The ACIT, Kottayam V. M/s.St. Mary's Rubbers P. Ltd, Kottayam

ITA 224/COCH/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3910 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 11-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: PRASANTH SRINIVASC A
• Keywords: TDS
• Section: 40(a)(ia); 194C; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI ABRAHAM P. GEORGE, AM & GEORGE GEORGE K., JM I. T.A. NO S . 224/ C OCH/201 6 ASSESSMENT YEAR : 2011 - 12 THE ASSISTANT COMMISSIONER OF INCOME-TAX, KOTTAYAM. VS. ST. MARYS RUBBERS PRIVATE LTD., 54B/IX, PARATHODU PANCHAYATH, KOOVAPALLY P.O., KANJIRAPALLY KOTTAYAM-686 518. [PAN: AAHCS 5763Q] ( REVENUE - APPELLANT) ( ASSESSEE - RESPONDENT) REVENUE BY SHRI A. DHANARAJ, SR. DR ASSESSEE BY SHRI PRASANTH SRINIVAS,C A D ATE OF HEARING 14 / 0 6 / 201 7 DATE OF PRONOUNCEMENT 15 / 0 6 /201 7 O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AG AINST AN ORDER DATED 10/03/2010 OF THE CIT(A). 2. REVENUE, THROUGH ITS GROUNDS, IS AGGRIEVED ON THE DELETION OF DISALLOWANCE OF RS.60,80,063/- MADE BY THE ASSESSING OFFICER U/S. 4 0(A)(IA) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR NON DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE BY THE ASSESSEE TO C&F AGENTS. I.T.A. NO. 224/COCH/2016 2 3. FACTS APROPOS ARE THAT THE ASSESSEE, A MANUFAC TURER AND SELLER OF CENTRIFUGED LATEX , HAD FILED ITS RETURN OF INCOME FOR THE IMPUGNED A SSESSMENT YEAR, DECLARING INCOME OF RS.70,89,989/-. AN ASSESSMENT U/S. 143(3 ) WAS COMPLETED ON 21/12/2011, COMPUTING TOTAL INCOME OF THE ASSESSEE AT RS.77,87,140/-. THEREAFTER, THE ASSESSMENT WAS RE OPENED FOR A REASON THAT SHIPPING FREIGHT OF RS.9,7 0,828/- WAS PAID WITHOUT DEDUCTING TAX AT SOURCE. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT ASSESSEE HAD PAID RS.60,80,063/- AS CLEARING AND FORWARDING CHARGES TO ONE M/S. MARK LOGISTICS. CLAIM OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THESE WERE REIMBURSEMENT OF EXPENDITURE INCURRED BY THE SAID A GENT. AS PER THE ASSESSEE, SAID C&F AGENT WAS INCURRING EXPENDITURE ON ITS BEH ALF AND THEREFORE, IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. HOWEVER, ASSESSING OFFICER WAS NOT IMPRESSED. ACCORDING TO HIM, THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE ON THE PAYMENTS EFFECTED TO M/S. MARK LOGISTICS. SINCE AS SESSEE HAD NOT DEDUCTED SUCH TAX, ASSESSING OFFICER APPLIED SECTION 40(A)(IA) OF THE ACT AND MADE A DISALLOWANCE OF RS.60,80,063/-. 4. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE PRODUCED A STATEMENT FROM M/S. MARK LOGIST ICS ACCORDING TO THIS STATEMENT, THE AMOUNTS GIVEN BY THE ASSESSEE TO M/S . MAK LOGISTICS WERE REIMBURSEMENT OF EXPENDITURE. IN THE SAID STATEMEN T, M/S. MARK LOGISTICS CERTIFIED I.T.A. NO. 224/COCH/2016 3 THAT EXPENDITURE WAS INCURRED ON BEHALF OF THE ASSE SSEE AND NOT C&F CHARGES. THEY ALSO STATED THAT THEY HAD DEDUCTED TAX AT SOUR CE WHILE EFFECTING PAYMENTS TO VARIOUS PERSONS WITH WHOM THEY HAD ENTRUSTED THE WO RK OF THE ASSESSEE. LD. CIT(A) SOUGHT A REMAND REPORT FROM THE ASSESSING OF FICER. AS PER THE CIT(A), IN THE REMAND REPORT, THE ASSESSING OFFICER HAS ADMITT ED THAT AMOUNTS PAIDBY ASSESSEE FO M/S. MARK LOGISTICS WERE RE-IMBURSEMENT S. CIT(A) HELD THAT PAYMENT OF RS.60,80,063/- MADE BY THE ASSESSEE TO M/S. MARK LOGISTICS WERE IN THE NATURE OF REIMBURSEMENT OF EXPENDITURE AND THE PAYMENTS RE CEIVED BY THEM WERE NOT C&F CHARGES. RELYING ON THE JUDGMENT OF THE HONBLE GUJ ARAT HIGH COURT IN THE CASE OF CIT VS. NARMADA VALLEY FERTILIZER CO. LTD. (361 ITR 0192), THE CIT(A) HELD THAT FOR RE-IMBURSEMENT OF EXPENDITURE, DEDUCTION OF TAX WAS NOT REQUIRED. HE DELETED THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. 5. LD. DR, ASSAILING THE ORDER OF THE CIT(A), S UBMITTED BEFORE US THAT ASSESSEE HAD PAID RS.60,80,063/- FOR THE SERVICES RECEIVED BY THE ASSESSEE FROM M/S. MARK LOGISTICS, WHICH WERE CONTRACTUAL IN NATURE. ACCOR DING TO HIM, THESE WERE NOT REIMBURSEMENT OF EXPENDITURE AND EVEN IF IT WAS REI MBURSEMENT, AS PER THE LD. DR, THERE WOULD HAVE BEEN PROFIT BOOKING BY M/S. MARK L OGISTICS IN-BUILT IN THE BILLINGS. IN HIS OPINION, ASSESSING OFFICER HAS RIGHTLY CONSI DERED THE PAYMENTS AS LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S. 194C OF THE ACT. AC CORDING TO HIM, CIT(A), MERELY BASED ON THE SUBMISSIONS OF THE ASSESSEE, HAD ALLOW ED THE CLAIM OF THE ASSESSEE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE I.T.A. NO. 224/COCH/2016 4 CASE OF CBDT VS. COCHIN GOODS TRANSPORT ASSOCIATION (236 ITR 993) AND THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF A SSOCIATED CEMENT CO. LTD. VS. CIT AND ANOTHER (201 ITR 435). 6. IN REPLY, LD. AR SUBMITTED THAT THE DELHI BE NCH OF THIS TRIBUNAL IN THE CASE OF ITO VS. DEEPAK BHARGAWA IN I.T.A. NO. 343/DEL/2012 DATED 13 TH NOVEMBER, 2014 HAD CLEARLY HELD THAT SECTION 194C WOULD NOT BE APP LICABLE FOR REIMBURSEMENT OF EXPENDITURE. AS PER THE LD. AR, FACTS OF THIS CASE WERE VERY SIMILAR TO THAT CASE. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE BAN GALORE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. DHANYAA SEEDS (P) LTD. (42 TAX MANN.COM 277) AND THAT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PRI. CIT VS. CONSUMER MARKETING (INDIA) (P.) LTD. (64 TAXMANN.COM 16). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS. CERTIFICATE ISSUED ON 23.08.2014 BY M/S. MARK LOGISTICS READS AS UNDER : ST. MARYS RUBBERS PRIVATE LTD., 54B/IX, PARATHODU PANCHAYATH, KOOVAPALLY P.O., KANJIRAPALLY KOTTAYAM-686 518. DEAR SIR, 23.08.2014 AMOUNTS RE-IMBURSED BY YOU TOWARDS EXPENDITURE INCURRED BY US ON YOUR BEHALF DURING THE FINANCIAL YEAR 2008-09 CLARIFICATION - REGARDING I.T.A. NO. 224/COCH/2016 5 DURING THE FINANCIAL YEAR 2008-09 WE HAVE RECEIVED THE FOLLOWING AMOUNTS FROM YOU TOWARDS RE-IMBURSEMENT OF EXPENDITURE INCURRED BY US ON YOUR BEHALF, ON WHICH WE HAVE DEDUCTED TAX AT SOURCE, WHEREVER A PPLICABLE. DATE WISE LIST IS ENCLOSED SEPARATELY. DOCUMENTATION CHARGES 10,854 POSTAGE, COURIER, GROUNDING CHARGES 181,300 CERTIFICATE OF ORIGIN, INVOICE LEGIS LATION ETC. 24,300 TRANSPORTATION BY ROAD IN GOODS CARR IAGE 2,681,528 SELF STUFFING CHARGES 80,400 SUNDRY CHARGES 217,700 TALLY WAGES PAID 44,500 HANDLING CHARGES PAID 489,497 OTHER EXPENSES 2,349,984 TO TAL (RS.) 6,080,063 YOURS FAITHFULLY, (AUTHORIZED SIGNATORY (NAME AND DESIGNATION FOR MARK LOGISTICS SD/- SHAJI KURIAN MANAGER ENCLOSURE LIST OF AMOUNTS REIMBURSED BY YOU AS STAT ED ABOVE 7. M/S. MARK LOGISTICS HAS ALSO GIVEN DETAILS OF BILLS, COPIES OF WHICH ARE PLACED IN PAPERBOOK PGS. 23 TO 32 AND THESE ALSO CLEARLY SHOW THAT THEY WERE CLAIMING REIMBURSEMENT OF EXPENDITURE INCURRED BY THEM ON BE HALF OF THE ASSESSEE. IN THE CASE OF DEEPAK BHARGAVA (SUPRA), WHERE ALSO THE QUE STION WAS DISALLOWANCE U/S. 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SO URCE ON PAYMENTS EFFECTED TO I.T.A. NO. 224/COCH/2016 6 CLEARING AND FORWARDING AGENTS, WHAT WAS HELD BY TH E TRIBUNAL IS REPRODUCED HEREUNDER: 6.1 THE CIT(A) HAS CATEGORICALLY HELD THAT THE AM OUNT OF RS.18,16,637/- IS NOTHING BUT REIMBURSEMENT OF EXPENSES INCURRED BY T HE PAYEE ON BEHALF OF THE ASSESSEE. COPIES OF THE FEW BILLS RAISED BY THE TWO AGENCIES WERE PLACED ON RECORD AT PAGES 40 TO 66 OF THE ASSESSEES PAPER BO OK. ON PERUSAL OF THE SAME, IT IS CLEARLY EVIDENT THAT THESE ARE NOTHING, BUT R EIMBURSEMENT OF EXPENSES INCURRED BY THE CLEARING AGENCIES ON BEHALF OF THE ASSESSEE. THEREFORE, THESE AMOUNTS DID NOT CONSTITUTE INCOME OF THE CLEARING A GENT AND NO TDS WAS REQUIRED TO MADE THEREON. THEREFORE, THE PROVISION OF SECTION 194C WILL NOT BE APPLICABLE IN RESPECT OF REIMBURSEMENT OF EXPENSES. THE TRIBUNAL, WHILE GIVING THE ABOVE DECISION, HAD ALSO CONSIDERED THE EFFECT OF CBDT CIRCULAR NO.715 DATED 08.08.1995 AND ALSO RULE D THAT THE SAID CIRCULAR WAS APPLICABLE ONLY WHERE CONSOLIDATED BILLS WERE RAISE D INCLUSIVE OF CONTRACTUAL PAYMENTS AND RE-IMBURSEMENT OF ACTUAL EXPENDITURE. SAME VIEW WAS TAKEN BY THE BANGALORE BENCH OF THIS TRIBUNAL IN THE CASE OF DCI T VS. DHANYAA SEEDS (P) LTD. (SUPRA). HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS. CONSUMER MARKETING (INDIA) (P.) LTD.(SUPRA) HELD THAT WHEN SEPARATE BI LLS ARE THERE FOR REIMBURSEMENT OF EXPENDITURE RECEIVED BY C&F AGENT, TDS WAS NOT R EQUIRED TO BE MADE ON REIMBURSEMENT. IT IS AN ADMITTED POSITION IN THE CA SE BEFORE US THAT ASSESSEE HAD IN ADDITION TO REIMBURSEMENT OF EXPENSES, SEPARATEL Y PAID BROKERAGE AND COMMISSION RS.2,52,410/- WHICH WAS SUBJECTED TO DIS ALLOWANCE IN THE ORIGINAL ASSESSMENT. CONSIDERING ALL THESE, WE ARE OF THE OPINION THAT THE CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S. 40 (A)(IA) OF THE ACT. WE DO NOT FIND ANY REASON FOR INTERFERENCE WITH THE ORDER OF THE C IT(A) . I.T.A. NO. 224/COCH/2016 7 8. IN THE RESULT, THE APPEAL OF THE REVENUE STAN DS DISMISSED. PRONOUNCED IN THE OPEN COURT O N 15-06-2017. SD/- SD/- (GEORGE GEORGE K.) ( ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 15 TH JUNE, 2017 GJ COPY TO: 1. ST. MARYS RUBBERS PRIVATE LTD., 54B/IX, PARATHO DU PANCHAYATH,KOOVAPALLY P.O., KANJIRAPALLY, KOTTAYAM-686 518. 2. ASSISTANT COMMISSIONER OF INCOME-TAX, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOTTAYA M. 4. THE PR. COMMISSIONER OF INCOME-TAX, KOTTAYAM 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN