Mrs Sarla Bhaiya, Kolkata V. ITO, WD-36(3), KOLKATA, Kolkata

ITA 1335/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1741 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD GHYAS UDDIN J
• Assessee Lawyers: MANISH TIWARI
• Keywords: Business income
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1335/KOL/2014 ASSESSMENT YEAR:2008-09 MRS. SARLA BHAIYA 1, R.N. MUKHERJEE ROAD, 5 TH FLOOR, ROOM NO.52, KOLKATA-700001 [ PAN NO.ADEPB 3757 G ] / V/S . INCOME TAX OFFICER, WARD-36(3), AAYKAR BHAWANA, POORVA, 110,SHANTIPALLY, KOLKATA-107 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI MANISH TIWARI, FCA /BY RESPONDENT MD. GHYAS UDDIN, JCIT-DR /DATE OF HEARING 24-03-2017 /DATE OF PRONOUNCEMENT 12-05-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DATED 18.02.2014. ASSESSM ENT WAS FRAMED BY ITO WARD- 36(3), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 16.12.2010 FOR ASSESSMEN T YEAR 2008-09. SHRI MANISH TIWARI, LD. AUTHORIZED REPRESENTATIVE A PPEARED ON BEHALF OF ASSESSEE AND MD. GHYAS UDDIN, LD. DEPARTMENTAL REPRESENTATIV E REPRESENTED ON BEHALF OF REVENUE. 2. FIRST ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAI NING THE DISALLOWANCE OF 16,07,830/- ON ACCOUNT OF NON DEDUCTION OF TAX DED UCTED AT SOURCE (TDS FOR SHORT) U/S 194C VIS--VIS 40(A)(IA) OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN IND IVIDUAL AND ENGAGED IN TRADING BUSINESS OF FABRIC AND ALUMINUM PANEL SHEETS. DURIN G THE COURSE OF ASSESSMENT ITA NO.1335/KOL/2014 A .Y. 2008-09 MRS. SARLA BHAIYA VS. ITO WD-36(3) KOL. PAGE 2 PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS CLAIMED CLEARING CHARGES FOR 17,08,432/-. OUT OF THIS SAID EXPENSE TDS WAS DEDUC TED ONLY IN RESPECT OF THE PAYMENT OF 1,00,602/ AND THE BALANCE PAYMENT WAS MADE WITHOUT DEDUCTION OF TDS. ON QUESTION BY AO ABOUT SUCH DISALLOWANCE OF SAID E XPENSE THE ASSESSEE SUBMITTED THAT THE BALANCE CLEARING CHARGES REPRESENT THE REI MBURSEMENT OF THE EXPENSE AND ON REIMBURSEMENT THERE IS NO NEED TO DEDUCT THE TDS. T HE ASSESSEE IN SUPPORT HER CLAIM HAS RELIED ON THE ORDER OF ITAT DELHI BENCH IN THE CASE OF ITO VS. DR. WILLMAR SCHWABE INDIA PVT. LTD. (2005) 3 SOT 71. HOWEVER, AO DISREGARDED THE CLAIM OF ASSESSEE BY OBSERVING THAT THE AFORESAID DECISION W AS DELIVERED UNDER THE PROVISION OF SEC. 194J OF THE ACT AND THE INSTANT CASE RELATES T O THE PROVISION OF SEC. 194C OF THE ACT. ACCORDINGLY, AO DISALLOWED THE CLAIM OF ASSESS EE AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE AFORESAID CLEA RING CHARGES ARE REPRESENTING REIMBURSEMENT OF EXPENSE AND THEREFORE SUCH EXPENSE S ARE OUT OF THE PURVIEW OF TDS PROVISION. HOWEVER, LD. CIT(A) DISREGARDED THE CLAI M OF ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 4.2 I HAVE PERUSED THE ASSESSMENT ORDER AND CONSIDE RED THE SUBMISSION OF THE APPELLANT. THE FACT OF THE CASE IS THAT THE APPELLA NT MADE PAYMENTS OF RS.17,08,432/- ON ACCOUNT OF CLEARING CHARGES TO SHIPPING AGENTS, HOWEVER, TAX WAS DEDUCTED ONLY ON THE AMOUNT OF RS.1,00,602/-. BUT ON THE BALANCE AMOUNT OF RS.16,07,830/-, NO TAX WAS DEDUCTED, THEREFORE, THE AO INVOKED SECTION 40( A)(IA) AND MADE ADDITION ACCORDINGLY. HOWEVER, THE APPELLANT SUBMITTED THAT THE SAID AMOUNT PERTAINED TO REIMBURSEMENT OF EXPENSES INCURRED BY THEM ON BEHAL F OF THE APPELLANT, NO TAX WAS DEDUCTIBLE ON THE EXPENSES REIMBURSED TO THE CLEARI NG AND FORWARDING AGENTS. AFTER GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE CA SE, I FIND THAT IN VIEW OF THE CBDTS CIRCULAR IN THIS REGARD, TAX WAS REQUIRED TO BE DEDUCTED ON THE GROSS AMOUNT IN THE CASE OF CLEARING AND FORWARDING AGENTS, THER EFORE, THE AO WAS JUSTIFIED TO MAKE ADDITION U/S. 40(A)(IA) OF THE IT ACT. BEING AGGRIEVED BY THIS, ASSESSEE CAME IN SECOND AP PEAL BEFORE US. 5. BEFORE US LD. AR FOR THE ASSESSEE REITERATED THE ARGUMENTS THAT WERE MADE BEFORE THE LD. CIT(A). ON THE OTHER HAND LD. DR SUBMITTED THAT THERE IS NO EVIDENCE WHETHER THE CLEARING CHARGES REPRESENT REIMBURSEMENT OF EXPENSE. THE LD. DR REQUESTED THE BENCH TO RESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION TO ASCERTAIN ITA NO.1335/KOL/2014 A .Y. 2008-09 MRS. SARLA BHAIYA VS. ITO WD-36(3) KOL. PAGE 3 WHETHER THE CLEARING CHARGES ARE REIMBURSEMENT OF E XPENSES. HE LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT AO HAS DISALLOWED THE CLEARING CHARGES ON THE GROUND THAT TDS WAS NOT DEDUCTED AND WHICH WAS SUBSEQUENTLY CONFIRMED BY LD. CIT(A) . HOWEVER, ON PERUSAL OF THE ORDER OF AO WE FIND THAT ASSESSEE HAS MADE A SUBMISSION THAT AFORE SAID CLEARING CHARGES ARE REPRESENTING THE REIMBURSEMENT OF EXPENSES AS EVIDE NT AS UNDER:- THE A/R EXPLAINED THAT THE HON'BLE ITAT, DELHI BENC H IN THE CASE OF ITO VS. DR. WILLMAR SCHWABE INDIA PVT. LTD. (2005) 3 SOT 71 HAS DECIDED THAT IF A SEPARATE BILLS GIVEN FOR REIMBURSEMENT OF OUT OF POCKET EXPENDITUR E, IS NOT SUBJECT TO TAX DEDUCTION. HE HAS ALSO PLACED RELIANCE UPON THE JUDGEMENT OF T HE HON'BLE ITAT, DELHI BENCH IN THE CASE OF ACIT VS. MODICON NETWORK PVT. LTD. (200 8-TIOL-473-ITAT-DEL) AND CIRCULAR NO. 4/2008 OF THE CBDT. HOWEVER, THE AO WITHOUT ADJUDICATING THE SUBMISSION OF ASSESSEE HAS DISREGARDED THE PLEA OF ASSESSEE BY OBSERVING AS UNDER:- THE EXPLANATION OF THE ASSESSEE HAS BEEN DULY CONSI DERED THE JDGEMENT IN THE CASE OF ITO VS. DR. WILLMAR SCHWABE INDIA PVT. LTD WAS PASS ED IN RESPECT OF PAYMENT ATTRACTING PROVISIONS OF SECTION 194J AND NOT 194C. THEREFORE, THE RATIO OF THE SAID JUDGEMENT IS NOT APPLICABLE IN THE INSTANT CASE. SI MILARLY, THE DECISION IMPUGNED ORDER MODICON NETWORK PVT. LT., WAS GIVEN ON A DIFF ERENT ISSUE. MOREOVER, IN CIRCULAR NO 4/2008 DATED 28.4.2008, THE BOARD HAS GIVEN CLAR IFICATION ON DEDUCTION OF TDS ON SERVICE TAX COMPONENT OF RENTAL UNDER SECTION 194I. THEREFORE, THE CONTENTS OF THIS CIRCULAR HAVE ALSO NO APPLICATION IN THE PRESENT CA SE. SIMILARLY, ON PERUSAL OF THE ORDER OF LD. CIT(A) WE FIND THAT LD. CIT(A) HAS DISREGARDED THE PLEA OF ASSESSEE WITHOUT ADDUCING A NY REASON ON ASSESSEES SUBMISSION. IN VIEW OF THE ABOVE, WE FIND THAT CLAI M OF ASSESSEE HAS NOT BEEN ADJUDICATED BY AUTHORITIES BELOW IN-SPITE OF SPECIF IC SUBMISSION ON THE ISSUE MADE BY ASSESSEE. THEREFORE, IN THE AFORESAID FACTS AND CIR CUMSTANCES OF THE CASE, WE CONCLUDE THAT AFORESAID EXPENSES ARE NOTHING BUT REIMBURSEME NT OF EXPENSE WHICH IS NOT SUBJECT TO TDS. IN HOLDING SO, WE RELY ON THE FOLLOWING CAS E:- A) ITO VS. DR. WILLMAR SCHWBE INDIA PVT. LTD. (2005) 3 SOT 71 B) ACIT VS. MODICON NETWORK PVT. LTD. (2008-TIOL-473-I TAT-DEL) ITA NO.1335/KOL/2014 A .Y. 2008-09 MRS. SARLA BHAIYA VS. ITO WD-36(3) KOL. PAGE 4 IN THIS VIEW OF THE MATTER, WE HAVE NO HESITATION I N REVERSING THE ORDER OF AUTHORITIES BELOW AND DIRECT THE AO TO DELETE THE ADDITION. HEN CE, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 7. NEXT ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY AO FOR 3,89,337/- ON ACCOUNT OF INTEREST EXPENSE. 8. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS PREPARED TWO PROFIT AND LOSS ACCOUNTS (I) FOR ITS PROPRIETARY CONCERN AND (II) F OR HER INDIVIDUAL CAPACITY. THE ASSESSEE HAS CLAIMED INTEREST EXPENSE IN HER PERSON AL PROFIT AND LOSS ACCOUNT FOR 4,78,663/-. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE IN HER PERSONAL CAPACITY HAS SHOWN THE FOL LOWING INCOME:- I) BUSINESS INCOME FOR 6,09,476; II) INTEREST ON LOAN FOR 91,207; III) DIVIDEND INCOME OF 19,933/-; IV) INTEREST ON LOAN FOR 1,187/- V) INCOME FROM UTI FOR 5,636/-; VI) MIS. INCOME FOR 6,998/- VII) INTEREST OF PPF FOR 45,369/-; VIII) INTEREST ON SAVING ACCOUNT FOR 121/- THE ASSESSING OFFICER ALSO OBSERVED THAT ASSESSEE H AS UTILIZED SUBSTANTIAL PORTION OF UNSECURED LOAN TOWARDS INVESTMENT IN JEWELLERY, FLA T, LAND PROPERTY, PPF AND SHARE INVESTMENT. AS SUCH, THE UNSECURED LOAN WAS NOT UTI LIZED FOR ANY TAXABLE INCOME OF THE ASSESSEE. ACCORDINGLY, THE AO DISALLOWED THE INTERE ST EXPENSE AFTER GIVING RELIEF UP TO THE AMOUNT OF INCOME EARNED BY ASSESSEE DURING THE YEAR UNDER CONSIDERATION I.E. INTEREST INCOME OF 91,207/- MISCELLANEOUS INCOME FOR 6,998/- AND INTEREST OF SAVING ACCOUNT FOR 121/-. THE AO DISALLOWED A SUM OF 3,80,337/- ( 478663 98326 ) AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER:- 7.2 THE FACT OF THE CASE IS THAT THE AO FOUND THAT THE APPELLANT CLAIMED TO HAVE PAID INTEREST ON BORROWED FUND. HOWEVER, HE FURTHER FOUN D THAT THE LOAN FUNDS ON WHICH INTEREST WAS PAID INCLUDES PAYMENT OF PERSONAL LOAN ALSO WHICH WAS NOT UTILIZED FOR ITA NO.1335/KOL/2014 A .Y. 2008-09 MRS. SARLA BHAIYA VS. ITO WD-36(3) KOL. PAGE 5 THE PURPOSE OF BUSINESS. AFTER CAREFUL CONSIDERATIO N OF THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE AND SUBMISSION OF THE APPELLANT, I FIN D THAT THE APPELLANT COULD NOT CONTROVERT THE FINDING OF THE AO WITH THE SUPPORTIN G DETAILS/DOCUMENTS. THEREFORE, I FIND NO INFIRMITY IN THE A O'S ORDER IN THIS REGARD . BEING AGGRIEVED BY THIS, ASSESSEE CAME IN SECOND AP PEAL BEFORE US. 10. BEFORE US LD AR FOR THE ASSESSEE SUBMITTED THAT THE BORROWED FUND WAS UTILIZED IN THE PROPRIETARY CONCERN OF THE ASSESSEE FOR THE PURPOSE OF BUSINESS. THEREFORE, THE INTEREST EXPENSE IS ELIGIBLE EXPENSE . THE AR ALSO SUBMITTED THAT ALL THE NECESSARY DETAILS OF BALANCE-SHEET AND PROFIT AND L OSS ACCOUNT WERE PLACED BEFORE THE AUTHORITIES BELOW. LD. AR ALSO REQUESTED THE BENCH TO RESTORE THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION. IN REJOINDER LD. DR AGRE ED TO THE SUBMISSION OF LD. AR. 11. IN THE LIGHT OF ABOVE DISCUSSION, WE FIND THAT LD. CIT(A) HAS PASSED HIS ORDER WITHOUT CONSIDERING THE SUBMISSION OF ASSESSEE. THE REFORE, WE ARE INCLINED TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH ADJUDIC ATION IN ACCORDANCE WITH LAW. HENCE, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED IN TERM S OF ABOVE DIRECTION. NEEDLESS TO MENTION THAT ASSESSEE SHOULD CO-OPERATE BEFORE THE AO. 11. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 12/05/2017 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ! - /05/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-MRS. SARLA BHAIYA, 1, R.N.MUKHERJEE ROAD, 5 TH FL, R.52,KOL-01 2. /RESPONDENT-INCOME TAX OFFICER WARD-36(3), AAYKAR BHA WAN, POORVA,110 SHA NTIPALLY, KOLKATA-700107 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY O RDER/ , /TRUE COPY/ SR . PRIVATE SECRETARY HEAD OF OFFICE/DDO / /'#,