THE ITO, Vijayawada V. Annavarapu Enterprises (1989), Vijayawada

ITA 13/VIZ/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8823 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V APPALA RAJU
• Keywords: Business expenditure; Corroborative evidences
• Section: 143(3); 194C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON'BLE JUDICIAL MEMBER ITA NO. 13 / VIZ /201 6 (ASST. YEAR : 20 08 - 09 ) ITO, WARD - 3(1), VIJAYAWADA. VS. M/S. ANNAVARAPU ENTERPRISES (1989) 24 - 6 - 2, OPP. RAMALAYAM, SAMBAMURTHY ROAD , VIJAYAWADA. PAN NO. AAEFA 0457 H (APPELLANT) (RESPONDENT) C.O.NO. 56/VIZ/2016 ( ITA NO. 13 / VIZ /201 6 ) (ASST. YEAR : 20 08 - 09 ) M/S. ANNAVARAPU ENTERPRISES (1989) 24 - 6 - 2, OPP. RAMALAYAM, SAMBAMURTHY ROAD , VIJAYAWADA. VS. ITO, WARD - 3(1), VIJAYAWADA. PAN NO. AAEFA 0457 H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI V. APPALA RAJU SR. DR DATE OF HEARING : 31 / 0 7 /201 7 . DATE OF PRONOUNCEMENT : 30 / 0 8 /201 7 . O R D E R THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), VIJAYAWADA , DATED 30 / 1 0/201 5 FOR THE ASSESSMENT YEAR 2008 - 09 . 2. FACTS ARE IN BRIEF THAT THE ASSESSEE - FIRM IS ENGAGED IN THE BUSINESS OF C & F AGENCY , FILED ITS RETURN OF INCOME BY DECLARING TOTAL 2 ITA NO. 13/VIZ/2016 [M/S. ANNAVARAPU ENTERPRISES (1989)] INCOME OF 1,65,070/ - . RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT') AND THEREAFTER A NOTICE UNDER SECTION 148 WAS ISSUED AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS FOUND THAT THE ASSESSEE HAS MADE THE FOLLOWING CONTRACT PAYMENTS WITHOUT DEDUCTING TAX AT SOURCE : - 1 CHENNUPATI TR ANSPORT 1,22,440 2 DECENT LORRY SERVICES 6,38,664 3 KRANTI TRANSPORT 13,09,535 4 KUMOOL NANDYAL TR ANSPORT . (HYD) 2,78,658 5 NAGARJUNA TRANSPORT 6,17,566 6 NAVATA TRANSPORT 11,63,417 TOTAL TRANSPORT CHARGES 41,63,417 THE ASSESSING OFFICER HAS ASKED THE ASSESSEE AS TO WHY TDS WAS NOT DEDUCTED ON THE ABOVE PAYMENTS. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PAYMENTS IN QUESTION ARE MADE ON BEHALF OF THE PRINCIPALS AND THE INVOICES RAISED IN THE NAME OF THE PRINCIPAL S , HENCE, PROVISIONS OF SECTION 194C ARE NOT ATTRACTED. IT WAS ALSO SUBMITTED THAT THE PAYMENTS REFERRED TO ABOVE WERE NOT CLAIMED AS EXPENDITU RE IN THE PROFIT & LOSS ACCOUNT. H OWEVER, THE ASSESSING OFFICER HAS NOT AGREED WITH THE SUBMISSIONS MA DE BY THE ASSESSEE AND OBSERVED THAT AS PER SECTION 194C, IT IS AN OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TDS ON THE PAYMENTS MADE TO THE VARIOUS TRANSPORT 3 ITA NO. 13/VIZ/2016 [M/S. ANNAVARAPU ENTERPRISES (1989)] COMPANIES. THEREFORE, THE ASSESSING OFFICER HAS MADE AN ADDITION OF 41,63,417/ - UNDER SECTION 40(A)(IA) OF THE ACT. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE HIRES THE TRANSPORTERS AND RAISED THE BILLS IN THE NAME OF THE PRINCIPAL S AND THE SAME IS GIVEN TO THE ASSESSEE AND THE ASSESSEE SEND THESE BILLS TO THE PRINCIPALS, WHO IN TURN HONOURED THE SAID BILLS AND PAID THE SAME TOGETHER WITH THE ASSESSEES COMMISSION AFT ER DEDUCTING TDS, AND , SUBMITTED THAT THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS AND, T HEREFORE, SECTION 40(A)(IA) HAS NO APPLICATION. THE LD. CIT(A) AFTER CALLING THE RELEVANT DETAILS AND ALSO CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. FOR TH E SAKE OF CONVE NIENCE , THE RELEVANT PORTION OF THE LD. CIT(A)S ORDER IS EXTRACTED AS UNDER: - 4.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED THE WRITTEN SUBMISSIONS, WHICH ARE REPRODUCED AS UNDER: 2. DISALLOWANCE U/S 40(A)(IA) . APPELLANT IS C&F AGENT DERIVING COMMISSION FROM ITS PRINCIPALS. THE TRANSPORTERS OF GOODS RAISED BILLS ON PRINCIPAL NAMES. APPELLANT SENT THESE BILLS TO PRINCIPALS WHO, IN TURN, PAID THE SAME TO THE APPELLANT TOGETHER WITH COMMISSION AFTER EFFECTING TDS IN APPELLANT S HANDS. APPELLANT PASSED ON THE TRANSPORTATION CHARGES TO THE RESPECTIVE TRANSPORTERS. THE PRINCIPAL HAS MADE TDS FROM COMMISSION PAID TO THE APPELLANT AND TRANSPORT CHARGES PAID TO THE TRANSPORTERS. BUT, THE TOTAL BILL AMOUNTS I.E. INCLUDING T HE TDS DEDUCTED HAVE BEEN PASSED ON BY THE APPELLANT TO THE TRANSPORTERS. AS PER THE AGREEMENT WITH PRINCIPAL, THE APPELLANT HAS TO TRANSPORT THE PRODUCTS THROUGH THE TRANSPORTERS ASSIGNED BY THE PRINCIPAL. THUS FACTUALLY THE TRANSPORT CHARGES ARE THE EXPE NDITURE OF THE PRINCIPAL AND THEREFORE, HE HAS MADE TDS FROM TRANSPORT CHARGES PAYMENTS. SINCE THE ENTIRE BILL AMOUNTS ARE PAID TO THE TRANSPORTERS THE CREDIT OF TDS CERTIFICATES OF TRANSPORT CHARGES PAYMENTS ON APPELLANTS NAME WAS CLAIMED BY THE APPELLAN T IN HIS RETURN 4 ITA NO. 13/VIZ/2016 [M/S. ANNAVARAPU ENTERPRISES (1989)] OF INCOME. AS THERE WAS NO CONTRACT BETWEEN APPELLANT AND TRANSPORTERS AND AS NO EXPENDITURE WAS INCURRED UNDER THIS HEAD NO TDS WAS MADE BY APPELLANT BUT AO HELD THAT EVEN THOUGH TRANSPORT CHARGES WERE NOT CLAIMED AS EXPENSES, SECTION 40(A )(IA) WAS APPLICABLE FOR NOT MAKING TDS AND ADDED THE TRANSPORT CHARGES OF RS. 41,63,417/ - TO THE INCOME. 3. APPELLANT SUBMITS THAT WHEN APPELLANT HAS NOT CLAIMED TRANSPORT CHARGES AS EXPENDITURE AND DID NOT DEBIT TO P&L A/C, THE QUESTION OF INVOKING PROV ISIONS OF SECTION 40(A)(IA) DOES NOT ARISE IN VIEW OF THE FOLLOWING: IN M/S NAME CONSTRUCTIONS (P) LTD. IN ITA'NOS. 1462 & 1463/ HYD/ 2011, FOR AYS 2004 - 05 ORDER DATED 25/01/2012, IT AT, HYDERABAD HELD: '10. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE . TH E CONTENTION OF THE ASSESSEE IS THAT THIS ITEM HAS NOT BEEN DEBITED TO PROFIT & LOSS A/C AND THIS HAS BEEN SHOWN IN THE BALANCE SHEET AND IT CANNOT BE CONSIDERED FOR ALLOWANCE OR DISALLOWANCES. WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE'S COUNSEL THAT UNLESS THE ASSESSEE CLAIMS THIS ITEM AS EXPENDITURE , THE AO CANNOT ALLOW OR DISALLOW THE SAME. IN THAT CIRCUMSTANCES, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO EXAMINE WHETHER THIS IS , AN EXPENDITURE CLAIMED BY THE ASSESSEE IN THE PROFIT & LOSS A/ C OR SHOWN AS AN ITEM IN THE BALANCE SHEET. IN THE EVENT, IF IT IS CLAIMED AS AN EXPENDITURE, THE AO COULD DISTURB THE SAME AND DISALLOW AN EXPENDITURE CLAIMED IN THE P&L A/C TO THE EXTENT OF 10%, WHICH, IN OUR OPINION, IS REASONABLE. ON THE OTHER HAND, IF IT IS BALANCE - SHEET ITEM, THE AO IS PRECLUDED FROM DOING SO .' IN M/S. GODAVARI DEVELOPERS VS. ACIT, CIRCLE - 11(1), HYDERABAD IN ITA NO. 918/HYD/2011 DATED 31/10/2012, ITAT, HYDERABAD B - BENCH HELD: - 14. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND MERIT IN THE ARGUMENTS OF THE LD. COUNSEL FOR M ASSESSEE MM H THE PRESENT CASE ME R IT FROM THE P&L ACCOUNT, WHICH WAS MED BY THE ASSESSEE AT THE HA TIME OF HEARING THAT IT IS NOR CLAIMED THE ABOVE AMOUNT OF RS. 44,01,500/ - AS EXPENDITURE AND DID NOT DEBIT THE SAME TO THE P&L A/C. WHEN THE ASSESSEE DID NOT CLAIM THE SAID EXPENDITURE/PAYMENTS BY DEBITING P&L A/C, THE QU ESTION OF DISALLOWING THIS AMOUNT BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) DOES NOT ARISE . 4. IT IS SUBMITTED THAT THERE IS NO CONTRACT BETWEEN APPELLANT AND TRANSPORTERS AND THEREFORE SECTION 194C DOES NOT APPLY. FOR THIS ARGUMENT, SUPPORT IS DERI VED FROM DECISION OF ITAT, BENCH ' B ' AHMEDABAD, IN ITA NO. 2456/AHD/2010, AY 2006 - 07 DATED 21.06.2013 IN ITO VS. M/S BHADREH YAM TRADERS. IT WAS HELD THEREIN: 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND ALSO THE ORDERS OF THE REVENUE AUTHORITIES. WE FIND THAT 5 ITA NO. 13/VIZ/2016 [M/S. ANNAVARAPU ENTERPRISES (1989)] THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTER AND THE SECTION 194C IS APPLICABLE TO WORK CONTRACT. THE LEARNED CIT(A) HAS FOUND THAT IN THE INSTANT CASE THE CLEARING AND FORWARDING CONTRACTOR APPOINTS FOR TRANSPORTATION OF GOODS, AND HENCE THE ONLY RESPONSIBILITY OF THE ASSESSEE WAS TO MAKE PAYMENT ON RECEIPTS OF GOODS. ADMITTEDLY, THE ASSESSEE IS ENGAGED IN PURCHASE OF YARN AND TRADING THEREON, AND RECEIVE THE GOODS FROM TRANSPORTERS, THROUGH CLEARING AND FORWARDING AGENTS. THE AO HAS MADE THE IMPUGNED ADDITION ON THE ASSUMPTION THAT THE ASSESSEE WAS HAVING AGREEMENT WITH THE TRANSPORTER FOR TRANSPORTATION OF ITS GOODS , WAS NOT BASED ON ANY EVIDENCE ON RECORD. THEREFORE, IN THE ABSENCE OF ANY DOCUMENTARY PR OOF TO ESTABLISH THAT THERE IS AN AGREEMENT BETWEEN THE ASSESSEE AND THE TRANSPORTER FOR CARRIAGE OF GOODS, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE, WHICH IS CONFIRMED AND THIS GROUND NO. 1 OF THE REVENUE IS DISMISSED. 5. APPELLANT ALSO SUBMITS THAT AO. NEVER DOUBTED GENUINENESS OF PAYMENT OF TRANSPORT CHARGES. IN SUCH SITUATION, HE OUGHT NOT HAVE INVOKED SECTION 40(A)(IA) IN THE LIGHT OF DECISION OF JAIPUR BENCH OF ITAT IN JAIPUR VIDYUT VITRAN NIGAM - LTD. VS. DY.CIT (2009) 123 TTJ (JP.) 888. RELYING ON CBDTS CIRCULAR NO.5 OF 2005, DATED 15.07.2005, THE HONBLE TRIBUNAL HELD THAT THE PURPOSE OF INTRODUCING SECTION 40(A) (IA) WAS TO AUGMENT TDS COMPLIANCE AND TO CURB BOGUS PAYMENTS. HENCE, THE PAYMENTS WHICH HAVE BEEN MADE AND NOT FOUND TO BE BOGUS CANNOT BE DISALLOWED BY INVOKING SECTION 40(A)(IA) OF THE ACT. 6. IT IS SUBMITTED THAT PARTIES ARE LOCALS; ASSESSED TO TAX LOCALLY AND FILED RETURNS OF INCOME DULY DISCLOSING THESE TRANSPORT CHARGES. UNDER THESE FACTS, THE R ATIO OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA - COLA BEVERAGES PVT . LTD. VS. CIT 293 ITR 226 WHEREIN IT WAS HELD THAT THE LIABILITY OF THE DEDUCTOR COMES TO AN END ONCE TAXES HAVE BEEN PAID BY THE DEDUCTEE APPLIES TO APPELLANTS C ASE. ONCE APPELLANT IS NOT LIABLE TO EFFECT TDS, THERE CANNOT BE ANY DEFAULT WARRANTING I NVOKING OF SECTION 40(A) (IA). 7 ESTIMATED ADDITION TOWARDS INTEREST ON LOANS / ADVANCES . AO POINTED OUT THAT APPELLANT ADVANCED RS.3,21,837/ - TO ONE J. RAVI KUMAR AND RS.20,842/ - TO ANOTHER TILDA RICE LAND PVT. LTD. BUT HAS NOT ADMITTED ANY INCOME FROM THOSE ADVANCES. AO OBSERVED THAT APPELLANT PAID INTEREST @ 8% ON LOANS TAKEN AND THEREFORE ESTIMATED INCOME ON ADVANCES MADE BY CHARGE ANY INTEREST ON SUCH ADVANCE AND ACCORDINGLY IT IS NOT WITHIN SCOPE OF TOTAL INCOME UFS 5 OF IT. ACT, 1961. APPELLANT PRAYS FOR REDUCTION OF ADDITION RELATING TO INTEREST ON ADVANCE OF RS.3,21,837/ - . 5. NECESSARY INCOME TAX RECORDS WERE CALLED FOR AND PERUSED . 5.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, APPELLANT SUBMITTED COPIES OF RELEVANT DETAILS WITH REGARD TO PAYMENT TO TRANSPORTERS. THE FOLLOWING FEATURES WERE SUPPORTED BY PROPER EVIDENCE. (1) THE TRANSPORT OPERATORS MENTIONED IN THE 6 ITA NO. 13/VIZ/2016 [M/S. ANNAVARAPU ENTERPRISES (1989)] ASSESSMENT ORDER RAISE D THE FREIGHT BILLS IN THE NAME OF THE PRINCIPAL AND NOT IN THE NAME OF APPELLANT (C&F AGENT) (2) THE PRINCIPAL REIMBURSED THE TRANSPORTATION COST (INITIALLY BORNE BY THE APPELLANT) TO APPELLANT AFTER DUE VERIFICATION OF SUPPORTING DOCUMENTS IN EVIDENCE OF SUCH COSTS. HENCE GENUINENESS OF PAYMENT OF TRANSPORT CHARGES IS NOT IN DOUBT. (3) THERE IS NO CONTRACT BETWEEN THE APPELLANT AND THE TRANSPORTER. THUS THE CLAIMS OF THE APPELLANT THAT (1) APPELLANT IS ONLY A CONDUIT FOR PAYMENT TO TRANSPORTERS FROM PRINC IPAL AND (2) IT DID NOT ENTER INTO ANY CONTRACT DIRECTLY WITH ANY TRANSPORTERS AND (3) THE PRINCIPAL REIMBURSES APPELLANT FOR SUCH PAYMENTS ARE BORNE OUT BY SUPPORTING EVIDENCE. 5.2 AS PER THE AGREEMENT, THE APPELLANT BEING C&F AGENT RENDERS FOLLOWING S SE RVICES TO THE PRINCIPAL COMPANY VIZ., M/S MARICO INDUSTRIES LIMITED. A. UNLOADING AND STORING IN THE GODOWNS OF C & F AGENT THE GOODS RECEIVED FROM THE PRINCIPAL COMPANY. B. EXECUTING THE SALE ORDERS RECEIVED FROM THE FIELD STAFF OF THE PRINCIPAL COMPANY. C. DIS PATCHING THE GOODS TO THE DEALERS THROUGH LOCAL TRANSPORTERS WHICH WERE DULY APPROVED BY THE PRINCIPAL COMPANY. D. PROVIDING INFRASTRUCTURE FACILITIES LIKE TELEPHONE TO THEIR FIELD STAFF, COURIER FACILITY, XEROX FACILITY, FAX FACILITY AND PURCHASING THE MISCE LLANEOUS ITEMS AS PER PRINCIPAL COMPANYS NEED. E. LOADING THE GOODS INTO TRUCKS & LOCAL DELIVERIES. F. THE C&F AGENTS SHALL BE ENTITLED TO MONTHLY REIMBURSEMENTS AT ACTUAL OF THE LOCAL CARTAGE, ETC. /LOADING / UNLOADING CHARGES. (I) AS PER TERMS OF THE AGREEMENT, T HE APPELLANT (C&F AGENT) HAS TO INCUR EXPENSES FOR THESE SERVICES ON PRINCIPAL BEHALF FOR WHICH RESPECTIVE SERVICE PROVIDERS RAISED BILLS AND VOUCHERS IN THE NAME OF PRINCIPAL COMPANY. (II) THE APPELLANT MAKES PAYMENTS ON DAY - TO - DAY BASIS AND SUBMITS A CLAIM FOR REIMBURSEMENT TO THE PRINCIPAL COMPANY ONCE IN A MONTH. (III) AT THE END OF EVERY MONTH, A STATEMENT FOR SUCH EXPENDITURE IS SUBMITTED ALONG WITH ORIGINAL BILLS AND VOUCHERS TO PRINCIPAL COMPANY FOR REIMBURSEMENT. SIMULTANEOUSLY AN ENTRY IS ALSO PASSED BY D EBITING THEIR EXPENSES ACCOUNT AND CREDITING TO REIMBURSEMENT ACCOUNT. WHEN REIMBURSEMENT IS MADE BY PRINCIPAL COMPANY THEN REIMBURSEMENT ACCOUNTS ARE CREDITED TO BY REIMBURSED AMOUNT AND TDS DEDUCTED THEREON. 5.2.1 DURING THE APPELLATE PROCEEDINGS , APPELLANT HAS PRODUCED BOOKS OF ACCOUNT, MONTHLY EXPENDITURE STATEMENTS FOR CLAIM SUBMITTED TO THE PRINCIPAL COMPANY AND BILLS RAISED BY THE SERVICE PROVIDERS ON BEHALF OF PRINCIPAL COMPANY. THE BILLS RAISED BY THE SERVICE PROVIDERS LIKE TRANSPORTERS, ET C. ARE IN FACT, IN THE NAME OF PRINCIPAL COMPANY. AS AND WHEN ASSESSES INCURS ANY EXPENSES ON BEHALF OF THE PRINCIPAL COMPANY, THEIR EXPENSES ACCOUNTS ARE DEBITED. ASSESSEE PREPARES A MONTHLY EXPENDITURE STATEMENT AND SENDS IT TO THE PRINCIPAL COMPANY AL ONG WITH ORIGINAL BILLS FOR REIMBURSEMENT. THE PRINCIPAL COMPANY DEDUCTS TDS U/S 194C FROM SUCH 7 ITA NO. 13/VIZ/2016 [M/S. ANNAVARAPU ENTERPRISES (1989)] CLAIM AND ONLY NET AMOUNT IS REIMBURSED TO THE APPELLANT. THE APPELLANT, THUS, CREDITS THE REIMBURSEMENT ACCOUNT 1 BY REIMBURSED AMOUNT AND TDS. ALL THE EXPENS ES INCURRED ON BEHALF OF THE PRINCIPAL COMPANY ARE ACCOUNTED FOR IN THE BOOKS OF THE APPELLANT. ALL THE REIMBURSEMENTS RECEIVED FROM THE PRINCIPAL COMPANY ARE ALSO ACCOUNTED FOR IN ITS BOOKS OF ACCOUNT. THE TDS AMOUNT DEDUCTED TIE PRINCIPAL COMPANY IS ALSO ACCOUNTED FOR IN ITS BOOKS. THUS, ALL REIMBURSEMENTS AND EXPENSES INCURRED ON BEHALF OF PRINCIPAL COMPANY ARE ACCOUNTED FOR AS RECEIPTS AND PAYMENTS. IT IS VERIFIED THAT THE PRINCIPAL VIZ., M/S MARICO INDUSTRIES LIMITED HAS DEDUCTED TDS ON THE TRANSPORT P AYMENTS AND ONLY THE NET AMOUNT IS REIMBURSED TO THE APPELLANT. 5.2.2. IN THE PROFIT & LOSS A/C, THE APPELLANT HAS NOT CLAIMED REIMBURSEMENT EXPENSES. THE EXPENSES CLAIMED IN THE PROFIT & LOSS A/C RELATE TO COMMISSION INCOME. THE APPELLANT HAS ALSO SUBMIT TED THAT THE PRINCIPAL COMPANY IS NOT SUPPOSED TO 'DEDUCT TDS FROM REIMBURSED AMOUNTS SINCE IT IS NOT AN INCOME. THE ASSESSEE IS BOUND TO INCUR EXPENSES ON BEHALF OF PRINCIPAL COMPANY AS PER THE TERMS OF THE AGREEMENT BUT IT IS ENTITLED FOR REIMBURSEMENT. THUS, ASSESSEE PROVIDES FACILITIES TO THE PRINCIPAL COMPANY AND IN FACT THEY ARE THE BUSINESS EXPENSES OF THE PRINCIPAL COMPANY. THE ASSESSEE FOLLOWS ACCOUNTING SYSTEM FOR GETTING THESE EXPENSES REIMBURSED. THE NECESSARY ENTRIES ARE MADE IN ITS BOOKS OF AC COUNT. THE ASSESSEE FURNISHES A MONTHLY EXPENDITURE STATEMENT TO THE PRINCIPAL COMPANY ENCLOSING THEREWITH ORIGINAL BILLS RAISED IN FAVOUR FOR INCURRING EXPENSES ON ITS BEHALF. THE PRINCIPAL COMPANY REIMBURSED SUCH AMOUNTS AND ARE ACCOUNTED FOR IN ITS BOO KS THE TDS DEDUCTED ON REIMBURSED AMOUNTS IS ALSO ACCOUNTED FOR. THE TDS DEDUCTED ON REIMBURSED AMOUNTS IS ALSO ACCOUNTED FOR. THE ASSESSEE, THEREFORE, HAS DISCLOSED ALL THESE TRANSACTIONS IN ITS BOOKS OF ACCOUNT. IF REIMBURSED AMOUNT IS TAKEN AS RECEIP T, THEN OBVIOUSLY THE EXPENSES INCURRED ON BEHALF OF PRINCIPAL COMPANY ARE TO BE GIVEN SAME TREATMENT. THE NEXT RESULT OF SUCH RECEIPTS AND PAYMENTS IS NIL. THUS, THERE IS NO TAXABLE INCOME OUT OF SUCH TRANSACTIONS. 5.3 HON B LE DELHI HIGH COURT IN THE CA SE OF C IT VS DLF COMMERCIAL PROJECT CORPORATION HELD THAT THE OBLIGATION TO DEDUCT TDS IS ONLY WITH REFERENCE TO INCOME '. AS AMOUNTS PAID AS REIMBURSEMENTS OF EXPENSES DO NOT HAVE THE CHARACTER OF INCOME, THERE IS NO OBLIGATION TO DEDUCT TDS. 5.4 THE OV ERRIDING EFFECT OF THE OPENING CLAUSE UNDER SECTION 40(A) CANNOT BE LOST SIGHT OF. THE VIEW THAT SECTION 40(A)(IA) WOULD HAVE NO APPLICATION IN RESPECT OF EXPENDITURE NOT FALLING UNDER SECTIONS 30 TO 38 HAS BEEN TAKEN BY THE TRIBUNAL. IN VIEW OF THE NON OB STANTE CLAUSE UNDER SECTION 40(A)(IA) VIZ., NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF THIS ACT', WHAT ARE DISALLOWED ARE ONLY AMOUNTS COVERED BY ITEMS OF EXPENSES REFERRED TO IN SECTION 30 TO 38. IN OTHER WORDS, ONLY IF THERE IS DEFAULT IN R ESPECT OF TAX DEDUCTION VIZ., NON - DEDUCTION OR FAILURE TO DEPOSIT AFTER DEDUCTION THEREOF IN RESPECT OF SUMS REFERRED IN SECTION 30 TO 38, THE PROVISIONS OF SECTION 40(A)(IA) COULD BE INVOKED TO DISALLOW SUCH SUMS IN THAT YEAR WHERE DEFAULT HAS OCCURRED. 5.5 AS THE APPELLANT HAS GOT ONLY REIMBURSEMENT FROM PRINCIPAL FOR THE EXPENDITURE INCURRED BY IT, IT HAD NEITHER SHOWN RECEIPT NOR CLAIMED EXPENDITURE IN ITS P&L A/C. SECTION 40(A)(IA) WILL COME INTO PLAY ONLY IN RESPECT OF EXPENSES DEBITED IN P&L A/C 8 ITA NO. 13/VIZ/2016 [M/S. ANNAVARAPU ENTERPRISES (1989)] THAT ATTRACT TDS PROVISIONS. SINCE THE APPELLANT HAS NOT CLAIMED THIS EXPENDITURE / PAYMENTS BY DEBITING THE P&L A/C, THE QUESTION OF DISALLOWING THIS AMOUNT BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) DOES NOT ARISE. RELIANCE IS PLACED ON THE DECISION OF HONBLE HYDERABAD ITAT IN THE CASE OF ACIT, CIRCLE - 11(1), HYDERABAD VS M/S GODAVARI DEVELOPERS IN ITA NO,918/HYD/2011 DATED 31.10.2012. 5.6 H ENCE, I HOLD THAT ADDITION OF RS.41,63,417/ - TOWARDS DISALLOWANCE U/S 40(A)(IA) IS NOT WARRANTED. I DIRECT THE ASSES SING OFFICER TO DELETE THE SAME. 4 . ON BEING AGGRIEVED, THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5 . LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 6 . LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS FILED ALL THE DETAILS BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) . T HERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS AND THE BILLS RECEIVED FROM THE TRANSPORTER S WERE FORWARDED TO THE P RINCIPALS, WHO AFTER DEDUCTING TDS, COMMISSION PAYMENT IS MADE TO THE ASSESSEE AND SUBMITTED THAT SECTION 40(A)(IA) HAS NO APPLICATION. 7 . I HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 8 . THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WH ETHER ASSESSEE IS UNDER OBLI G A TION TO DEDUCT TDS OR NOT. THE CASE OF THE ASSESSEE IS THAT HE IS ACTING ON BEHALF OF THE PRINCIPALS, ONCE TRANSPORTER S SEND THE BILLS TO THE ASSESSEE, IN TURN, THE ASSESSEE FORWARDED T HE SAME TO THE PRINCIPALS AND THE PRINCIPAL S DEDUCTED TDS AND COMMISSION PAYMENT IS PAID TO THE ASSESSEE. THE LD. CIT(A) AFTER CALLING ALL THE DETAILS AND AFTER EXAMINING THE SAME, HE ACCEPTED THE SUBMISSIONS MADE BY THE 9 ITA NO. 13/VIZ/2016 [M/S. ANNAVARAPU ENTERPRISES (1989)] ASSESSEE AND DELETED THE ADDITION. THE DEPARTMENTAL REPRESENTATIVE IS NOT ABLE TO POINT OUT ANY MISTAKE OR ERROR COMMITTED BY THE LD. CIT(A) . I HAVE ALSO GONE THROUGH THE ORDER PASSED BY THE LD. CIT(A). THE LD. CIT(A) AFTER EXAMINING EACH AND EVERY DETAIL, PASSED A DETAILED ORDER. I FI ND NO INFIRMITY IN THE ORDER PASSED BY THE REVENUE. THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. C.O.NO. 56/VIZ/2016 9 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER PASSED BY THE LD. CIT(A). HENCE, CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. 10 . IN THE RESULT, APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF AUGUST , 201 7 . SD/ - ( V. DURGA RAO ) JUDICIAL MEMBER DATED : 30 TH AUGUST, 201 7 . VR/ - COPY TO: 1. THE ASSESSEE - M/S. ANNAVARAPU ENTERPRISES (1989), 24 - 6 - 2, OPP. RAMALAYAM, SAMBAMURTHY ROAD, VIJAYAWADA. 2. THE REVENUE ITO, WARD - 3(1), VIJAYAWADA. 3. THE PCIT, VIJAYAWADA. 4. THE CIT(A), VIJAYAWADA. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SENIOR PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.