAT THE EXPENSES ARE INCURRED BY AGENTS AND THE AMOUNTS ARE PAID BY THE ASSESSEE TO THE AGENTS . IN FACT THE 2 AMOUNT WAS TO BE PAID TO THE GOVERNMENT ORGANISATIONS LIKE INDIAN RAILWAYS, SHIPPING CORPORATION ETC. INS TEAD OF ASSESSEE DIRECTLY PAYING THE AMOUNT TO GOVERNMENT ORGANISATIONS, IT IS PAYING THROUGH AGENTS WHO ARE ENTITLED TO SOME NOMINAL COMMISSION. 4. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE IS DUTY BOUND TO DEDUCT TAX AT SOURCE U/S 194C OF THE ACT . I N THE ABSENCE OF DEDUCTING TAX AND REMITTING IT TO THE GOVERNMENT ACCOUNT, THE EXPENDITURE OF RS. 4,00,662/ - WAS DISALLOWED U/S 40(A)(IA) OF THE ACT. 5. ON AN APPEAL FILED BY THE ASSESSEE, LD. CIT(A) OBSERVED THAT NONE APPEARED FOR THE ASSESSEE AND THEREFORE, IT DESERVES TO BE DISMISSED. HOWEVER, HE ALSO DECIDED THE ISSUE ON MERITS WHEREIN HE ADMITTED THAT THE ASSESSEE HAD SUBMITTED ALL THE DETAILS OF EX PORT AND SHIPPING FORWARD AND THE CHARGES WERE PAID TO THE AGENTS BUT HE WAS OF THE OPINION THAT THE CHARGES HAVING NOT BEEN PAID TO THE GOVERNMENT AGENCIES DIRECTLY, THE SAME IS ATT RACTED BY THE PROVISIONS OF SECTION 194C OF THE ACT. HE THEREFORE CONFIR MED THE ORDER OF THE A.O. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 6. LEARNED COUNSEL , APPEARING ON BEHALF OF THE ASSESSEE , SUBMITTED THAT THOUGH THERE ARE JUSTIFIABLE REASONS FOR NON - APPEARANCE BUT SINCE ASSESSEE HAS A STRONG CASE ON MERITS H E LIMITED HIS ARGUMENTS TO THE MERITS OF THE ISSUE I.E., THE CORRECTNESS OF INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. IN THIS REGARD, HE RELIED UPON THE ORDER OF THE ITAT MUMBAI BENCH IN THE CASE OF SMT. MADHU MEHTA VS. DCIT (48 ITR (TRIB) 246) WHEREIN IT WAS HELD THAT REIMBURSEMENT OF EXPENSES PAID BY THE ASSESSEE TO THE CLEARING AND FORWARDING AGENTS CANNOT BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AS THERE IS NO LIABILITY ON THE ASSESSEE TO DEDUCT TAX AT SOU RCE U/S 194C OF THE ACT SINCE THE CLEARING AND FORWARDING AGENTS ARE MERELY DISCHARGING 3 FUNCTIONS ON BEHALF OF THE ASSESSEE. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PAYMENTS MADE TO GOVERNMENT AGENCIES DO NOT ATTRACT THE PROVISIONS OF SECTION 194C OF THE ACT. AT BEST, COMMISSION, IF ANY, PAID BY THE ASSESSEE TO THE MIDDLEMEN CAN BE CONSIDERED FOR DISALLOWANCE WHEREAS THE TAX AUTHORITIES HAVE TAKEN THE TOTAL AMOUNT INTO CONSIDERATION FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 40(A)(I A) OF THE ACT. 7. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT IN THE FITNESS OF THINGS THE MATTER DESERVES TO BE VERIFIED BY THE ASSESSING OFFICER AS TO WHETHER THE ASSESSEE HAS PAID ANY COMMISSION TO THE AGENTS. 8. IN THE LI GHT OF THE DECISION CITED (SUPRA) AND HAVING REGARD TO THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION, THAT IN THE FITNESS OF THINGS THE MATTER DESERVES TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER, WHO IS DIRECTED TO RE - CONSIDER THE ISSUE IN ACCORDA NCE WITH LAW , IN THE LIGHT OF THE DECISION CITED (SUPRA). 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018. SD/ - SD/ - (B. RAMAKOTAIAH) (D. MANMOHAN) ACCOUNTAT MEMBER VICE PRESIDENT HYDERABAD , DATED: 23 RD MAY, 2018. OKK, SR.PS 4 COPY TO 1. SMT. M.S. NIRMALA L/R OF LATE M.B. SIVANANDAM, C/O. CH. PARTHASARATHY & CO., 1 - 1 - 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST . NO.1, ASHOKNAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD - 2, HINDUPUR - 515201. 3. CIT(A), KURNOOL. 4. PRINCIPAL COMMISSIONER OF INCOME TAX, KURNOOL 5. DR, ITAT, HYDERABAD. 6. GUARD FILE.