The ACIT,Navsari Circle, Navsari V. M/s. Desai Fruits & Vegetable Pvt.Ltd., Navsari

ITA 2045/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9817 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-12-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Opportunity of being heard
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2045/AHD/2013 ( / ASSESSMENT YEAR : 2005-06) ASSTT. COMMISSIONER OF INCOME-TAX, NAVSARI CIRCLE, NAVSARI / VS. M/S. DESAI FRUITS AND VEGETABLES PVT.LTD. N.H.NO.8, AMADPORE, DIST-NAVSARI. ./ ./ PAN/GIR NO. : AABCD 0223 G ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ROOP CHAND, SR.D.R. / RESPONDENT BY : --NONE-- / DATE OF HEARING 07/12/2016 / DATE OF PRONOUNCEMENT 14/12/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL HAVE BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) VALSAD, DATED 31/05/2013 FOR THE ASSESSMENT YEAR (AY) 2005-06 AND FOLLOWING GROUND HAS BEEN TAKEN. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT(A) IS ERRED IN DELETING THE DISALLOWANCE OF RS.88,66,596/- MADE U/S.40(A)(IA) OF THE ACT. ITA NO. 2045/AHD/2013 ACIT VS. DESAI FRUITS AND VEGETABLES PVT.LTD ASST.YEAR 2005-06 - 2 - 2. THE FACTS OF THE CASE ARE THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30/10/2005, DECLARING TOTAL LOSS OF RS. (-) 26,52,354/-. THEREAFTER, THE ASSESSMENT U/S.143(3) OF THE ACT WAS FINALIZED ON 29/11/2007 DETERMINING TOTAL LOSS OF RS. (-) 24,74,940/-. AGAINST THE SAID ORDER, THE ASSESSEE PREFERRED FIRST STATUTORY APPEAL AND THE SAME WAS ALLOWED BY THE CIT(A), CONFIRMING THE RETURNED LOSS OF RS.26,52,354/-. 3. THEREAFTER, ON VERIFICATION ON RECORD, IT IS REVEALED THAT THE ASSESSEE HAS MADE PAYMENT TO POMONA CARGO MOVERS OF RS.88,66,596/- FOR AIR FREIGHT EXPENSES. IT IS FURTHER OBSERVED THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THESE PAYMENTS. WHICH IS REQUIRED U/S.194C OF THE ACT. 4. ACCORDINGLY, THE ASSESSEES CASE WAS RE-OPENED U/S.147 OF THE ACT. DURING THE A.Y. PROCEEDING THE ASSESSEE WAS ASKED OF RS.88,66,596/- BEING AIR FREIGHT PAYMENT MADE TO POMONA CARGO MOVERS SHOULD NOT BE DISALLOWED CONSIDERING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 5. IN THIS ACTION THE ASSESSEE SUBMITTED THAT IT MAY PLEASE BE APPRECIATED THAT WE HAVE MADE THESE AIR FREIGHT PAYMENTS TO SHIPPING AGENTS OF NON- RESIDENT SHIP OWNERS OR CHARTERERS FOR CARRIAGE OF GOODS, EXPORTED OUT OF INDIA. SINCE, THE AGENT ACTS ON BEHALF OF THE NON-RESIDENT SHIP OWNERS OR CHARTERER, HE ITA NO. 2045/AHD/2013 ACIT VS. DESAI FRUITS AND VEGETABLES PVT.LTD ASST.YEAR 2005-06 - 3 - STEPS INTO THE SHOES OF THE PRINCIPAL. ACCORDINGLY, PROVISIONS OF SECTION 172 SHALL APPLY AND THOSE OF SECTIONS 194C AND 195 WILL NOT APPLY. 6. THE SUBMISSION MADE BY THE ASSESSEE COULD NOT CONVINCED, THE LD.AO AND HE OBSERVED THAT SECTION 194C OF THE IT ACT, 1961 PROVIDE THAT ANY PERSON RESPONSIBLE FOR MAKING ANY PAYMENT TO A RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF CONTRACT SHALL DEDUCT TDS AT THE TIME OF PAYMENT AND FOR THE PURPOSE OF SECTION 194C WORK INCLUDES CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORTS OTHER THAN BY RAILWAYS. FURTHER, CBDT S CIRCULAR NO.723 DATED 19/09/1995 FOR NON DEDUCTION OF TAX AT SOURCE ON FREIGHT CHARGES IS APPLICABLE TO NON-RESIDENT SHIPPING COMPANY ONLY AND NOT FOR AIR FRIGHT PAID TO RESIDENT COMPANIES. CONSIDERING THESE ASPECTS THE PAYMENT OF AIR FREIGHT RS.88,66,596/- WAS DISALLOWED U/S.40(A)(IA) OF THE ACT. 7. THEREAFTER, ASSESSEE PREFERRED STATUTORY APPEAL BEFORE THE LD.CIT(A) WHO ALLOWED THE APPEAL WITH FOLLOWING OBSERVATIONS THAT THE APPELLANT HAS PAID FREIGHT CHARGES TO THE C&F AGENT WHICH WERE NOT COVERED WITHIN THE MEANING OF SECTION 194C. EVEN OTHERWISE TO MAKE DEDUCTION OF TAX AT SOURCE ON REIMBURSEMENT OR EXPENDITURE BECAUSE IF THE PAYMENTS ARE MADE ON ACCOUNT OF REIMBURSEMENT, THEN NO TDS ARE LIABLE TO BE DEDUCTED ON BEHALF OF THE PAYER I.E. APPELLANT. THE FACT REMAINS THAT WHATEVER AMOUNT HAS BEEN PAID BY THE AGENTS TOWARDS FRIGHT THAT WAS REIMBURSED BY THE APPELLANT. THEREFORE, THERE WAS NO INCOME COMPONENT IN THE HANDS OF AGENTS. THE FACTS OF APPELLANT COMPANY ARE COVERED BY THE DECISION OF ACIT V/S. MINPRO INDUSTRIES 143 TTJ 331 (ITAT JODHPUR) AND DCIT V/S. HASMUKH J. PATEL 49 SOT 197 (ITAT ITA NO. 2045/AHD/2013 ACIT VS. DESAI FRUITS AND VEGETABLES PVT.LTD ASST.YEAR 2005-06 - 4 - AHMEDABAD). WHAT THE ASSESSEE HAS PAID WAS NOTHING BUT REIMBURSEMENT OF FREIGHT CHARGES FOR WHICH NECESSARY MEMOS WERE ISSUED BY THE AGENTS. THEREFORE INCLINED TO DELETE THE DISALLOWANCE OF RS.88,66,596/- MADE BY THE AO BY INVOKING PROVISIONS OF SECTION 194C R.W.S. 40(A)(IA) OF THE I.T. ACT,1961. 8. THE DEPARTMENT WAS NOT SATISFIED WITH THE OBSERVATION OF CIT(A) AS PER THE DEPARTMENT. THE PAYMENT HAS BEEN MADE BY THE ASSESSEE TO POMONA CARGO MOVERS OF RS.88,66,596/- FOR AIR FREIGHT EXPENSES IS NOT A C&F AGENT. THE ASSESSEE HAS MADE DIRECT PAYMENT TO POMONA CARGO MOVERS AND NOT THROUGH THE C&F AGENT. FURTHER, THE POMONA CARGO MOVERS IS A RESIDENT SHIPPING COMPANY AND THEREFORE, THE ASSESSEE OUGHT TO DEDUCTED TAX ON SOURCE ON PAYMENT OF AIR FRIGHT. CONSIDERING THE FACTS AND CIRCUMSTANCES NOW THIS APPEAL IS BEFORE US. 9. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND WE FIND THAT PAYMENT OF RS.88,66,596/- WAS PAID BY THE ASSESSEE TO THE POMONA CARGO MOVERS AND DIRECTLY AND NOT THROUGH THE C & F AGENT. 10. IN OUR OPINION LD.CIT(A) HAS NOT GIVEN THE CORRECT FACTS IN HIS OBSERVATION, THEREFORE WE REVERT THIS MATTER BACK TO THE FILE OF THE LD.CIT(A) TO DECIDE THIS MATTER AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO BOTH THE PARTIES. ITA NO. 2045/AHD/2013 ACIT VS. DESAI FRUITS AND VEGETABLES PVT.LTD ASST.YEAR 2005-06 - 5 - 11. IN THE RESULT APPEAL OF THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 14 /12/2016 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 14/12/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A), VALSAD. 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY