Suryavanshi Spinning Mills Limited, Secunderabad V. Dy.CIT, Circle-3(2), Hyderabad

ITA 224/HYD/2012

• Counselvise Citation: 22422514 RSA 2012
• Duration Of Justice: 3 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 14-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 13-02-2012
• Court: TRIBUNAL
• Department Lawyers: Y SESHA SRINIVAS
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Additional evidence
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 224/HYD/2012 ASSESSMENT YEAR: 2008-09 SURYAVANSHI SPINNING MILLS LIMITED, SECUNDERABAD [PAN: AADCS8201J] VS DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V. SIVA KUMAR, AR FOR REVENUE : SHRI Y. SESHA SRINIVAS, DR DATE OF HEARING : 14-09-2015 DATE OF PRONOUNCEMENT : 23-09-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IV, HYDERABAD DATED 30-12-2011 . ASSESSEE IS AGGRIEVED ON THREE ISSUES, ON WHICH CIT(A) DID NOT AGREE WITH ASSESSEES CONTENTIONS AND RAISED AS MANY AS FIVE GROUNDS. GR OUND NOS. 1 & 5 BEING GENERAL IN NATURE, THERE IS NO NEED OF ANY AD JUDICATION. WE HAVE HEARD THE LD. COUNSEL AND LD. DR IN DETAIL. I.T.A. NO. 224/HYD/2012 SURYAVANSHI SPINNING MILLS LIMITED :- 2 -: 2. GROUND NO.2 : THIS GROUND IS PERTAINING TO DISA LLOWANCE OF PROVISION FOR LEAVE ENCASHMENT OF RS. 11,35,943/- U /S. 43B(F) OF THE INCOME TAX ACT [ACT]. IN APPEAL, LD. CIT(A) UPHELD THE DISALLOWANCE STATING THAT THE DECISION OF THE CALCUTTA HIGH COUR T IN THE CASE OF EXIDE INDUSTRIES LTD., VS. UNION OF INDIA [292 ITR 470] H AS BEEN STAYED BY THE SUPREME COURT CLARIFYING THAT ASSESSEE MUST PAY THE TAX AS IF SECTION 43B(F) IS ON THE STATUTE THOUGH THEY ARE ENTITLED T O MAKE A CLAIM IN THEIR RETURN OF INCOME. 3. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO N OT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). EVE N THOUGH IT IS A FACT THAT HON'BLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE IN DUSTRIES LTD., VS. UNION OF INDIA [292 ITR 470] (SUPRA) HAS STRUCK DOW N PROVISIONS OF SECTION 43B(F), THE HON'BLE SUPREME COURT STAYED TH AT ORDER. CONSEQUENTLY, THE PROVISIONS OF SECTION 43B(F) ARE APPLICABLE, CIT(A)S ORDER IS IN ACCORDANCE WITH THE PRINCIPLES ON THE S UBJECT. WE HOWEVER, DIRECT THE ASSESSING OFFICER (AO) TO GIVE RELIEF TO ASSESSEE IN CASE HONBLE SUPREME COURT ALSO CONCURS WITH THE OPINION EXPRESS ED BY THE HON'BLE CALCUTTA HIGH COURT. THE GROUND FOR THE TIME BEING IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 4. GROUND NO.3 PERTAINS TO DISALLOWANCE OF PAYMENT OF OCEAN FREIGHT OF RS. 45,10,256/-. AO NOTICED THAT ASSESSEE HAS N OT AFFECTED TDS ON SUCH PAYMENTS. ASSESSEE CONTENDED THAT THE AMOUNTS PAID TO LOCAL SHIPPING AGENTS ON ACCOUNT OF FOREIGN SHIP OWNERS I S NOT COVERED BY THE PROVISIONS OF TDS AND RELIED ON THE BOARDS CIRCULA R NO. 723 DT. 19-09- 1995. HOWEVER, AO WITHOUT GIVING ANY REASONS AS TO WHY ASSESSEES EXPLANATION WAS NOT ACCEPTABLE, DISALLOWED THE AMOU NT. THE APPLICATION MADE U/S. 154 BY ASSESSEE SEEMS TO HAVE BEEN NOT AT TENDED TO. LD. CIT(A) ALSO CONFIRMED THE DISALLOWANCE STATING THAT ASSESSEE EVEN THOUGH SUBMITTED THE NAMES OF THE PARTY TO WHOM PAYMENTS A RE MADE ARE AGENTS OF NON-RESIDENT SHIPPING LINERS, NO EVIDENCE COULD BE FURNISHED I.T.A. NO. 224/HYD/2012 SURYAVANSHI SPINNING MILLS LIMITED :- 3 -: DURING THE COURSE OF APPELLATE PROCEEDINGS TO SUBST ANTIATE THIS CONTENTION. 