ITO 28(1)(3), NAVI MUMBAI V. CARGO CARRIERS, NAVI MUMBAI

ITA 130/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2417 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 08-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Section: 143(3); 194C; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO S . 129 & 130 /MUM/201 5 : (A.Y S : 20 1 0 - 11 & 2011 - 12 ) ITO - 28(1)(3), MUMBAI (APPELLANT) VS. M/S. CARGO CARRIERS A - 322, CITY MALL, VASHI, NAVI MUMBAI 400 705. PAN : AACFC8577G (RESPONDENT) ASSESSEE BY : SHRI PRAKASH PANDIT REVENUE BY : SHRI A.K. KARDAM DATE OF HEARING : 1 8 /0 7 /2016 DATE OF PRONOUNCEMENT : 22 /0 7 /2016 O R D E R PER G.S. PANNU , AM : BOTH THE APPEALS BY THE REVENUE RELATING TO ASSESSMENT YEARS 2010 - 11 & 2011 - 12 INVOLVE A COMMON ISSUE AND THEREFORE THEY HAVE BEEN CLUBBED TOGETHER AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVIT Y. 2. ITA NO. 129/MUM/2015 PERTAINING TO ASSESSMENT YEAR 2010 - 11 IS TAKEN AS A LEAD CASE. THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 33, MUMBAI DATED 01 . 10 .2014, WHICH IN TURN HAS ARISEN 2 M/S. CARGO CARRIERS ITA NOS. 129 & 130/MUM/2015 FROM ORDER PASSED BY THE ASSESSING OFFICER DATED 26 .0 3 .201 3 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 3. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN D ELETING THE DISALLOWANCE MADE BY THE A.O U/S 40(A)(IA) OF THE ACT OF RS.2,90,90,302/ - . 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE RESPONDENT - ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGENTS. FOR ASSESSMENT YEAR 2010 - 11 IT FILED A RETURN OF INCOME DECLARING AN INCOME OF RS.17,38,720/ - WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT WHEREBY THE TOTAL INCOME WAS ASSESSED AT RS.3,12,42,320/ - . ONE OF THE DISALLOWANCES MADE BY THE ASSESSING OFFICER WAS OF RS.2,90,90,302/ - BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. AS PER THE ASSESSING OFF ICER, THE FOLLOWING PAYMENTS MADE TO THE VARIOUS PARTIES WERE LIABLE FOR DEDUCTION OF TA X AT SOURCE U/S 194C OF THE ACT : - AIRLINE CHARGES RS. 78,976/ - CONTAINER FREIGHT STATION CHARGES RS.1,31,26,921/ - SHIPPING CHARGES RS. 13,55,360/ - TRANSPORT CHARGES RS.1,45,29,075/ - TOTAL RS.2,90,90,302/ - 3 M/S. CARGO CARRIERS ITA NOS. 129 & 130/MUM/2015 SINCE THE ASSESSEE - FIRM DID NOT DEDUCT THE REQUISITE TAX U/S 194C OF THE ACT, THE ASSESSING OFFICER INVOKED SEC. 40(A)(IA) OF THE ACT AND THE CORRESPONDING EXPENDITURE WAS DISALLOWED. 