DCIT 22(2), NAVI MUMBAI V. VINOD C JHJUNJHUNWALA, MUMBAI

ITA 1757/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93152 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 02-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NISHIR GANDHI
• Section: 194C

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI N.K. BILLAIYA, A M .. , . . , ./ I.T.A. NO. 1757 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10 D.C.I.T. 22(2) , TOWER NO. 6, 4 TH FLOOR, VASHI RAILWAY STATION BLDG COMPLEX, VASHI, NAVI MUMBAI. / VS. SHRI VINOD C. JHUNJHUNWALA, 402/403, SWASTIK CHAMBERS, CST ROAD, CHEMBUR, MUMBAI 400 071. ./ PAN : AABPJ2068C ( ! / APPELLANT ) .. ( '# ! / RESPONDENT ) A PPELLANT BY SHRI SUNIL KUMAR AGARWAL R E SPONDENT BY : SHRI NISHIR GANDHI $ % & ' ( ) / DATE OF HEARING : 02-07-2015 *+,- ' ( ) / DATE OF PRONOUNCEMENT : 08-07-2015 [ . / O R D E R PER A.D. JAIN, J.M . : .. , THIS IS DEPARTMENTS APPEAL FOR A.Y. 2009-10, RAISI NG THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITIONS OF FREIGH T CHARGES MADE U/S 40(A)(IA) OF THE ACT AMOUNTING TO RS.13,02,636/-, R S.10,42,178/- AND RS.2,60,458/- PAID TO THREE PARTIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE FREIGHT CHARGES ARE COVERED U/S 194C R.W.S. 40(A)(IA) OF THE ACT. ITA 1757/M/13 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) ERRED IN INTERPRETING THAT SECTION 194C O F THE ACT IS NOT APPLICABLE TO THE ASSESSEE AND THE ASSESSEE IS COVE RED BY SHIPPING BUSINESS OF NON-RESIDENT AS GOVERNED BY SECTION 172 OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF CO MMISSION PAID TO NON- RESIDENT FOREIGN AGENTS WITHOUT TDS MADE BY THE A.O . 2. THE FIRST ISSUE IS THE DEPARTMENTS CHALLENGE TO TH E ACTION OF THE LD. CIT(A) IN DELETING THE ADDITIONS OF FREIGHT CHARGES MADE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961, PAID BY THE ASSESSEE TO THREE PARTIES. 3. DURING THE YEAR, THE ASSESSEE HAD PAID TOTAL FRE IGHT CHARGES OF RS. 24,07,924/- TO 15 SHIPPING COMPANIES. THE TDS HAD B EEN DEDUCTED ON PAYMENT OF FREIGHT CHARGES TO 13 COMPANIES. THIS W AS NOT DONE QUA PAYMENT OF RS. 13,02,636/- TO M/S APL INDIA PVT. LTD. AND R S. 10,42,178/- AND RS. 2,60,458/-, MADE TO M/S YANG MING LINCE (I) PVT. LT D. THE A.O. MADE DISALLOWANCE OF THESE PAYMENTS. THE LD. CIT(A) DEL ETED THE DISALLOWANCE. 4. THE LD. D.R. HAS CONTENDED THAT THE LD. CIT(A) D ID NOT APPRECIATE THE FACT THAT THESE PAYMENTS WERE COVERED UNDER THE PRO VISIONS OF SECTION 194C R.W.S. 40(A)(IA) OF THE ACT, AND WRONGLY HOLDING TH AT SECTION 194C IS NOT APPLICABLE TO THE ASSESSEE, AND THE ASSESSEE IS COV ERED BY THE SHIPPING BUSINESS OF THE NON-RESIDENT, AS GOVERNED BY SECTIO N 172 OF THE ACT. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED STRO NG RELIANCE ON THE IMPUGNED ORDER. 