M/s Orchid Biomedical Systems., Bambolim V. Income Tax Officer, (TDS) Ward - 1, Panaji

ITA 139/PAN/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0387 (ITAT-PANAJI)
• Duration Of Justice: 4 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: WT(D)
• Assessment Year: 2011-2012
• Appeal Filed On: 08-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANJUNATH HEDGE
• Keywords: TDS; Set aside
• Section: 143(3); 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘PANAJI’ BENCH, PANAJI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.139/PAN/2018 Assessment Year: 2011-12 M/S. ORCHID BIOMEDICAL SYSTEMS Ground Floor, Geetanjali Building, Dr. Rego Bagh, Santa Cruz, Bambolim, Goa-403202. PAN: AAAFO 4304 K Vs. ITO (TDS), Ward-1, Panaji (Appellant) (Respondent) Present for: Appellant by : Shri Manjunath Hedge, CA Respondent by : Shri Mayur Kamble, Sr. DR Date of Hearing : 14.06.2022 Date of Pronouncement : 16.06.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal by the assessee is arising out of the order of Ld. CIT(A) – 2, Panaji in ITA No. 507/CIT(A)-2/PNJ/2017-18 dated 10.01.2018 against the order passed by ITO (TDS), Ward-1, Panaji u/s 201(1)/(1A) of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 22.01.2015. 2. The sole issue involved in this appeal relates to holding the assessee as assessee in default for non-deduction of tax on payments made by the assessee towards certain reimbursement of expenses. The assessee has taken six grounds of appeal which are not reproduced for the sake of brevity. 3. Shri Manjunath Hedge, CA represented the assessee and Shri Mayur Kamble, Sr. DR represented the Department before us. ITA No.139/PAN/2018 M/s. Orchid Biomedical Systems A.Y. 2011-12 2 4. Brief facts of the case are that the assessee is a partnership firm engaged in the business of manufacture and trading of diagnostic kits. The assessee filed its return of income reporting total income of Rs. 12,99,54,720/-. The assessment was completed u/s 143(3) of the Act vide order dated 30.12.2013 and assessed income of Rs. 14,73,89,556/- by making a disallowance of Rs. 1,74,34,836/- u/s 40(a)(ia) of the Act for non deduction of tax on expenses reimbursement to Forwarding Agents, Clearing & Forwarding Agents and others which was challenged by the assessee before the Ld. CIT(A), Panaji. Subsequent to the assessment made u/s 143(3) of the Act, an order u/s 201(1)/(1A) was passed by the ITO (TDS) on 09.01.2015 on the basis of disallowance made u/s 40(a)(ia) of the Act. 5. Assessee preferred an appeal before this order also before the ld. CIT(A), Panaji. Subsequently, the appeal against the assessment made u/s 143(3) was allowed by the ld. CIT(a), Panaji vide order dated 20.03.2015 for which Department went in appeal before the Co-ordinate Bench of ITAT, Panaji. The Co-ordinate Bench of ITAT, Panaji passed the order against the assessee on 05.10.2015 restoring the order of the ld. AO in Appeal No. ITA 298/PNJ/2015 against the order of Co- ordinate Bench of ITAT, Panaji. The assessee went in appeal before the Hon’ble High Court of Bombay, Bench at Panjim. While the appeal by the assesse before the Hon’ble High Court of Bombay was pending, the ld. CIT(A) decided the appeal against the assessee in respect of order passed by ld. ITO (TDS) u/s 201(1)/(1A) on 10.01.2018, even though the assessee prayed for keeping the matter in abeyance until the disposal of appeal of the assessee pending before the Hon’ble High Court of Bombay. The Hon’ble Bombay High Court at Panjim in tax Appeal No. 10 of 2016 vide order dated 07.10.2020 decided the matter in favour of the assessee holding that no TDS was required on reimbursement of expenditure thereby restoring the order of ld. CIT(A) ITA No.139/PAN/2018 M/s. Orchid Biomedical Systems A.Y. 2011-12 3 and deleting the disallowance made u/s 40(a)(ia) in the assessment made u/s 143(3) of the Act and accepting the income returned by the assessee. 6. Aggrieved by the order of ld. CIT(A) against the order u/s 201(1)/(1A), the assessee is in appeal before the Tribunal. 7. The ld. counsel for the assessee submitted that the issue before the Hon’ble Tribunal is covered by the decision of Hon’ble Bombay High Court, Panjim in assessee’s own case, pursuant to which the matter has attained finality. Since the basis of passing the order by ld. ITO (TDS) u/s 201(1)/(1A), the disallowance made by the ld. AO u/s 40(a)(ia) of the Act in the assessment made u/s 143(3) of the Act. He submitted that since the Hon’ble High Court as agreed with the contention of the assessee that no TDS was required to be made on reimbursement, the disallowance made u/s 40(a)(ia) in respect of this reimbursement of expenses having deleted the very basis of the order of ld. ITO (TDS) in the impugned order has collapsed. According to him, the present appeal before this Tribunal ought to be decided in his favour based on the decision of the Hon’ble Bombay High Court, Panjim in assessee’s own case. 8. Per contra, the ld. Sr. DR relied on the order of ld. CIT(A). 9. We have heard the rival contentions and perused the material on record gone through the decision of the Hon’ble Bombay High Court, panjim in assessee’s own case. In the present case, we note that that C & F agents had raised two separate bills towards reimbursement of freight charges paid to the carriers and the actual service charges of the C & F agents. It was claimed that the payments made by the assessee towards this reimbursement never had any income element therein and, therefore, there was neither any obligation upon the C & F agents to pay ITA No.139/PAN/2018 M/s. Orchid Biomedical Systems A.Y. 2011-12 4 any income tax on such reimbursed amounts nor there was any obligation upon the assessee to deduct any tax at source while making the such payments for such amounts. We also taken note of the fact from the first para of the impugned order of ITO (TDS) wherein it is noted that the regular assessment u/s 143(3) was completed vide order dated 30.12.2013 by JCIT, Range-1, Panaji, in which he had made addition u/s 40(a)(ia) on account of TDS defaults amounting to Rs. 1,74,34,836/-. 9.1. This factual note by the ld. TDS Officer shows that the disallowance made u/s 40(a)(ia) is the sole basis for passing of the impugned order u/s 201(1)/(1A) of the Act. The disallowance made u/s 40(a)(ia) of the Act in assessment made u/s 143(3) of the Act has been deleted by the Hon’ble High Court of Bombay, Panjim in assessee’s own case for the year under consideration. The substantial question of law before the Hon’ble High Court were as under: “i. Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal wsa right in law in holding that the appellant is liable to deduct tax at source under section 194C of IT Act on the payments made to C & F agents which is outright reimbursement of freight charges having no element of profit? ii. Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal was right in law in upholding the disallowance under section 40(a)(ia) of IT Act when said section cannot be applied in the instant case?” 9.2. While deleting the disallowance u/s 40(a)(ia) of the Act, the Hon’ble High Court of Bombay noted the following position: “17. In all these appeals, there is no dispute or in any case there is overwhelming material on record which establishes the following position: (i) The C&F agents have raised two separate sets of bills :- ITA No.139/PAN/2018 M/s. Orchid Biomedical Systems A.Y. 2011-12 5 (a) first towards the services rendered by the C & F agents and (b) second towards the reimbursement of freight charges paid to the carriers. (ii) These are not cases where any composite bills were raised by the C & F agents without indicating the service charge components and reimbursement components separately; (iii) There are ample evidences in the form of ledger entries, bills, payment vouchers etc., placed on record to establish that separate sets of bills were invariably made towards the service charge components and reimbursement components by the assessees to the C & F agents; (iv) The assessees have invariably deducted tax at source when it comes to payment towards the first set of bills i.e. towards the services rendered by the C & F agents without any demur; (v) Even in cases where composite bills were issued or where there was any ambiguity about payment towards reimbursement components, the asessees have deducted tax at source; (vi) It is only in cases where separate bills were raised by the C & F agents towards reimbursement and the freight charges, backed by proper evidence that the assessces have not deducted any tax at source before making payments towards such reimbursement.” 10. Considering the above position and several judicial precedents, the Hon’ble High Court accepted the assessee’s contention that there was no liability to deduct tax at source on the payments made towards reimbursement of amounts to the C & F agents. The relevant portion is reproduced as under: “22. Based upon legal position as explained in the aforesaid decisions of the Hon’ble Supreme Court and our High Court, the assessee’s contention that there was no liability to deduct tax at source upon payments made towards reimbursement of amounts to the C & F agents, will have to be accepted.” 11. Respectfully following the decision of Hon’ble High Court of Bombay, Panjim in assessee’s own case for the impugned year on the very issue of disallowance made u/s 40(a)(ia) which formed the very ITA No.139/PAN/2018 M/s. Orchid Biomedical Systems A.Y. 2011-12 6 basis of passing the impugned order by ITO (TDS) u/s 201(1)/(1A) has been thrived leading us to set aside the order of ld. CIT(A) and the ITO (TDS). Accordingly, the appeal of the assessee is allowed. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 16.06.2022. Sd/- Sd/- (CHANDRA MOHAN GARG) (GIRISH AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Panaji, Dated: 16.06.2022. Biswajit, Sr. P.S. Copy to: 1. The Appellant: M/s. Orchid Biomedical Systems. 2. The Respondent: ITO (TDS), Ward-1, Panaji. 3. The CIT, Concerned, 4. The CIT (A) Concerned, 5. The DR Concerned Bench //True Copy// [ By Order Sr. Private Secretary ITAT, Panaji (on tour)