4. THE ASS ESSEE - FIRM CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHEREIN VARIOUS SUBMISSIONS WERE MADE ON FACTS AND IN LAW. THE ASSESSEE CANVASSED BEFORE THE CIT(A) THAT THE AFORESAID PAYMENTS WERE MADE TO VARIOUS CFS (CONTAINER FREIGHT STATION) AGENCIES APPOIN TED UNDER THE CUSTOMS ACT AND THEY RELATED TO CLEARANCE OF GOODS, AND WERE INCURRED ON BEHALF OF ASSESSEES CLIENTS. THE ASSESSEE ALSO POINTED OUT TO THE CIT(A) THAT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR OF 2009 - 10, THE THEN CIT(A) HAD DECIDED A S IMILAR ISSUE IN FAVOUR OF THE ASSESSEE. WE FIND THAT THE CIT(A) NOTED THAT IN ASSESSMENT YEAR 2009 - 10, IN ASSESSEES OWN CASE, THE PREDECESSOR CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND FOLLOWING THE PRECEDENT HE HAS DELETED THE DISALLOWAN CE. AGAINST SUCH AN ACTION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ORDER OF CIT(A) IN ASSESSMENT YEAR 2009 - 10 , RELIED UPON BY THE CIT(A) , IN THE INSTANT YEAR HAS SINCE BEEN AFFIRMED BY THE TRIBUNAL VIDE ITA NO. 55/MUM/ 2013 DATED 16.1.2015. A COPY OF THE SAID ORDER HAS BEEN PLACED ON RECORD. APART THEREFROM, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT A SIMILAR CONTROVERSY HAS BEEN CONSIDERED BY DIFFEREN T BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES : 4 M/S. CARGO CARRIERS ITA NOS. 129 & 130/MUM/2015 I) ITO V. UNIVERSAL TRAFFIC CO., ITA NOS. 1426 TO 1429/MUM/2013 & 1473 TO 1475/MUM/2013 DATED 17.12.2014 ITAT, MUMBAI II) JAGUAR ENTERPRISES V. DCIT, ITA NO. 1815/DEL/2014 DATED 3.7.2014 ITAT, DELHI III) M/S. DAWN INDIA V. ACIT, ITA NO. 5941/MUM/2010 DATED 8.1.2014 ITAT, MUMBAI IV) DCIT V. M/S. RANK SHIPPING AGENCY PVT. LTD., ITA NO. 5946 & 5805/MUM/2008 DATED 21.11.2012 ITAT, MUMBAI V) JAY KAY FREIGHTERS PVT. LTD. V. ITO, ITA NO. 3407/DEL/2011 ITAT, DELHI IT WAS ALSO POINTED OUT THAT A SOMEWHAT SIMILAR ISSUE ALSO CAME UP BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF CARGO LINKERS, 218 CTR (DEL) 695 , WHEREIN IT WAS HELD THAT THE CLEARING AND FORWARDING AGENT IS NOT THE PERSON RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE IN TERMS OF SEC. 194C OF THE ACT IN RELATION TO FREIGHT PAYMENTS MADE TO THE AIRLINE OR ITS GENERAL SALES AGENT , AS THE CONTRACT OF TRANSPORTATION WAS ACTUALLY BETWEEN EXPORTER AND AIRLINE, AND ASSESS EE WAS ONLY AN AGENT . 6. THE LD. DR APPEARING FOR THE REVENUE HAS NOT CONTROVERTED THE FACTUAL MATRIX BROUGHT OUT BY THE LEARNED REPRESENTATIVE FOR THE ASSESSEE, BUT HAS RELIED UPON ORDER OF THE ASSESSING OFFICER IN SUPPORT OF THE CASE OF THE REVENUE. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE RESPONDENT - ASSESSEE IS IN THE BUSINESS OF CUSTOMS HOUSE CLEARING AND 5 M/S. CARGO CARRIERS ITA NOS. 129 & 130/MUM/2015 FORWARDING AGENCY AND IT HAS INCURRED VARIOUS EXPENSES, VIZ., AIRLINE CHARGES, CONTAINER FREIGHT STATION CHARGES, SHIPPING AND TR ANSPORTATION CHARGES, ETC. THE AFORESAID PAYMENTS WERE MADE BY THE ASSESSEE ON BEHALF OF ITS CLIENTS TO THE TUNE OF RS.2,90,90,302/ - DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE FROM THESE PAYMENTS AND HENCE THE ASSESSIN G OFFICER INVOKED SEC. 40(A)(IA) OF THE ACT AND DISALLOWED THE CORRESPONDING EXPENDITURE. SIMILAR DISPUTE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009 - 10 ( SUPRA ) AND THE F OLLOWING DISCUSSION IS RELEVANT : - 5. THE N EXT ISSUE RELATES TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. THE ASSESSEE HAD PAID CUSTOM CHARGES, WAREHOUSING CHARGES FREIGHT CHARGES, PROFESSIONAL FEE ETC. TO VARIOUS PARTIES ON BEHALF OF ITS CLIENTS TO THE TUNE OF RS.2,35,97,801/ - . THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE FROM THESE PAYMENTS AND HENCE THE AO ADDED THE ABOVE SAID AMOUNT BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. THE LD CIT(A) EXAMINED THIS ISSUE IN DETAILS AND NOTICED THAT THE ASSESSEE HAS INCURRED THESE EXPENSES ON BEHALF OF ITS CLIENTS ON ACTUAL BASIS AND HAS GOT THE REIMBURSEMENT FROM ITS CLIENTS. THUS, THERE WAS NOT PROFIT ELEMENT AND HENCE THE LD CIT(A) HELD THAT THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE FROM THESE PAYMENTS. ACCORDINGLY HE DELETED THE DISA LLOWANCE. 6. WE NOTICE THAT THE ASSESSEE HAS INCURRED THESE EXPENSES ON BEHALF OF ITS CLIENTS, MEANING THEREBY THE ASSESSEE HAS ACTED AS AGENT OF ITS CLIENTS. IN THIS KIND OF SITUATION, THE CONTRACT DOES EXIST BETWEEN THE CLIENT OF THE ASSESSEE AND THE S ERVICE PROVIDER. HENCE, THE LD CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT, SINCE THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. AT THE TIME OF HEARING BEFORE US, THE LD A.R PLACED RELIANCE O N THE DECISION RENDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ITO VS. UNIVERSAL TRAFFIC CO. (2014)(42 CCH 6 M/S. CARGO CARRIERS ITA NOS. 129 & 130/MUM/2015 0055)(MUM),WHEREIN THE TRIBUNAL HAD EXPRESSED THE VIEW IDENTICAL TO THAT OF THE LD CIT(A) IN THE INSTANT CASE. THE DELHI BENCH OF TRIBUN AL HAS ALSO EXPRESSED AN IDENTICAL VIEW IN THE CASE OF JAGUAR ENTERPRISES VS. DCIT (151 ITD 376). 7. SINCE THE VIEW TAKEN BY LD CIT(A) ON THIS ISSUE IS IDENTICAL WITH THE VIEW EXPRESSED BY THE CO - ORDINATE BENCHES OF TRIBUNAL, WE DO NOT FIND ANY INFIRM ITY IN HIS ORDER ON THIS ISSUE. 8. FOLLOWING THE AFORESAID PRECEDENT, WHICH HAS BEEN RENDERED IN AN IDENTICAL SITUATION, WE HEREBY AFFIRM THE STAND OF CIT(A) WHICH IS IN LINE WITH THE DECISION OF THE TRIBUNAL. THUS, ON THIS ASPECT, REVENUE FAILS. 9. INSOF AR APPEAL FOR ASSESSMENT YEAR 2011 - 12 IS CONCERNED, THE ISSUE AS WELL AS THE FACTS AND CIRCUMSTANCES ARE PARI MATERIA TO THOSE CONSIDERED BY US IN THE REVENUES APPEAL FOR ASSESSMENT YEAR 2010 - 11 IN THE EARLIER PARAGRAPHS ; THUS, OUR DECISION IN THE APPEAL FOR ASSESSMENT YEAR 2010 - 11 SHALL MUTATIS MUTANDIS APPLY FOR ASSESSMENT YEAR 2011 - 12 ALSO. 10. RESULTANTLY, CAPTIONED APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 N D JULY, 2016. SD/ - SD/ - ( AMARJIT SINGH ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 2 2 N D JULY, 2016 *SSL* 7 M/S. CARGO CARRIERS ITA NOS. 129 & 130/MUM/2015 COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, I BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI