The ACIT,(OSD)Range-1, Ahmedabad V. Consumer Marketing (India) Pvt.Ltd., Ahmedabad

ITA 2125/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8623 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA. NO.2125/AHD/2011 (ASSESSMENT YEAR:2008-09) ACIT(OSD), RANGE-1, AHMEDABAD APPELLANT VS. CONSUMER MARKETING (INDIA) PVT. LTD. 30, OMKAR HOUSE, C.G. ROAD, AHMEDABAD RESPONDENT PAN: AABCC7453K /BY APPELLANT : SHRI M. K. SINGH, SR. D.R. /BY RESPONDENT : SHRI PRAKASH D. SHAH, A.R. !' /DATE OF HEARING : 23.02.2015 #$% !' /DATE OF PRONOUNCEMENT : 30.03.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 2 AHMEDABAD, DATED JUNE 17.06.2011 FOR A.Y. 2008-09 O N THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.8,33,252/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S.36(I)(III) OF THE ACT. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION OF RS.55,94,825/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S.40(A)(IA) OF THE ACT. 2. FIRST ISSUE IS WITH REGARDS TO DISALLOWANCE OF RS.8,33,252/- ON ACCOUNT OF INTEREST EXPENSES. ASS ESSING OFFICER HAS HELD IN ASSESSMENT ORDER DATED 07.12.20 10 AS UNDER: AFTER CAREFULLY CONSIDERING THE ASSESSEE'S REPLY, THE CONTENTION OF THE ASSESSEE IS NOT FOUND ACCEPTABLE. IN THE ACCOUNTS OF ASSESSEE ITSELF THE AMOUNT GIVEN TO M/S . AARTI IMPEX HAS BEEN SHOWN AS LOAN AND ADVANCE, HENCE, TH E CONTENTION OF THE ASSESSEE THAT IT IS DEBTOR IS NOT ACCEPTABLE. FURTHER, NO ANY BUSINESS PURPOSE WAS EXPLAINED WITH REGARD TO ADVANCE GIVEN TO OTHER TWO PARTIES. THE A SSESSEE HAS NOT EXPLAINED THE AVAILABILITY OF INTEREST FREE FUNDS ON THE DATE OF TRANSACTIONS. THE ASSESSEE HAS ONLY GIV EN TOTAL OF INTEREST FREE FUNDS OF RS. 199 LACS. HOWEVER, THE A SSESSEE HAS NOT EXPLAINED WHETHER THESE FUNDS WERE AVAILABL E AS BANK BALANCE ON THE DATE OF ADVANCING THESE LOANS. HENCE, THE ASSESSEE HAS NOT PROVED THAT NO BORROWED FUNDS WERE UTILIZED FOR ADVANCING INTEREST FREE LOANS. INTEREST ON BORROWED CAPITAL IS ALLOWED AS A DEDUCT ION FROM BUSINESS ONLY IF IT SATISFIES THE CONDITION THAT IT IS FOR THE PURPOSE OF BUSINESS OR PROFESSION. WHERE THE MONEY BORROWED WAS DERIVED FOR GIVING INTEREST FREE LOANS TO OTHERS, THE PROPORTIONATE INTEREST ATTRIBUTABLE TO SUCH LOA NS COULD BE LEGITIMATELY DISALLOWED BY THE ASSESSING OFFICER . IT WAS SO HELD IN S.A. BUILDERS LTD. V. CIT (2004) 269 ITR 53 5 (P&H). FURTHER, THIS VIEW WAS ACCEPTED IN CIT V. H.R. SUGA R FACTORY PVT. LTD. [1971] 187 ITR 363 (ALL) IN A CASE, WHERE MONEY ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 3 WAS BORROWED FOR PURPOSES OF BUSINESS, BUT ADVANCED AT A CONCESSIONAL RATE TO ITS DIRECTORS, SO THAT THE HIG H COURT UPHELD THE INFERENCE OF THE REVENUE TO DISALLOW THE AMOUNT TO THE EXTENT OF DIFFERENCE IN INTEREST RATES, THOU GH THE REVENUE WAS NOT ABLE TO ESTABLISH THE IDENTITY OF T HE FUNDS ALLEGEDLY DIVERTED. THE HIGH COURT POINTED OUT THAT NO BUSINESS PURPOSE WAS SERVED BY SUCH LENDING AND THA T THE AMOUNTS WERE SUBSTANTIAL AND CANNOT BE GLOSSED OVER AND THAT THE FACT THAT THE ASSESSEE BORROWS MONEY FOR I TS BUSINESS CANNOT BY ITSELF JUSTIFY THE DEDUCTION. TH E TRIBUNAL'S APPROACH IN ALLOWING DEDUCTION FOR THESE REASONS WAS CHARACTERIZED BY THE HIGH COURT AS 'NOT ONLY SU PERFICIAL BUT TOO NAIVE'. WHERE THE ASSESSEE LENDS MONEY WITHOUT INTEREST, TH ERE CAN BE NO INFERENCE OF NOTIONAL INCOME BASED ON REASONA BLE INTEREST, WHICH THE ASSESSEE MIGHT HAVE CHARGED FOR LENDING TO RELATIVES OR SISTER CONCERNS/OTHERS. BUT THEN, I T IS POSSIBLE IN SUCH CASES, TO DISALLOW A PROPORTIONATE PART OF INTEREST PAID ON SUCH BORROWED CAPITAL, IF ANY, TO THE EXTENT THAT THE BORROWED FUNDS ARE UTILIZED FOR INTEREST-F REE ADVANCES. DISALLOWANCE IS ON THE GROUND, THAT IT WI LL NOT BE ELIGIBLE FOR DEDUCTION AS EXPENDITURE INCURRED FOR PURPOSES OF BUSINESS. FURTHER, RELIANCE IS PLACED ON THE FOL LOWING DECISIONS:- 1. PATEL FILTER LTD. VS. CIT [2003] 264 ITR 21 (GUJ .) 2. CIT VS. VALLABH GLASS WORKS LTD. [1982] 137 ITR 3 89 (GUJ.) 3. CIT VS. H. R. SUGAR FACTORY PVT. LTD. [1991] 187 ITR 363 (ALL.) 4. INDIAN SAVING PRODUCTS LTD. VS. CIT [2004] 265 I TR 250 (RAJ.) 5. CALDERN PHARMACEUTICAL PVT. LTD. VS. CIT [2004] 265 ITR 244 (KAL.) 6. CIT VS. BOMBAY SAMACHAR LTD. [ 1969] 74 ITR 723 (BOM.) 7. K. SOMASUNDRAM & BRO. [1999] 238 ITR 939 (MADRAS ) 8. ELMER HAVELL ELECTRICS VS. CIT [2005] 277 ITR 54 9 (DEL.) IN VIEW OF THE ABOVE NARRATED FACTS AND THE JUDICIA L PRONOUNCEMENTS, THE CLAIM OF THE ASSESSEE IN RESPEC T OF INTEREST IS NOT ALLOWED. SINCE THE ASSESSEE HAS BEE N PAYING ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 4 INTEREST ON LOANS ACCEPTED, THEREFORE, 12% AT AN AV ERAGE RATE OF INTEREST IS TO BE DISAVOWED FROM INTEREST E XPENSES. AT THIS RATE, THE INTEREST DISALLOWANCE COMES TO RS, 9 ,73,692/-. BUT, THE ASSESSEE HAS MADE EXPENDITURE ON ACCOUNT O F INTEREST PAID ON BORROWED FUNDS OF RS. 8,33,252/-. HENCE, THE DISALLOWANCE OF INTEREST IS LIMITED TO RS. 8,33 ,252 /-. ' 2.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELI EF TO THE ASSESSEE BY OBSERVING AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANT'S SUBMISSION. ASSESSING OFFICER DISALLOWED INTEREST ON THE GROUND THAT APPELLANT MA DE INTEREST FREE ADVANCES. HOWEVER APPELLANT SUBMITTED THAT BORROWINGS WERE SPECIFICALLY MADE FROM THE BANK FOR PURCHASE OF OFFICE PREMISE AND MOTOR CAR. THERE IS DIRECT NEXUS BETWEEN BORROWINGS AND UTILISATION OF FUNDS T HEREFORE IT CANNOT BE SAID THAT INTEREST-BEARING BORROWED FU NDS WERE DIVERTED FOR NON-BUSINESS PURPOSE. THIS ISSUE WAS D ECIDED IN APPEAL ORDER DATED 03-03-2011 IN THE APPELLANT'S OWN CASE FOR ASSESSMENT YEAR 2007-08. THE RELEVANT EXTR ACT OF THIS ORDER IS QUOTED BELOW- 'ASSESSING OFFICER DISALLOWED THE INTEREST ON THE G ROUND THAT THE SAME WAS PAID ON THE CAPITAL BORROWED WHIC H WAS UTILIZED IN GIVING INTEREST FREE ADVANCES. HOWE VER OFFER GOING THROUGH THE DETAILS SUBMITTED BY THE APPELLANT IT IS CLEAR THAT THE INTEREST WAS PAID FO R THE LOANS TAKEN FROM ICICI BANK FOR THE PURPOSE OF PURCHASING CAR AND OFFICE PREMISE. APPELLANT SUBMITTED DOCUMENTS GIVING DETAILS OF SANCTION OF THESE LOANS. THE LOAN FOR PURCHASES OF OFFICE WAS T AKEN IN DECEMBER 2005 AND FOR PURCHASE OF CARS THE LOANS WERE TAKEN IN SEPTEMBER AND DECEMBER 2006. CONSIDERING ALL THESE DOCUMENTS IT IS CLEAR THAT TH E INTEREST WAS PAID AND CLAIMED BY THE APPELLANT ONLY IN RESPECT OF THESE LOANS WHICH WERE DIRECTLY USED FOR THE PURPOSE OF BUSINESS. THE INTEREST FREE ADVANCES WER E GIVEN PRIOR TO TAKING THESE LOANS AND THEREFORE THE SE ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 5 LOANS COULD NOT HAVE BEEN USED FOR GIVING INTEREST FREE ADVANCES. SINCE THERE IS DIRECT NEXUS BETWEEN BORROWINGS AND BUSINESS PURPOSE, INTEREST CANNOT BE DISALLOWED UNDER SECTION 36 (1) (III) OF IT ACT. IN VIEW OF THIS, THE DISALLOWANCE MADE BY THE ASSESSING OFFICE R IS DELETED. ' SINCE FACTS ARE IDENTICAL THIS YEAR ALSO, IT IS HEL D THAT INTEREST-BEARING BORROWED FUNDS WERE NOT DIVERTED F OR NON- BUSINESS USE AND ACCORDINGLY THE DISALLOWANCE OF IN TEREST CANNOT BE MADE. THE ADDITION MADE BY THE ASSESSING OFFICER IS THEREFORE DELETED. 2.2 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE O N BEHALF OF REVENUE. FACTS BEING SIMILAR SO FOLLOWING SAME REASONING, WE ARE NOT INCLINED TO INTERFERE IN THE ORDER OF CI T(A) BECAUSE INTEREST BEARING FUNDS WERE HELD NOT TO BE DIVERTED FOR NON BUSINESS USE AND ACCORDINGLY DISALLOWANCE IN QUESTI ON WAS RIGHTLY DELETED BY CIT(A). FOR SAKE OF CONSISTENCY , WE UPHOLD THE SAME. 3. NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE U/S. 40(A)(IA) ON ACCOUNT OF REIMBURSEMENT OF EXPENSES. ASSESSING OF FICER HAS STATED IN ASSESSMENT ORDER AS UNDER: REPLY OF THE ASSESSEE IS CAREFULLY CONSIDERED. AS PER DETAILS FURNISHED BY THE ASSESSEE, CLEARING AND FORWARDING AGENTS ARE RENDERING SERVICES OF CLEARING AND FORWARDING T O THE ASSESSEE. THE CONTENTION OF THE ASSESSEE THAT THE A MOUNT INVOLVED IS BELOW THE PRESCRIBED LIMIT IS FAR FROM THE FACTS AS THE PAYMENTS MADE ARE IN LAKHS TO THE AGENTS. THE CONTENTION OF THE ASSESSEE THAT THESE EXPENSES ARE PETTY EXPENSES IS ALSO NOT ACCEPTABLE AS THE SUM REFERRED IS NOT AN PETTY AMOUNT. IT IS CLEAR THAT THERE WAS A CONTRACT FOR CARRYING OUT THE WORK AS PER REQUIREMENT OF THE ASSESSEE. PAYMENT MA DE FOR ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 6 CARRYING OUT OF ANY WORK IS LIABLE FOR IDS AS PER S ECTION 194 C OF THE I. T. ACT. HOWEVER, THE ASSESSEE HAS FAILE D TO DEDUCT TAXES. AS PER SECTION 40 (A) (IA) PAYMENTS MADE WIT HOUT DEDUCTING TDS ARE NOT DEDUCTIBLE AS EXPENSE. THE RE LEVANT PART OF THAT SECTION 40 (A) (IA) IS REPRODUCED HERE UNDER FOR READY REFERENCE. '40. AMOUNTS NOT DEDUCTIBLE NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'.- (A) IN THE CASE OF ANY ASSESSEE.. ...(IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT , ROYALTY FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT, A NY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI IB AND SUCH FAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR OR IN THE SUBSEQ UENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSE QUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200, SUCH SUM SHALL BE ALLOW ED AS A DEDUCT/ON IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID..........' THE ASSESSEE HAS FURTHER STATED THAT THE PAYMENT MA DE TO C&F AGENT INCLUDES REIMBURSEMENT OF THE EXPENSES. REIMBURSEMENT DO NOT CONSTITUTE TRADING RECEIPTS OF THE C&F AGENT, THEREFORE NO TDS IS REQUIRED TO BE MADE. THIS EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED . FIRSTLY, TDS IS DEDUCTABLE ON THE GROSS AMOUNT OF PAYMENT. ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 7 SECONDLY, EVEN IF THE BILLS WERE SEPARATED IN THE F ORM OF REIMBURSEMENT OF EXPENDITURE, THE PAYMENT IS BEING MADE BY THE ASSESSEE TO THE SERVICE PROVIDER FOR EXECUTI ON OF WORK. IN THE CASE OF ASSOCIATE CEMENTS CO. LTD. 201 ITR 4 35 (SC), HON'BLE SUPREME COURT HELD THAT LANGUAGE OF S. 194 C (1) DOES NOT PERMIT EXCLUSION OF ANY AMOUNT PAID TO CON TRACTOR AS REIMBURSEMENT OF AMOUNT PAID BY HIM ON BEHALF OF ORGANIZATION. IN THE ABOVE DECISION, HON'BLE SC FUR THER HELD THAT PAYMENT TO CONTRACTOR IS NOT CONFINED TO A WOR K CONTRACT. ANY SUM PAYABLE BY AN ORGANIZATION FOR CA RRYING OUT ANY WORK IS LIABLE TO DEDUCT TAX. THE ASSESSEE HAS NOT EXPLAINED THAT ON THE FACTS OF THE CASE, JUDGEMENT RELIED UPON BY THE ASSESSEE IS APPLICABLE . IN THE CASE RELIED UPON BY THE ASSESSEE THE PAYMENT WAS MA DE TO SISTER CONCERN OUTSIDE INDIA, WHICH IS NOT THE CASE WITH THE ASSESSEE. ON THE FACTS OF THE CASE, JUDGEMENT OF TH E HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. KUMDUM PUBLICATIONS P. LTD. IS ALSO APPLICABLE. THE HC HEL D THAT ASSESSEE WAS LIABLE TO DEDUCT TAX FROM AMOUNTS PAID TO CONTRACTOR AS PER SECTION 194 C AS THE AGREEMENT WA S IN THE NATURE OF WORK CONTRACT. IN THE PRESENT CASE ALSO T HERE IS CONTRACT FOR CARRYING OUT WORK BETWEEN ASSESSEE AND THE SERVICE PROVIDER AND PROVISIONS OF SECTION 194 C AR E CLEARLY APPLICABLE. THUS, AS THE TAX WAS NOT DEDUCTED ON THE AMOUNT OF RS. 55,94,825/- BY THE ASSESSEE COMPANY. THESE AMOUNTS ARE DISALLOWED AND ADDED BACK TO TOTAL INCOME AS PER PR OVISIONS OF SEC. 40(A)(IA) OF THE ACT.' 3.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE. SAME HAS BEEN OPPOSED ON BEHALF OF R EVENUE INTER ALIA SUBMITTED THAT CIT(A) ERRED IN LAW AND I N DELETING ADDITION OF RS.55,94,825/- MADE ON ACCOUNT OF DISAL LOWANCE U/S. 40(A)(IA) OF THE ACT. ACCORDINGLY, ORDER OF C IT(A) BE SET ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 8 ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. O N OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORD ER OF CIT(A). 3.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT ASSESSEE DID NOT DEDUCT TDS ON REIMBURSEMENTS MADE TO C&F AGENT ON SEPARATE BILLS OF REIMBURSEMENT ON ACCOUNT OF FREIGHT AND OTHER PAYME NTS MADE ON BEHALF OF ASSESSEE. ITAT, AHMEDABAD BENCH IN C ASE OF M/S. OM SATYA EXIM PRIVATE LTD. IN ITA NO. 1335/AHD /2010 DATED 13.05.2011 HAS HELD AS UNDER: WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND GOING THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGEMENT CITED BY THE LD COUNSEL OF THE ASSESSEE. WE HAVE ALSO CONSIDERED BOARD CIR CULAR DATED 8-8-1995, COPY OF WHICH HAS BEEN SUBMITTED BY D R OF THE REVENUE. IN THE PRESENT CASE, IT HAS BEEN SU BMITTED BEFORE US BY A R THAT THE COMMISSION AGENT HAS RAIS ED SEPARATE BILLS FOR REIMBURSEMENT OF THE EXPENSES. W ITH ALL THESE FACTS, WHEN WE CONSIDER THE BOARD CIRCULAR NU MBER 715 DATED 8-8-1975, WE FIND THAT THIS BOARD CIRCULA R CANNOT BE MADE APPLICABLE TO THE PRESENT CASE BECAUSE IN T HE PRESENT CASE, THERE IS NO COMPOSITE BILL RAISED BY THE COMMISSION AGENT AND AS PER THE AR OF THE ASSESSEE SEPARATE BILLS WERE RAISED BY THE COMMISSION AGENT FOR REIMBURSEMENT OF EXPENSES AND THE DR COULD NOT CONT RADICT THE SUBMISSION OF THE AR OF THE ASSESSEE. WE ALSO F IND THAT TRIBUNAL HAS ALSO CONSIDERED THE BOARD CIRCULAR NUM BER 715 DATED 8-8-1995 IN THE CASE OF DR WILLMAR SCHWABE IN DIA PRIVATE LTD AND IT WAS HELD THAT WHEN THE BILL FOR REIMBURSEMENT OF EXPENSES HAS BEEN SEPARATELY RAISE D BY THE CONSULTANT, SECTION 194J IS NOT APPLICABLE. HEN CE MY RESPECTFULLY FOLLOWING THIS TRIBUNAL DECISION, WE H OLD THAT IN THE PRESENT CASE ALSO, SINCE BILLS FOR REIMBURSEMEN T OF EXPENDITURE HAVE BEEN RAISED BY THE COMMISSION AGEN T SEPARATELY, TDS WAS NOT REQUIRED TO BE DEDUCTED FRO M SUCH ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 9 REIMBURSEMENT OF EXPENSES AND AS A CONSEQUENCE, SEC TION 40 (A) (IA) IS NOT APPLICABLE WITH REGARD TO SUCH P AYMENTS. THE TRIBUNAL DECISION CITED BY THE AR OF THE ASSESS EE RENDERED IN THE CASE OF MODICON NETWORK PRIVATE LTD AND GRANDPRICKS FAB PRIVATE LTD ALSO SUPPORT THE CASE O F THE ASSESSEE AND HENCE, BY RESPECTFULLY FOLLOWING ALL T HE ABOVE TRIBUNAL DECISIONS, WE HOLD THAT NO TDS IS REQUIRED TO BE DEDUCTED IN THE PRESENT CASE FOR REIMBURSEMENT OF E XPENSES FOR WHICH SEPARATE BILLS WERE RAISED BY THE COMMISS ION AGENT AND HENCE, THE PROVISIONS OF SECTION 40 (A) ( IA) IS NOT APPLICABLE TO SUCH PAYMENTS. THEREFORE, DISALLOWANC E MADE BY THE ASSESSING OFFICER IS TO BE DELETED.' 3.3 THIS VIEW IS FORTIFIED BY THE DECISION OF ITAT, AHMEDABAD A BENCH IN CASE OF DCIT VS. IGNITE MUNDRA PVT. LT D. IN ITA NOS. 3110 & 3111/AHD/2010, WHEREIN SIMILAR ISSUE HA S BEEN DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER : 4.2 WITHOUT GOING FURTHER IN DETAIL AND KEEPING BREVITY IN MIND, WE HEREBY HOLD THAT IN A SITUATION WHEN THE ADMITTED FACTUAL POSITION WAS THAT THE PAYMENT WAS NOTHING BUT REIMBURSEMENT AS ADMITTED BY LEARNED CIT(A); HE NCE, WE ARE NOT INCLINED TO INTERFERE WITH THOSE FACTUAL FINDING; HENCE, AFFIRM THE SAME; ESPECIALLY, WHEN NO CONTRAR Y MATERIAL IS PLACED BEFORE US FROM THE SIDE OF THE R EVENUE. RESULTANTLY, GROUNDS RAISED BY THE REVENUE ARE HERE BY DISMISSED. 4. IN VIEW OF ABOVE, CIT(A) RIGHTLY OBSERVED THAT N O TDS IS REQUIRED TO BE DEDUCTED IN CASE REIMBURSEMENT BILLS WERE SEPARATELY RAISED. ASSESSEE HAS MADE PAYMENT TO C& F AGENT AND SEPARATE BILLS WERE RAISED IN RESPECT OF REIMBU RSEMENT EXPENSES INCURRED BY AGENT ON BEHALF OF ASSESSEE. THE FACT THAT SEPARATE BILLS WEE ISSUED FOR SERVICES AND FOR REIMBURSEMENT WAS NOT DISPUTED IN ASSESSMENT ORDER. AS DISCUSSED ABOVE, IN M/S. OM SATYA EXIM PRIVATE LTD. (SUPRA) ITA NO. 2125/AHD/11 A.Y. 08-09 [ACIT(OSD) VS. CONSUMER MARKETING (INDIA) PVT. LTD.] PAGE 10 HELD THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TDS ON REIMBURSEMENT OF EXPENSES INCURRED BY AGENT ON BEHA LF OF ASSESSEE. DISALLOWANCE IN RESPECT OF THESE ITEMS H AS NOT BEEN MADE U/S. 40(A)(IA). NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. FACTS BEING SIMILA R SO FOLLOWING SAME REASONING, CIT(A) WAS JUSTIFIED IN D ELETING ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF DI SALLOWANCE U/S. 40(A)(IA) OF THE ACT. WE UPHOLD THE SAME. 5. AS A RESULT, APPEAL FILED BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF MARCH, 2015. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 30/03/2015 TRUE COPY S.K.SINHA & & & & ' ' ' ' ('% ('% ('% ('% / COPY OF ORDER FORWARDED TO:- 1. +, / REVENUE 2. / ASSESSEE 3. // 0 / CONCERNED CIT 4. 0- / CIT (A) 5. '45 , , / DR, ITAT, AHMEDABAD 6. 589 :; / GUARD FILE. BY ORDER / & ,