6. IN THIS REGARD, WE FIND THAT THE LD. CIT(A) HAS DULY TAKEN INTO CONSIDERATION THE FACT THAT, THE RELEVANT CERTIFICA TES WERE ISSUED BY THE DEPARTMENT TO THE COMPANIES WHO WERE AGENTS OF THEI R PRINCIPALS, AND WHO HAD DONE THE JOB FOR THE SHIPPING BUSINESS OF THEIR NON-RESIDENT PRINCIPALS. AS CORRECTLY HELD BY THE LD. CIT(A), SHIPPING BUSI NESS OF NON-RESIDENT IS GOVERNED BY THE PROVISIONS OF SECTION 172. AS SUCH , NO TAX CAN BE DEDUCTED ITA 1757/M/13 3 U/S 194C OF THE ACT. THE PAYMENT WAS MADE TO SHIPPI NG COMPANIES WHO WERE INDIAN AGENTS OF NON-RESIDENT FOREIGN SHIPPING COMP ANY AND HAD DONE JOB FOR THEM. THEREFORE, NO DISALLOWANCE U/S 40(A)(IA) OF T HE ACT COULD HAVE BEEN MADE AND, THEREFORE, THE LD. CIT(A) HAS CORRECTLY D ELETED THE DISALLOWANCE. 7. APROPOS THE PAYMENT OF FREIGHT CHARGES OF RS. 10 ,42,178/- TO M/S APL INDIA PVT. LTD., AND RS. 2,60,458/- TO M/S YANG MI NG LINE (I) PVT. LTD., THE A.O. WAS GIVEN A COPY OF 100% RELIEF CERTIFICATES. RELIANCE THEREIN WAS PLACED ON CBDT CIRCULAR NO. 723 DATED 19.9.1995 AND LETTER S/CERTIFICATES DATED 15- 4-2008 AND 21-04-2008 OF THE ITO (INTERNATIONAL TAX ATION) RELIEF CERTIFICATE NO. 11/ITO/(IT)/07-08, & ADIT(IT)/2(2)/SHIPPING/4/2 008-09 PERTAINING TO M/S APL CO. (P) LIMITED, AND M/S YANG MING LINE (I) PVT. LTD. RESPECTIVELY. THE CIRCULAR AND THE COMMUNICATION DECLARED WERE TH E PAYMENTS TO BE NO TAX DEDUCTIBLE. THEREFORE, IT HAS RIGHTLY BEEN HELD THA T NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT WAS CALLED FOR. THE LD. CIT(A ) WAS CORRECT IN DELETING THE DISALLOWANCE. 8. APROPOS THE DISALLOWANCE REGARDING COMMISSION TO NON-RESIDENT FOREIGN AGENTS WITHOUT TDS, IT IS NOT DISPUTED THAT THE PAY EES ARE COMMISSION AGENTS, AS EVIDENT FROM THE CREDIT NOTES ISSUED BY THE ASSE SSEE, AND PAYMENT VOUCHERS SHOWED ACCOUNT NUMBER AND CREDIT NOTE NUMB ER WITH INVOICE NUMBER AND ALSO GAVE BANK TRANSACTION DETAILS. FURT HER, THE LD. CIT(A) HAS ALSO CORRECTLY PLACED RELIANCE ON THE FIRST APPELLA TE DECISION IN THE CASES OF M/S K.M. GANTARA & CO. AND SHRI VENKATESH S. KA MAT. THEREIN, RELYING ON IN THE CASE OF GE INDIA TECHNOLOGY CENTRE (P) L TD. VS. CIT, 327 ITR 456 (SC), IT WAS HELD TO THE EFFECT, INTER ALIA, WHERE AN AMOUNT IS PAYABLE TO A NON- RESIDENT, THE PAYER IS UNDER AN OBLIGATION TO DEDUC T TAX IS LIMITED TO THE APPROPRIATE PROPORTION OF INCOME WHICH IS CHARGEABL E UNDER THE ACT. AS CHARGING SECTION 4,5 AND 9 OF THE ACT DO NOT MAKE INCOME OF A NON-RESIDENT PERSON RENDERING SERVICES ABROAD AND RECEIVING REMU NERATION ALSO ABROAD AND ITA 1757/M/13 4 HAVING NO OTHER SOURCE OF INCOME ARISING IN INDIA, THEIR INCOME IS NOT CHARGEABLE TO TAX. 9. ACCORDINGLY, THE ACTION OF THE LD. CIT(A) IN DEL ETING THIS DISALLOWANCE IS ALSO UPHELD. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JULY, 2015. . ' *+,- $ /0 1 2 08-07-2015 + ' 3& SD/- SD/- (N.K. BILLAIYA) (A.D. JAIN ) ACCOUNTANT MEMBER /J UDICIAL MEMBER / $ & MUMBAI ; 1 DATED [ %.../ R.K. R.K. R.K. R.K. , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $ ?( () / THE CIT(A)-19, MUMBAI 4. $ ?( / CIT-9, MUMBAI 5. B%C 3 '(DE , ) DE- , / $ & / DR, ITAT, MUMBAI G BENCH 6. 3 F G & / GUARD FILE. ! ( / BY ORDER, # B( '( //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , / $ & / ITAT, MUMBAI