MEHTA EXPORTS, MUMBAI V. JCIT 20(2), MUMBAI

ITA 2211/MUM/2013

• Counselvise Citation: 221119914 RSA 2013
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 19-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHA K NARANG
• Keywords: Corroborative evidences
• Section: 194C

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.2211/MUM/2013 ASSESSMENT YEAR: 2008-09 M/S MEHTA EXPORTS, B-9, VIRAL APARTMENTS, OPP. SHOPPERS STOP, S.V.ROAD, ANDHERI, MUMBAI / VS. JOINT COMMISSIONER OF INCOME TAX-20(2), MUMBAI ( ! ' /ASSESSEE) ( # / REVENUE) P.A. NO. AA AFM1566B ! ' / ASSESSEE BY SHRI PIYUSH CHHAJED # / REVENUE BY MS. RADHA K. NARANG $ #% & ' ' / DATE OF HEARING : 17/06/2015 & ' ' / DATE OF ORDER: 01/07/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 22/02/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON THE GROUNDS, WHICH ARE REPRODUCED AS UNDER:- M/S MEHTA EXPORTS ITA NO.2211/MUM/2013 2 I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE W ITHOUT APPRECIATING THAT THE SAID PAYMENTS WERE MADE TOWARDS THE BILLS FOR REIMBURSEMENT OF ACTUAL EXPENSES INCURRED BY THE CL EARING AND FORWARDING AGENTS WHICH IS NOT COVERED BY SECTION 1 94C AND HENCE THERE CANNOT BE ANY DISALLOWANCE U/S 40A(IA). II. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RS.8,01,154/- U/S 40A(IA), WITHOUT APPRECIATING THAT THE SAID PAYMENTS WERE MADE TOWARDS THE BILLS FOR R EIMBURSEMENT OF ACTUAL EXPENSES INCURRED BY THE CLEARING AND FORWAR DING AGENTS AND HENCE NOT DISALLOWABLE. WITHOUT PREJUDICE TO ABOVE III. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING TOTAL AMOUNT WHEN THE BILLS WERE ALREADY PAID DURING THE FINANCIAL YEAR AND HENCE THE MAXIMUM DISALLOWANCE IF ANY SHOULD BE RESTRICTED TO THE EXTENT OF AMOUNTS OUTSTANDING AS AT 31.3.2008 A S LAID DOWN BY HONBLE SPECIAL BENCH IN CASE OF MERILYN SHIPPING & TRANSPORTS. 2. DURING HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE, SHRI PIYUSH CHHAJED, CONTENDED THAT T HE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TR IBUNAL (ITA NO.7321/MUM/2010) ORDER DATED 28/08/2013. THI S FACTUAL MATRIX WAS CONSENTED TO BE CORRECT BY MS. R ADHA K.NARANG, LD.DR. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE ORDER OF THE TRIBUNAL FOR READY REFERENCE: - 2. OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE A SSESSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), I TS COUNSEL, THAT THE ISSUE ARISING IN THE INSTANT APPEAL, AGITATED PE R ITS GD. NOS. 1 TO 3 (WITH GD. NO.3 BEING ALTERNATIVE AND NOT PRESSED), A RE IN RESPECT OF M/S MEHTA EXPORTS ITA NO.2211/MUM/2013 3 DISALLOWANCE U/S.40(A)(IA) FOR RS.15,30,150/- ON AC COUNT OF NONDEDUCTION OF TAX AT SOURCE ON PAYMENT BY THE ASSE SSEE, AN EXPORTER, TO TWO CLEARING AND FORWARDING (C & F) AG ENTS, I.E., M/S. MONARCH SHIPPING SERVICES (RS.6,33,389/-) AND M/S. MA HENDRA SHIPPING AGENCY (RS.8,96,761/-). THE SAME, IN FACT, R EPRESENTS A PART OF THE TOTAL PAYMENT TO THEM, BEING AT RS.7,10,845/- AND RS.12,18,304/- FOR THE YEAR FOR THE TWO PAYEES AFORE SAID RESPECTIVELY; THE ASSESSEE HAVING DEDUCTED TAX AT SOURCE ON THE BAL ANCE, SO THAT THE SAME STOOD EXCLUDED IN COMPUTING THE DISALLOWANCE U /S. 40(A)(IA). THE ASSESSEE WHILE DEDUCTING THE TAX AT SOURCE HAS EXC LUDED THE AMOUNT PAYABLE TO THEM TO THE EXTENT IT RELATES TO T HE REIMBURSEMENT OF EXPENSES INCURRED BY THE C & F AGENTS FOR AND ON BEHALF OF THE ASSESSEE-CLIENT. ON THIS, IT WAS MADE KNOWN TO HIM THA T THE BENCH WAS OF THE CLEAR VIEW THAT EXCLUSION OF THE AMOUNT CLAIMED TO BE BY WAY OF REIMBURSEMENT OF EXPENSES WOULD ONLY BE WHERE IT ST ANDS CHARGED SEPARATELY AND THE ASSESSEE IS ABLE TO DEMONSTRATE O F IT BEING A REIMBURSEMENT, I.E., AS A FACT, AND NOT WHERE A CON SOLIDATED AMOUNT IS CHARGED, OF WHICH A PART IS CLAIMED TO BE TOWARD REIMB URSEMENT. IT WAS EXPLAINED BY HIM THAT IN THE INSTANT CASE, THE AGEN T HAS IN FACT RAISED CHARGES PER TWO SEPARATE BILLS (FOR EACH CONSI GNMENT), I.E., TOWARD REIMBURSEMENT, AND THE OTHER TOWARDS THEIR OWN CHARGES, WITH THE ASSESSEE HAVING ADMITTEDLY DEDUCTED TAX AT S OURCE ON THE LATTER, SO THAT THE SAME CAME TO BE EXCLUDED, FURNISHI NG A PAPER-BOOK (FOR 35 PAGES) CONTAINING LEDGER ACCOUNTS AS WELL A S SAMPLE INVOICES. THE INVOICE FOR REIMBURSEMENT EXPENSES IS DULY VOUCHE D WITH SUPPORTING DOCUMENTS, FOR WHICH HE WOULD ALSO TAKE US THROUGH THE CONTENTS OF THE PAPER-BOOK. THE LD. DR, ON THE OTHER HAND, WOULD PLACE RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. 3.1 THE LD. CIT(A) HAS DISCUSSED THE MATTER AT LENGTH VIDE PARA 4 THROUGH 4.2.3 (PGS.4 TO 7) OF HIS ORDER. WITH REFERENCE TO PARAS 3.10 M/S MEHTA EXPORTS ITA NO.2211/MUM/2013 4 AND 3.13 OF THE ASSESSMENT ORDER, HE STATES THAT THE AS SESSEE HAS COMPLETELY FAILED TO SUBSTANTIATE ITS CLAIM OF REIM BURSEMENT OF EXPENSES BEFORE THE ASSESSING OFFICER (A.O.) (PARA 4.2). EVEN NO SUPPORTING EVIDENCE TOWARD RAISING SEPARATE CHARGES, WITH ONE BEING TOWARD REIMBURSEMENT OF EXPENSES, MUCH LESS DULY EVI DENCED, HAD BEEN PLACED BEFORE HIM (PARA 4.2.1). FURTHER, WITH REF ERENCE TO CBDT CIRCULAR NO.715 DATED 08.08.1995 (IN ANSWER TO Q. N O. 30), HE EXPRESSED A VIEW THAT NO DEDUCTION QUA REIMBURSEMENT OF EXPENSES OUT OF A GROSS BILL AMOUNT COULD BE MADE, I.E., ON NOTIONAL BASIS (PARA 4.2.2). THE ASSESSEES CLAIM WAS, ACCORDINGLY, FOUND NOT ACCEPTABLE, AND THE DISALLOWANCE IN ITS RESPECT CONFIRMED (PARA 4.2.3). 3.2 WE MAY AT THIS STAGE EXPLAIN THE BASIS FOR OUR HOL DING THAT WHERE THE EXPENDITURE INCURRED IS BY WAY OF REIMBURSEMENT OF EXPENSES, THE SAME WOULD NOT BE LIABLE TO DEDUCTION OF TAX AT SOU RCE AND, CONSEQUENTLY, FOR DISALLOWANCE U/S.40(A)(IA). THE RE ASON IS TWO FOLD. FIRSTLY, AS IT IS A REIMBURSEMENT, THE SAME BEARS OR ENCOMPASSES NO ELEMENT OF INCOME AS FAR AS THE PAYEE IS CONCERNED, ON WHICH THE TAX IS TO BE DEDUCTED; THE REIMBURSEMENT BY DEFINITION BEIN G AT COST ACTUALLY INCURRED. TWO, THE TDS PROVISION (AS VIDE SECTION 19 4C) PROVIDES FOR DEDUCTION OF TAX BY THE PERSON MAKING THE PAYMENT. THE PAYMENT IN RESPECT OF THE RELEVANT CHARGES IS MADE BY THE C & F AGENTS, THOUGH FOR AND ON BEHALF OF THEIR PRINCIPALS, AS THE ASSESSE E. IT IS THEY WHO ARE RESPONSIBLE FOR MAKING THE PAYMENT, AS A PART OF THEI R BUSINESS/BUSINESS ARRANGEMENT AND, AS SUCH, LIABLE TO DEDUCT THE TAX AT SOURCE ON THE PAYMENTS TO THE PAYEES, AND WHICH WOUL D ALSO INCLUDE THEIR INCOME COMPONENT. THUS, WHILE IT IS THE C & F AGENTS WHO ARE LIABLE TO DEDUCT THE TAX AT SOURCE, THE EXPEND ITURE IS ACTUALLY BORNE BY THE PRINCIPALS, IN WHOSE HANDS ONLY, THEREFORE , THE DISALLOWANCE U/S.40(A)(IA) COULD BE MADE ON DEFAULT . AS SUCH, NO DISALLOWANCE COULD BE MADE EVEN IN CASE OF A DEFAUL T IN DEDUCTING TAX AT SOURCE BY THE C & F AGENTS MAKING THE PAYMENT IN CASE OF REIMBURSEMENT. THIS DICHOTOMY ARISES IN VIEW OF THE SP ECIFIC PROVISION OF THE ACT, AND THE CLEAR PRINCIPLE OF LAW THAT NO ON E CAN SHIFT HIS M/S MEHTA EXPORTS ITA NO.2211/MUM/2013 5 STATUTORY RESPONSIBILITY/OBLIGATION THROUGH CONTRACT; THE PRIVITY OF CONTRACT FOR PAYMENT OF INCOME BEING BETWEEN THE A GENTS AND THE PAYEES. AS SUCH, IT IS ONLY THE C & F AGENTS WHO ARE RESPONSIBLE FOR PAYING THE INCOME TO THE RELEVANT PAYEES AND, ACCORDI NGLY, RESPONSIBLE FOR TAX DEDUCTION AT SOURCE ON THE SAID PAYMENTS, EVEN AS THE SAME BEING PAID FOR AND ON BEHALF OF THEIR PRINCI PALS, ARE CLAIMED FROM THEM BY WAY OF REIMBURSEMENT. THIS MATTER STANDS ALSO EXPLAINED AND DISCUSSED BY THE TRIBUNAL PER ITS DECI SION IN THE CASE OF MITRA LOGISTIC (P.) LTD. VS. ITO [2012] 139 ITD 420 (KOL). 3.3 COMING TO THE FACTS OF THE CASE, WE ARE SURPRISED THAT BOTH THE PARTIES DID NOT CONSIDER IT PROPER OR RELEVANT TO D RAW OUR ATTENTION TO THE SPECIFIC FINDINGS BY THE AUTHORITIES BELOW, WHICH A RE FINDINGS OF FACT, BEING IN FACT CONTRARY TO THE SPECIFIC SUBMISS IONS MADE BY THE LD. AR BEFORE US. WE DISCOUNTENANCE THE LD. ARS ACTION IN NOT BRINGING THE FULL FACTS TO OUR NOTICE DURING HEARING. IT IS AP PARENT THAT ONLY ONE OF THE STATEMENTS REPRESENTS THE TRUTH; THE ASSESSEE HA VING FURNISHED BEFORE US A PAPER-BOOK CERTIFYING THE CONTENTS THEREO F TO HAVE BEEN SUBMITTED BEFORE BOTH THE REVENUE AUTHORITIES. BE THAT A S IT MAY, THE ISSUE, THEREFORE, CANNOT BE DECIDED BY US. WE, THEREF ORE, TAKING THE PAPER-BOOK ON RECORD, RESTORE THE MATTER BACK TO THE FILE OF THE LD. CIT(A) TO EXAMINE THE ASSESSEES CLAIMS. FURTHER, THE CHARGES, AS WE OBSERVE FROM THE SAMPLE INVOICES FURNISHED, ARE RAISE D PER SEPARATE BILLS, WHICH FURTHER BEAR REFERENCE TO THE SPECIFIC CHA RGES, AS BY WAY OF FREIGHT CHARGES, CUSTOM CHARGES, MICT CHARGES, PORT/CUS TOM DOCUMENT CHARGES, ETC. AS SUCH, TO THE EXTENT THE ASSE SSEE IS ABLE TO DEMONSTRATE OF THE SAME AS REPRESENTING REIMBURSEMEN T OF EXPENSES, NO LIABILITY TO TDS AND, CONSEQUENTLY, DISALLOWANCE U/S. 40(A)(IA) WOULD ARISE. THE ONUS TO ESTABLISH ITS CLAIMS THOUGH W OULD ONLY BE ON THE ASSESSEE. WE DECIDE ACCORDINGLY. XXXXXXXXXXXXXXXXXXXXXXXXXX 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY AL LOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. M/S MEHTA EXPORTS ITA NO.2211/MUM/2013 6 2.2. IN THE PRESENT APPEAL, THE GROUND RAISED TO PERTAINS TO PAYMENTS MADE TOWARDS THE BILL FOR REIMBURSEMENT FOR ACTUAL EXPENSES INCURRED BY THE C LEARING AND FORWARDING AGENTS, CLAIMED TO BE NOT COVERED BY SECTION 194C OF THE ACT AND HENCE NO DISALLOWANCE C AN BE MADE U/S 40A(IA) AMOUNTING TO RS.8,01,154/- OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). WE FIND THAT THE TRIBUNAL RESTORED THIS MATTER BACK TO THE FILE OF T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) TO EXAMINE THE CLAIM OF THE ASSESSEE, THEREFORE, FOLLOWING THE AFORESAID ORDER WE RESTORE THIS APPEAL TO THE FILE OF THE LD. COMMISSI ONER OF INCOME TAX (APPEALS) TO EXAMINE THE ISSUE ON THE TE RMS & CONDITIONS MENTIONED IN THE AFORESAID ORDER, THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES ONLY. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17/06/2015. SD/ - (RAJENDRA) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ( DATED : 01/07/2015 F{X~{T? P.S/. . . M/S MEHTA EXPORTS ITA NO.2211/MUM/2013 7 %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1' ( *+ ) / THE CIT, MUMBAI. P4. 0 0 $ 1' / CIT(A)- , MUMBAI 5. 3#4 .' , 0 *+' * 5 , $ % / DR, ITAT, MUMBAI 6. 6 7% / GUARD FILE. / BY ORDER, /3+' .' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI