Teesta Valley Exports Ltd., Kolkata V. DCIT, Circle - 4(2), Kolkata, Kolkata

ITA 1242/KOL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1185 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 05-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS; C J SINGH JCITSRDR
• Keywords: Earning of tax free income; TDS
• Section: 143(3); 14A; 40(a)(ia); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1242 / KOL / 2018 ASSESSMENT YEAR :2012-13 TEESTA VALLEY EXPORTS LTD., 3, NETAJI SUBHAS ROAD, KOLKATA-001 [ PAN NO.AAACT 9980 D ] V/S . DCIT, CRICLE-4(2), AAYKAR BHAWAN, 4THFLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SANJAY BHATTACHARYA, FCA /BY RESPONDENT SHRI C.J. SINGH, JCIT-SR-DR & SMT. RANU BISWAS, ADDL.CIT-DR /DATE OF HEARING 02-09-2019 & 13.12.2019 /DATE OF PRONOUNCEMENT -12-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATAS O RDER DATED 24.04.2018 PASSED IN CASE NO.11320 & 1372/CIT(A)-2/15-16, INVO LVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE A CT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEE S FIRST SUBSTANTIVE GRIEVANCE RAIS ED IN THE INSTANT APPEAL CHALLENGES CORRECTNESS OF BOTH THE LOWER AUTHORITIE S ACTION DISALLOWING ITS WAREHOUSING CHARGES OF 14,06,503/- U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF FAILURE IN DEDUCTING TDS THEREUPON. CASE FILE SUGGE STS THAT THE VERY ISSUE HAD COME UP FOR HEARING IN SUBSEQUENT ASSESSMENT YEAR 2 013-14 AS WELL WHEREIN ITA NO.1242/KOL/2018 A.Y.2012-13 TEESTA VALLEY EXPORTS LTD. V. DCIT, CIR-4(2), K OL. PAGE 2 THE TRIBUNALS CO-ORDINATE BENCHS DECISION REJECTE D THE ASSESSEES EXPLANATION AS FOLLOWS:- 2. WE COME TO THE FIRST ISSUE OF WAREHOUSING CHARGE S DISALLOWANCE AMOUNTING TO 10,38,944/- ON ACCOUNT OF NON-DEDUCTION OF TDS UNDE R SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE CLAIMED TO HAVE PAID TWO INDIVIDUALS N AMELY PROLOY NEOGY AND ITA NO.399/KOL/2017 A.Y. 2013-14 TEESTA VALLEY EXPORTS LTD. VS. DCIT, CIRCLE 4(2), KOLKATA PAGE 2 BANNYA NEOGY FOR HAVING INCURRED THE IMPUGNED WAREHOUSING CHARGES ON ITS BEHALF ULTIMATELY PAID TO THIRD PART Y PAYEES. THE ASSESSING OFFICER DISALLOWED THE SAME ON ACCOUNT OF ITS FAILURE IN DE DUCTING TDS THEREUPON UNDER SECTION 40(A)(IA) OF THE ACT. THE CIT(A) UPHOLDS TH E ASSESSING OFFICERS ACTION AS FOLLOWS: UNDER THE ACCOUNTING HEAD ' OTHER MISC. EXPENSES ' THERE WERE ' WAREHOUSING CHARGES ' AGGREGATING TO RS.11,96,869. ON BEING ASKED BY THE ASSESSING OFFICER, THE APPELLANT SUBMITTED THE DETAILS OF ' WAREHOUSING CHARGES ' WHICH INCLUDED TWO PAYMENTS OF RS.9,07,209 TO PRO LOY NEOGI AND RS.1,31,735 TO BANNYA NEOQI, AGGREGATING TO RS.10,3 8,944. IT WAS EXPLAINED BY THE APPELLANT THAT BLENDING OF TEA WAS USED TO B E MADE AT THE APPELLANT'S PREMISES AS WELL AS THROUGH ONE OUTSIDE CONTRACTOR, VIZ; TARA TEA BLENDING CO. (TTBC) THE SAID TTBC WERE ALSO RENDERING OTHER INCIDENTAL SERVICES IN RELATION TO THE EXPORT OF TEA BY THE APPELLANT. DUR ING THE YEAR THE APPELLANT PAID AN AGGREGATE AMOUNT OF RS.27,45,455 TO TTBC FO R BLENDING CHARGES, SAMPLING CHARGES, PACKING CHARGES, TEA SHIPMENT EXP ENSES AND ALSO TOWARDS WAREHOUSING CHARGERS. THE ABOVEMENTIONED AG GREGATE AMOUNT OF RS.27,45,455 INCLUDED RS.49,952 PAID TOWARDS WAREHO USING CHARGES. SOME PORTION OF THE APPELLANT'S TEA WAS BEING KEPT AT TT BCS WAREHOUSE FOR WHICH RS.49,952 WAS PAID TO TTBC AS WAREHOUSING CHARGES. BESIDES TTBC'S WAREHOUSE THE APPELLANT HAD TO STORE SOME PORTION O F TEA IN DIFFERENT OTHER WAREHOUSES AND THE SAID STORING WAS USED TO BE MADE THROUGH TWO PERSONS, VIZ., PROLOY NEOGI AND BANNYA NEOGI WHO HAD BEEN AC TING ON BEHALF OF TTBC. THE APPELLANT DID NOT HAVE ANY CONTRACT OR AGREEMEN T WITH THE ABOVE-NAMED PROLOY NEOGI AND BANNYA NEOGI. ON THE BASIS OF THE ARRANGEMENTS FOR STORAGE OF TEA MADE AT VARIOUS WAREHOUSES BY PROLOY NEOGI AND BANNYA NEOGI, THE APPELLANT USED TO REIMBURSE THOSE TWO PE RSONS TOWARDS THE WAREHOUSING CHARGES OF VARIOUS WAREHOUSES. NO WORK USED TO BE PERFORMED BY EITHER PROLOY NEOGI OR BANNYA NEOGI FOR THE APPE LLANT OTHER THAN MAKING ARRANGEMENT FOR WAREHOUSES. SO, THERE DID NOT ARISE ANY LIABILITY ON PART OF THE APPELLANT TO DEDUCT ANY TAX AT SOURCE U/S 194C IN RELATION TO THE REIMBURSEMENTS OF RS.9,07,209 PAID TO PROLOY NEOGI AND RS.1,31,735 PAID TO BANNYA NEOGI. THOUGH THIS MATTER HAD DULY BEEN EXPL AINED BY THE APPELLANT TO THE ASSESSING OFFICER AND IT WAS CLARIFIED THAT THERE HAD NOT BEEN ANY REQUIREMENT OF TDS U/S 194C,YET THE ASSESSING OFFIC ER ASSUMED SUCH PAYMENTS TO HAVE ALLEGEDLY BEEN ATTRACTING TDS U/S 194C AND HE DISALLOWED THE SAID TWO AMOUNTS OF RS.9,07,209 AND RS.1,31,735 AGGREGATING TO RS.10,38,944 U/S 40(A)(IA) FROM COMPOSITE PAYMENTS TO TARA TEA BLENDING CO., THE ASSESSEE WAS ALSO LIABLE TO DEDUCT TAX AT SOURCE U/S.194CFROM REIMBURSEMENTS TO THE SAID TWO PARTIES, AND ON THE BASIS OF SUCH MISCONCEIVED ALLEGATIONS HE FURTHER ERRED IN DISALL OWING WAREHOUSING CHARGES OF RS.1 0,38,944/- U/S.40(A)(IA).' THE APPELLANT SUBMITS THAT SINCE THERE HAD NOT OCCU RRED ANY CASE OF PAYMENT IN PURSUANCE OF ANY CONTRACT REQUIRING TDS VIS 194C , THE ASSESSING OFFICER'S ITA NO.1242/KOL/2018 A.Y.2012-13 TEESTA VALLEY EXPORTS LTD. V. DCIT, CIR-4(2), K OL. PAGE 3 ACTION 3 IN MAKING DISALLOWANCE U/S 40(A)(IA) SHOUL D BE HELD TO BE UNJUSTIFIED AND SUCH DISALLOWANCE OF RS.1 0,38,944 MAY KINDLY B E DELETED. ' I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER FRAMED IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER DU RING THE ASSESSMENT PROCEEDINGS. THE AR HAS STATED THAT LIABILITY DID N OT ARISES ON PART OF THE APPELLANT TO DEDUCT ANY TAX AT SOURCE U/S 194C IN R ELATION TO THE REIMBURSEMENTS OF RS.9,07,209 PAID TO PROLY NEOGI A ND RS.1,31,735 PAID TO BANNYA N EOGI. IT CLEARLY INDICATED THAT THESE TWO PERSONS MADE PAYMENTS ON BEHALF ON THE ASSESSEE. IN CASE THIS AMOUNT WAS DIR ECTLY PAID BY THE ASSESSEE THAN HE WAS LIABLE TO DEDUCT THE TDS. SO T HE LIABILITY OF TDS ARISES ON THE NATURE OF PAYMENT. THE ASSESSEE HAS AVOIDED THE TDS LIABILITY BY MAKING PAYMENT THROUGH MIDDLEMAN CREDITED BY HIM. T HE ONLY GROUND AS TAKEN BY THE ASSESSEE IS THAT THE AMOUNT WAS PAID T O THESE TWO PERSONS WERE REIMBURSED. IN VIEW OF ABOVE, THE ORDER OF THE AO I S UPHELD AND THIS GROUND OF APPEAL IS DISMISSED . 3. LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY CON TENDS DURING THE COURSE OF HEARING THAT SECTION 40(A)(IA) OF THE ACT DOES NOT APPLY IN CASE OF MERE REIMBURSEMENT OF WAREHOUSING EXPENDITURE. HE TERMS THE TWO PAYEES S/SHRI PROLOY NEOGI AND BANNYA NEOGI TO BE ASSESSEES AGENTS ONLY WHO HAD BEEN REIMBURSED THE RELEVANT WAREHOUSING CHARGES INCURRED ON ITS BEHALF . WE FIND NO SUBSTANCE IN ASSESSEES INSTANT ARGUMENT. THE INSTANT TAXPAYER A PPEARS TO HAVE ADOPTED AN INDIRECT METHOD OF INVOLVING THE TWO INDIVIDUALS PA YEES FOR THE PURPOSE OF INCURRING THE IMPUGNED WAREHOUSING CHARGES. THERE IS NO EVIDE NCE ON RECORD INDICATING THE RELEVANT FACTUAL BACKDROP AS TO HOW THE TWO PAYEES ASSUMED ITS AGENTS ROLE IN THIS ENTIRE SCHEME OF PAYMENT. WE, THEREFORE, SEE NO REA SONS TO INTERFERE WITH THE LOWER APPELLATE FINDINGS JUST BECAUSE THE ASSESSEE HAS MA DE ITS WAREHOUSING CHARGES PAYMENT THROUGH THE SO-CALLED TWO INDIVIDUALS PAYEE S IN ABSENCE OF ANY SUCH AGREEMENT OR CONTRACT ON RECORD. THIS WAREHOUSING C HARGES DISALLOWANCE OF 10,38,944/- IS ACCORDINGLY CONFIRMED . 3. LEARNED COUNSEL SEEKS TO INDICATE DISTINCTION ON FACTS THAT THE ASSESSEE CAN VERY WELL PROVE THE CORRESPONDING REIMBURSEMENT AGREEMENT WITH THE PAYEE HEREIN. WE SEE NO SUBSTANCE IN ASSESSEES PLE A SEEKING TO ADOPT A DIFFERENT APPROACH IN THE IMPUGNED ASSESSMENT YEAR SINCE THE TRIBUNALS CO- ORDINATE BENCH HAS ALREADY APPLIED ITS MIND ON THE VEY ISSUE. WE THUS AFFIRM BOTH THE LOWER AUTHORITIES ACTION DISALLOWING THE ASSESSEES WAREHOUSING CHARGES PAYMENTS BY ADOPTING JUDICIAL CONSISTENCY O N ACCOUNT OF NON- DEDUCTION OF TDS. THIS ASSESSEES FIRST SUBSTANTIVE GRIEVANCE IS REJECTED. 4. NEXT COMES SEC. 14A R.W.S. 8D(2)(II) PROPORTIONA TE INTEREST DISALLOWANCE OF 2,10,760 IN RELATION TO EXEMPT INCOME OF 51,500/-. SUFFICE TO SAY, ASSESSEES AGGREGATING BALANCE OF SHAREHOLDERS FUND WAS ON 31.03.2011 AND ITA NO.1242/KOL/2018 A.Y.2012-13 TEESTA VALLEY EXPORTS LTD. V. DCIT, CIR-4(2), K OL. PAGE 4 ASSESSEES INTEREST FREE FUNDS ARE OF 566,91,868 & 604,37,914/- AS AGAINST THE INVESTMENTS OF 39,29,975//- AS ON 31.03.2012. WE NOTICE IN THIS BA CKDROP THAT THE TRIBUNALS EARLIER DECISION (SUPRA) TAKE I NTO CONSIDERATION HON'BLE JURISDICTIONAL HIGH COURTS DECISION IN PCIT VS. RASOI LTD . GA NO.633 OF 2016 ITAT NO. 109 OF 2016 DATED 15.02.2017 THAT THE NECE SSARY PRESUMPTION IN SUCH A CASE IS OF UTILIZATION OF INTEREST FREE FUND S ONLY FOR THE PURPOSE OF DERIVING EXEMPT INCOME. WE THUS DECLINE REVENUES A RGUMENTS SUPPORTING THE IMPUGNED DISALLOWANCE. THE SAME STANDS DELETED. NECESSARY CONSEQUENTIAL COMPUTATION TO FOLLOW AS PER LAW. 5. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOV E TERMS. ORDER PRONOUNCED IN THE OPEN COURT 18/ 12/2019 SD/- SD/- ( &) (( &) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP )- 18 / 12 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-TEESTA VALLEY EXPORTS LTD., 3, NETAJI SU BHAS ROAD, KOLKATA-001 2. /RESPONDENT-DCIT, CIR-4(2), AAYAKAR BHAWA, 4 TH FL, P-7, CHOWRINGHEE SQ. KOL-69 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , 4,