Hah Logistics, New Delhi V. DCIT, New Delhi

ITA 1864/DEL/2011

• Counselvise Citation: 186420114 RSA 2011
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-10-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHANISH VERMA
• Section: 37; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.1864/DEL/2011 ASSESSMENT YEAR: 2008-09 HAH LOGISTICS, VS. DCIT, C-702, GANI NATH NIKUNJ, CIRCLE 26(1), PLOT NO. 1, SECTOR-5, NEW DELHI. DWARKA, NEW DELHI. AAEFH7858R (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VED JAIN, MS. RANO JAIN, SH. VENKETESH CHOMANIA, CAS RESPONDENT BY : SH. MOHANISH VERMA, CIT(DR) ORDER PER C.L. SETHI, J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 25.03.2011 PASSED BY THE LD. CIT(A) FOR THE A.Y. 20 08-09. 2. GROUND NO. 1 & 2 REGARDING NOT PROVIDING OPPORTU NITY OF BEING HEARD BY LD. CIT(A) HAS NOT BEEN PRESSED BEFO RE US. HENCE, THE SAME STANDS REJECTED. ITA NO. 1864/D/11 2 3. GROUND NO. 4, 5 & 6 REVOLVE AROUND THE ISSUE REG ARDING DISALLOWANCE OF RS. 2,04,72,855/- U/S 40(A)(IA) OF THE ACT. 4. THE ASSESSEE FIRM IS A PARTNERSHIP FIRM, WHICH I S ENGAGED IN THE BUSINESS OF LOGISTICS I.E. CLEARING AND FORWARDING AGENT. THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.09.2008 DECLARING TOTAL INCOME AT RS. 8,88,140/- . THE RETURN WAS SELECTED FOR SCRUTINY AND NOTICES U/S 14 3(2)/142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD DECLARED GR OSS RECEIPTS OF RS. 3,33,44,575/- AGAINST WHICH THE DIR ECT EXPENSES WERE CLAIMED AT RS. 3,08,91,654/-. THE DI RECT EXPENSES INCLUDE THE FREIGHT PAID TO THE VARIOUS PA RTIES. THE AO REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF FREIGHT PAID, AND RECONCILIATION FOR THE EXPENSES SHOWN UNDER THE HEAD PURCHASES AND SERVICES AND TAX DEDUCTED THEREUPON . THE ASSESSEE SUBMITTED THE DETAILS AS REQUIRED. FROM T HE DETAILS OF FREIGHT, IT WAS NOTICED BY THE AO THAT ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE AS REQUIRED U/S 194C OF THE ACT, THOUGH THE PAYMENT MADE TO THE PARTIES WERE MORE TH AN THE PRESCRIBED LIMIT OF RS. 50,000/-. THE NAME OF THE PARTIES TO ITA NO. 1864/D/11 3 WHOM THE PAYMENTS WERE MADE AND ON WHICH NO TAX WAS DEDUCTED AT SOURCE WERE TABULATED BY THE AO IN THE ASSESSMENT ORDER AS UNDER: - S.NO. PARTICULARS AMOUNT TDS DEDUCTED 1. MAERSK LOGISTICS, MUM. 50,23,655/- 0 2. ATLAS SHIPPING SERVICES 13,59,551/- 0 3. UPS MUMBAI 3,09,805/- 0 4. ZEUS AIR SERVICES 6,65,750/- 0 5. JEENA & CO., DELHI 7,44,187/- 0 6. ULA+TAI PAN 71,83,610/- 0 7. ASSOCIATED CONTAINER LINE 4,70,884/- 0 8. APL LOGISTICS, DELHI 2,14,030/- 0 9. SUNI TRANS MUMBAI 56,312/- 0 10. MAERSK LOGISTICS, DELHI 22,40,352/- 0 11. CDS OVERSEAS LOGISTICS 1,48,737/- 0 12. EXPENDITORS, MUMBAI 3,55,666/- 0 13. SDV AIR LINKS 4,89,525/- 0 14. WORLDWIDE LOGISTICS 80,214/- 0 15. EGL 2,50,188/- 0 16. APL LOGISTICS, MUM. 2,25,483/- 0 17. ATZ SHIPPING TRADE 96,782/- 0 18. KUENHE NAGEL 73,704/- 0 19. ASCENT AIR PVT. LTD. 54,969/- 0 20. NYK LOGISTICS 1,83,524/- 0 21. BEST SHIPPING 1,85,927/- 0 22. SSE 60,000/- 0 TOTAL 2,04,72,855/ - 0 6. SINCE, IN THE VIEW OF THE ASSESSING OFFICER, NO TAX REQUIRED TO BE DEDUCTED U/S 194C OF THE ACT WAS DED UCTED, THE ASSESSING OFFICER HAD DRAWN THE ASSESSEES ATTE NTION TO THE PROVISIONS CONTAINED IN SEC. 40(A)(IA) OF THE A CT VIDE ORDER- SHEET ENTRY DATED 25.10.2010 AND ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT PAID SHOULD NOT BE DISALLOWED AS DEDUCTION FOR NOT DEDUCTING THE TAX A T SOURCE FROM THE PAYMENTS. IN REPLY TO THE AOS QUERY, THE ASSESSEE SUBMITTED A LETTER DATED 12.11.2010 STATING THEREIN THAT THE ITA NO. 1864/D/11 4 PAYMENTS MADE TO THE SHIPPING LINE ARE NOT IN THE N ATURE OF PAYMENT TOWARDS ANY WORK CONTEMPLATED U/S 194C OF T HE ACT. THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE PAYME NT MADE TO THE PARTIES INCLUDED DOCUMENTATION CHARGES, TERMINAL HANDLING CHARGES AND THE CUSTOM BOUNDED TE RMINAL PAID FOR AND ON BEHALF OF ULTIMATE EXPORTER. IT WA S FURTHER SUBMITTED THAT THERE WAS NO CONTRACT BETWEEN THE SH IPPING LINE AND THE ASSESSEE FIRM, AND THE BILLS FOR SPECI FIED SERVICES WERE RAISED BY SHIPPING LINES IN THE NAME OF ULTIMA TE CONSUMER AND NOT IN THE NAME OF ASSESSEE, AS PER TH E TERMS AND CONDITIONS AGREED UPON BETWEEN THE PARTIES. TH E ASSESSEE FURTHER CLARIFIED THAT THE ASSESSEE FIRM M ADE THESE PAYMENTS ON BEHALF OF ITS CLIENT AND GOT THE SAME R EIMBURSED BY RAISING INVOICE TO ITS CLIENTS ON WHICH APPROPRI ATE TDS HAS BEEN DEDUCTED BY THE CLIENT OF THE ASSESSEE. HOWEV ER, THE ASSESSEES EXPLANATION WAS NOT FOUND ACCEPTABLE TO THE AO. THE AO HAD TAKEN A VIEW THAT THE ASSESSEE WAS REQUI RED TO DEDUCT TAX AT SOURCE U/S 194C OF THE ACT AND SINCE NO TAX WAS DEDUCTED AT SOURCE, THE PAYMENTS MADE BY THE ASSESS EE COULD NOT BE ALLOWED AS DEDUCTION U/S 40(A)(IA) OF THE ACT. THE AOS FINDING IN THIS RESPECT IS REPRODUCED AS U NDER: - ITA NO. 1864/D/11 5 THE SUBMISSION OF THE ASSESSEE IS NOT CORRECT BECAUSE IT IS NOT NECESSARY THE CONTRACT FROM THE SERVICE PROVIDER AND SERVICE RECIPIENT MAY BE IN WRITING, THE CONTRACT MAY BE ORAL OR BY ISSUE OF BILLS AND RECEIVING THE PAYMENT AGAINST THE RAISED BILLS. HERE THE ASSESSEE HAS RECEIVED THE BILL FROM THE SHIPPING COMPANIES THOUGH IN THE NAME OF THE CLIENT WHOSE GOODS HAVE TO BE EXPORTED OR IMPORTED AND RAISED THE CONSOLIDATE BILLS TO THE CLIENT INCLUDING CHARGES OF THE ASSESSEE OF DIFFERENT NATURES. THE ASSESSEE RECEIVED THE PAYMENT AGAINST THE BILLS FROM THE CLIENTS AND MADE FURTHER PAYMENTS TO THE PARTIES RESPONSIBLE FOR DISPATCHING THE GOODS THROUGH SHIPPING LINES. THIS ISSUE HAS BEEN CLARIFIED BY THE CBDT VIDE CIRCULAR NO. 715 DATED 08/08/1995 THAT SEC. 194C REFERRED TO ANY SUM [PAID, OBVIOUSLY, REIMBURSEMENT OF ACTUAL EXPENSES CANNOT BE DEDUCTED OUT OF THE BILLS AMOUNT FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE. THEREFORE, THE CONTENTION OF THE ASSESSEE IS NOT CORRECT IT WAS SUPPOSED TO DEDUCT THE TAX FROM THE PAYMENTS MADE TO THE ABOVE PARTIES AFTER DEDUCTION OF TAX INCLUDING THE AMOUNT OF REIMBURSEMENT BUT THE ASSESSEE HAS FAILS TO SO. THEREFORE, THE EXPENSES CLAIMED BY THE ASSESSEE IN THE P&L ACCOUNT TO THE EXTENT OF THE AMOUNT AS ITA NO. 1864/D/11 6 MENTIONED ABOVE IS NOT ALLOWABLE AS DEDUCTION IN VIEW OF THE PROVISION OF SEC. 40(1)(IA) OF THE I.T. ACT AND THE SAME IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 7. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE LD. CIT(A). 8. AFTER CONSIDERING THE AOS ORDER AND THE FACTS O F THE CASE, THE LD. CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: - 4. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE AOS FINDINGS. AS PER FIRST PARA OF THE PAGE 03 OF THE IMPUGNED ORDER, IT IS EVIDENT THAT 22 PERSONS AS DETAILED ON PAGE 02 OF THE IMPUGNED ORDER HAVE NOT RAISED ANY BILL TO THE APPELLANT THOUGH IT HAS MADE PAYMENTS OF RS. 2,04,72,855/- TO THESE PERSONS IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENTS ENTERED BETWEEN ITS CLIENTS (THE PERSONS EXPORTING THE GOODS THROUGH THE APPELLANT) AND THESE 22 PERSONS (SUPRA). THE APPELLANT HAS FURTHER SUBMITTED BEFORE THE AO THAT IT USED TO GET THE SUMS REIMBURSED BY RAISING INVOICE TO ITS CLIENTS WHO HAVE DEDUCTED TDS ON MAKING PAYMENTS TO IT. IN CASE THE APPELLANTS SUBMISSION IS ACCEPTED ITA NO. 1864/D/11 7 FOR THE SAKE OF DISCUSSION, THEN IT IS NOT UNDERSTANDABLE (I) FOR WHAT PURPOSE THE APPELLANT WAS EXISTING IN BETWEEN THE SERVICE PROVIDER AND ITS CLIENTS, (II) WHY PAYERS (APPELLANTS CLIENTS) HAVE NOT MADE DIRECT PAYMENTS TO THE SERVICE PROVIDERS (22 PERSONS AS MENTIONED ABOVE) WHEN BILLS ARE RAISED IN THEIR NAMES, (III) IN CASE THE APPELLANT HAS NOT RECEIVED ANY BILL FROM THE ABOVE MENTIONED 22 PERSONS THEN WHERE IS THE QUESTION OF REIMBURSEMENT, (IV) WHY PAYERS (APPELLANTS CLIENTS) HAVE DONE TDS ON REIMBURSEMENT, (V) IN CASE BILL IS RAISED TO THE PAYERS (APPELLANTS CLIENTS) BY THE SERVICE PROVIDERS THEN THE FATE OF THOSE BILLS IN BOOKS OF ACCOUNTS OF PAYERS. THE APPELLANT HAS NOT PRODUCED ANY CONTRACT AGREEMENT SHOWING THAT PAYERS (APPELLANTS CLIENTS) WOULD REIMBURSE THE BILLS RAISED BY THE SERVICE PROVIDERS. FURTHER, THE APPELLANT FAILED TO PRODUCE ANY DOCUMENT TO ESTABLISH THE SERVICES RENDERED BY THE SERVICE PROVIDERS AGAINST THE PAYMENTS OF RS. 2,04,72,855/- MADE BY IT. ADMITTING THE APPELLANTS VERSION THAT IT HAS MADE PAYMENT IN PURSUANCE OF CONTRACTS ENTERED BETWEEN PAYERS (APPELLANTS CLIENTS) AND THE SERVICE PROVIDERS THEN THE PAYMENT MADE BY THE APPELLANT FALL IN PURVIEW OF THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT AS THESE PAYMENTS MADE BY THE ASSESSEE ARE ITA NO. 1864/D/11 8 UNDER CONTRACTUAL OBLIGATIONS. THUS, THE AOS ACTION IS HELD JUSTIFIED. FURTHER, THE APPELLANT FAILED TO EXPLAIN AND ESTABLISH THE BUSINESS PURPOSES OF THE APPELLANT GOT SERVED BY MAKING THE PAYMENTS OF RS. 2,04,72,855/-. THUS, ALTERNATIVELY ALSO, THE PAYMENTS ARE NOT ALLOWABLE U/S 37 OF THE ACT. IT CANNOT BE RULED OUT THAT THE PAYMENTS MADE BY THE APPELLANT ARE NOT PUNISHABLE OFFENCE IN THE NATURE, ESPECIALLY WHEN THE PAYERS (APPELLANTS CLIENTS) HAVE ALSO MADE DIRECT PAYMENTS TO THE SERVICE PROVIDERS. THE AOS ACTION DISALLOWING RS. 2,04,72,855/- IS THUS SUSTAINED . 9. BEING AGGRIEVED WITH THE LD. CIT(A)S ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 10. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LOGISTICS I. E. CLEARING AND FORWARDING, AND IN THE COURSE OF CARRYING ON SU CH BUSINESS OF CLEARING AND FORWARDING, THE ASSESSEE M ADE PAYMENTS TO SHIPPING COMPANIES FOR AND ON BEHALF OF ITS CLIENTS, WHICH WERE REIMBURSED LATER BY ASSESSEES CLIENT ON ACTUAL BASIS. IT WAS THUS, CONTENDED BY THE LD. CO UNSEL FOR THE ASSESSEE THAT THERE WAS NO EXPENSES INCURRED BY THE ITA NO. 1864/D/11 9 ASSESSEE ON ACCOUNT OF PAYMENT MADE TO VARIOUS SHIP PING COMPANIES/FREIGHT FORWARDS AND THUS, THERE WAS NO Q UESTION OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. HE FURTHER SUBMITTED THAT THE PAYMENT MADE TO SHIPPING COMPANIES ON BEHA LF OF ASSESSEES CLIENT CONSISTED MAINLY OF FOLLOWING ITE MS: - (I) DOCUMENT CHARGES THESE CHARGES RELATE TO PREPARATION OF BILLS OF LADING WHICH IS A BASIC DOCUMENT FOR EXPORT/IMPORT IN INDIA. (II) THC (TERMINAL HANDLING CHARGES) THESE ARE THE CHARGES LEVIED BY SHIPPING COMPANIES FOR HANDLING CARGO IN THE CUSTOM BOUNDED TERMINAL. THESE INCLUDE CFS (CONTAINER FILLING STATION) CHARGES FOR HANDLING THE CARGO IN YARD. THE MAXIMUM CHARGES AS PAYABLE TO SHIPPING LINES IN THIS REGARD ARE FIXED BY PORT AUTHORITIES. THE SHIPPING COMPANIES CANNOT CHARGE MORE THAN THE RATES AS GIVEN BY PORT AUTHORITIES. 11. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT THERE WAS NO CONTRACT BETWEEN THE SHIPPING LINES AN D THE ASSESSEE FIRM IN THE NATURE OF A WORK SPECIFIED IN SEC. 194C OF THE ACT. HE FURTHER CLARIFIED THAT THE BILLS FOR S PECIFIED SERVICES WERE RAISED BY SHIPPING LINES IN THE NAME OF THE UL TIMATE CONSUMER AS PER THE TERMS AND CONDITIONS AGREED UPO N BETWEEN THEM, AND THE ASSESSEE FIRM AS A CLEARING A ND ITA NO. 1864/D/11 10 FORWARDING AGENT HAS NOTHING TO DO WITH THE COMPONE NTS OF THE BILLS RAISED BY THE SHIPPING LINES ON THE ULTIMATE CONSUMER. THE ASSESSEE HAS MERELY MADE THESE PAYMENTS ON BEHA LF OF ULTIMATE CONSUMER I.E. ASSESSEES CLIENTS, AND GOT REIMBURSED THE SAME WHILE RAISING INVOICE TO ITS CLIENTS, ON W HICH APPROPRIATE TDS HAS BEEN DEDUCTED BY THE CLIENT OF THE ASSESSEE. IN THIS CONNECTION, HE INVITED OUR ATTEN TION TO SOME COPIES OF THE BILLS RAISED BY SHIPPING LINES/FREIGH T FORWARDS AND ALSO COPIES OF BILLS RAISED BY THE ASSESSEE FIRM TO ITS CLIENTS IN THIS REGARD, WHICH WERE ALSO FURNISHED TO THE ASSES SING OFFICER VIDE LETTER DATED 12.11.10. A COPY OF ORDERS OF PO RT AUTHORITIES HAS ALSO BEEN FURNISHED. IT WAS THUS, SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS NO REQUIREM ENT TO DEDUCT TAX AT SOURCE BY THE ASSESSEE INTERMEDIARY F ROM THE PAYMENTS MADE TO SHIPPING LINES FOR AND ON BEHALF O F ASSESSEES CLIENT, AND AS SUCH NO DISALLOWANCE U/S 40(A)(IA) IS CALLED FOR. IN THIS CONNECTION, THE LD. COUNSEL FO R THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF COMMISSIONER OF INCOME TAX VS. CARGO LI NKERS (2009) 179 TAXMAN 151 = (2008) 218 CTR (DEL.) 695, WHERE ITA NO. 1864/D/11 11 IT WAS HELD BY THE HONBLE HIGH COURT THAT THE ASSE SSEE C&F AGENT IS ONLY AN INTERMEDIARY, WHO IS NOT A PERSON RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE IN TERMS OF SEC. 194 C OF THE ACT. 12. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND S UBMITTED THAT AS PER THE PROVISIONS OF SEC. 194C OF THE ACT, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE EVEN IF THE EXPENSES INCURRED BY THE ASSESSEE WERE REIMBURSED B Y THE ASSESSEES CLIENT. 13. THE RIVAL CONTENTIONS OF BOTH THE PARTIES HAVE BEEN CONSIDERED AND ORDERS OF THE AUTHORITIES BELOW HAVE BEEN PERUSED. WE HAVE ALSO GONE THROUGH THE VARIOUS PAP ERS AND DOCUMENTS CONTAINING 77 PAGES PLACED IN THE PAPER B OOK FILED BY THE ASSESSEE. 14. IT IS NOT IN DISPUTE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGENT. THE GOODS OF ASSESSEES CLIENT, WHO ARE EXPORTER OR IMPORTER, WE RE EXPORTED OR IMPORTED BY THE SHIPPING COMPANIES. THE SHIPPIN G COMPANIES RAISED BILL FOR VARIOUS CHARGES AGAINST T HE ULTIMATE EXPORTER OR IMPORTER, WHO ARE THE CLIENT OF THE ASS ESSEE. THE ITA NO. 1864/D/11 12 AMOUNT MENTIONED IN THE BILL RAISED BY SHIPPING COM PANIES ON ULTIMATE CONSUMER WERE INITIALLY PAID BY THE ASSESS EE, AND THEREAFTER THE ASSESSEE GOT REIMBURSED THE SAID AMO UNT FROM ITS CLIENT INCLUDING THE CHARGES OF THE ASSESSEE FO R SERVICES RENDERED. WE HAVE PERUSED THE VARIOUS BILLS RAISED BY VARIOUS SHIPPING COMPANIES AND FIND THAT THE SHIPPI NG COMPANIES RAISED THEIR BILLS ON THE ULTIMATE CUSTOM ER, WHO IS THE EXPORTER OR IMPORTER OF THE GOODS. THE ASSESSE E USED TO RAISE BILLS UPON EXPORTER OR IMPORTER I.E. ASSESSEE S CLIENT, INCLUDING THE CHARGES PAYABLE TO SHIPPING LINES, AN D AS WELL THE CHARGES OF THE ASSESSEE ON ACCOUNT OF VARIOUS S ERVICES RENDERED BY IT. IT HAS NOT BEEN DISPUTED BY THE AO THAT THE BILLS ISSUED BY SHIPPING COMPANIES WERE RAISED IN T HE NAME OF CLIENTS, WHOSE GOODS WERE EXPORTED OR IMPORTED, AND THE ASSESSEE THEREAFTER RAISED THE BILL TO ITS CLIENT S EPARATELY INDICATING CHARGES OF THE ASSESSEE AS WELL AS THE C HARGES PAID BY THE ASSESSEE TO SHIPPING COMPANIES ON BEHAL F OF ITS CLIENTS. THEREFORE, FROM THE VARIOUS DETAILS FILED BY THE ASSESSEE AND NATURE OF THE ASSESSEES BUSINESS OF C LEARING AND FORWARDING AGENTS, WE FIND THAT THE ASSESSEE IS NOTHING BUT AN INTERMEDIARY BETWEEN THE EXPORTERS AND THE S HIPPING LINES. THE ASSESSEE FACILITATES THE CONTRACT FOR C ARRYING GOODS ITA NO. 1864/D/11 13 FOR AND ON BEHALF OF ITS CLIENT I.E. EXPORTERS OR I MPORTERS, AND THE PRINCIPLE CONTRACT FOR CARRYING GOODS IS BETWEE N THE EXPORTER/IMPORTER AND THE SHIPPING LINES. AN IDENT ICAL ISSUE HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT OF DE LHI IN THE CASE OF COMMISSIONER OF INCOME TAX VS. CARGO LINKER S (SUPRA), WHERE THE HONBLE HIGH COURT WAS IN AGREEM ENT WITH THE ORDER PASSED BY THE TRIBUNAL, WHICH MAINLY DECI DED AN ISSUE OF FACT, NAMELY, THE NATURE OF THE CONTRACT B ETWEEN THE PARTIES CONCERNED, AND IT WAS FOUND AS A MATTER OF FACT THAT THE CONTRACT WAS ACTUALLY BETWEEN THE EXPORTER AND THE AIRLINE, AND THE ASSESSEE WAS ONLY AN INTERMEDIARY. IT WAS, THEREFORE, HELD THAT THE ASSESSEE IS NOT A PERSON RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE IN TERMS OF SEC. 194C OF THE ACT. RELYING ON THE AFORESAID DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CARGO LINKERS (SUPRA) WE HOL D THAT THE PRESENT ASSESSEE, WHO IS CARRYING ON THE BUSINESS O F CLEARING AND FORWARDING AGENTS, IS NOT A PERSON RESPONSIBLE FOR DEDUCTING THE TAX AT SOURCE IN TERMS OF SEC. 194C O F THE ACT IN AS MUCH AS THE ASSESSEE IS ONLY AN INTERMEDIARY BET WEEN THE EXPORTERS AND THE SHIPPING LINES AND IT MERELY FACI LITATES THE CONTRACT FOR CARRYING THE GOODS. SINCE THE ASSESSE E WAS NOT A PERSON RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE I N TERMS OF ITA NO. 1864/D/11 14 SEC. 194C OF THE ACT, THE QUESTION OF FAILURE ON TH E PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT M ADE TO SHIPPING LINES FOR AND ON BEHALF OF ITS CLIENT WOUL D NOT ARISE, AND, CONSEQUENTLY, PROVISIONS OF SEC. 40(A)(IA) CAN NOT BE INVOKED IN RESPECT OF THE PAYMENT MADE BY THE ASSES SEE TO SHIPPING LINES FOR AND ON BEHALF OF ASSESSEES CLIE NT I.E. ULTIMATE EXPORTER OR IMPORTER. WE, THEREFORE, REVE RSE THE ORDER OF AUTHORITIES BELOW AND DELETE THE DISALLOWANCE OF RS. 2,04,72,855/- MADE U/S 40(A)(IA) OF THE ACT BY THE AO. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 4 TH NOVEMBER, 2011. SD/- SD/- (K.G. BANSAL) (C.L. SETH I) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 4.11.11 *KAVITA ITA NO. 1864/D/11 15 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR ITA NO. 1864/D/11 16