5. LD. COUNSEL SUBMITTED THAT AO ALSO STATED THAT N O DETAILS WERE FURNISHED AND ASSESSEES CONTENTIONS WERE NOT ACCEP TED. LD. CIT(A) WHILE AGREEING THAT THE DETAILS OF PAYMENTS TO WHOM THEY ARE MADE WERE FURNISHED BEFORE THE AO, BUT DID NOT ACKNOWLEDGE, E VEN THOUGH THEY WERE FURNISHED BEFORE THE CIT(A). IN VIEW OF THIS, IT WAS SUBMITTED THAT INVOICES ISSUED BY AGENTS TO WHOM PAYMENTS HAVE BEE N MADE, INVOICES OF OVERSEAS SHIPPING COMPANIES AND BILLS OF LADING SHOULD BE VERIFIED BY THE AO IN ORDER TO EXAMINE ASSESSEES CONTENTIONS. IN THIS REGARD, LD. COUNSEL FILED A REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE, PLACING VARIOUS DOCUMENTS IN THE PAPER BOOK, THAT THEY BE E NTERTAINED. AS FAR AS PRINCIPLES OF LAW ARE CONCERNED, IT WAS SUBMITTE D THAT PAYMENTS MADE BY ASSESSEE TO THE AGENTS OF NON-RESIDENT SHIP LINE RS ARE NOT SUBJECTED TO TDS AS PER BOARD CIRCULAR NO. 723. HE ALSO RELIED ON VARIOUS CO- ORDINATE BENCH DECISIONS IN SUPPORT OF THE SAME: I. GUJARAT RE-CLAIM & RUBBER PRODUCTS LTD., VS. ADDL. CIT [35 TAXMANN.COM 587 (MUM-TRIB)]; II. ITO VS. M/S. BHOPAL EXPORT ITA NO. 1218/CHD/2011 ( A.Y. 2008-09) DT. 23-08-2013; III. DCIT VS. HASMUKH J. PATEL [10 TAXMANN.COM 229 (AHD) ] IV. ITO VS. FREIGHT SYSTEMS (INDIA) (P.) LTD., [6 SOT 4 73 (DELHI)] 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE DOCUMENTS PLACED ON RECORD. SINCE THE ADDITIONAL E VIDENCE IS REQUIRED I.T.A. NO. 224/HYD/2012 SURYAVANSHI SPINNING MILLS LIMITED :- 4 -: TO BE EXAMINED AS BOTH AO AND CIT(A) GAVE CONTRADIC TORY FINDINGS, IN THE INTEREST OF JUSTICE, WE ADMIT THE ADDITIONAL EVIDEN CE AND REMIT THE ISSUE TO THE FILE OF AO TO EXAMINE THE SAID PAYMENTS AND IF THE PAYMENTS ARE TO THE AGENTS OF FOREIGN SHIPPING LINERS, WE MAKE IT C LEAR THAT AMOUNTS CANNOT BE DISALLOWED U/S. 40(A)(IA), AS THERE IS NO NEED TO MAKE TDS ON SUCH PAYMENTS. THIS ISSUE WAS ALREADY CRYSTALISED IN FAVOUR OF ASSESSEE. IN THE CASE OF GUJARAT RECLAIM & RUBBER PRODUCTS LT D., VS. ADDL. CIT [35 TAXMANN.COM 587 (MUM-TRIB)] (SUPRA), CO-ORDINATE BE NCH OF THE MUMBAI ITAT HAS HELD THAT SINCE INCOME OF NON-RESID ENT SHIP COMPANIES WAS SEPARATELY TAXED U/S. 172, ASSESSEE WAS NOT REQ UIRED TO DEDUCT TAX AT SOURCE ON OCEAN FREIGHT EXPENSES PAID OR PAYABLE TO NON-RESIDENT SHIPPING COMPANY, THUS, DISALLOWANCE U/S. 40(A)(IA) DOES NOT ARISE. SIMILAR VIEW WAS EXPRESSED IN THE OTHER CASES ALSO RELIED ON BY ASSESSEE. THEREFORE, IN CASE THE PAYMENTS ARE MADE TO LOCAL S HIPPING AGENTS OF NON-RESIDENT SHIP LINERS, THEN AO IS DIRECTED TO EX CLUDE THE AMOUNT AS PROVISIONS OF SECTION 40(A)(IA) DOES NOT APPLY TO T HE PAYMENTS. WITH THESE DIRECTIONS, GROUND IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.4: THIS GROUND PERTAINS TO DISALLOWAN CE OF PAYMENT MADE TOWARDS TRANSPORT CHARGES. AO FOUND THAT ASSES SEE MADE PAYMENTS TOWARDS FREIGHT CHARGES. OUT OF THE PAYME NTS MADE, AO WORKED OUT THE AMOUNTS ON WHICH TDS WAS NOT MADE AT RS. 75,06,155/- AND DISALLOWED SUCH AMOUNTS U/S. 40(A)(IA). 8. BEFORE THE CIT(A) IT WAS EXPLAINED THAT IN SOME CASES, THERE IS NO JUSTIFICATION FOR DISALLOWANCE SINCE THE RESPECTIVE PAYEES HAD OBTAINED CERTIFICATES U/S. 197. IN SOME OTHER CASES, ASSESS EE SOLD GOODS ON CONSIGNMENT BASIS AND CONSIGNEES INITIALLY PAID LOC AL AUTO/HAMALI CHARGES AND THE SAME WERE LATER REIMBURSED BY ASSES SEE. IT WAS ALSO SUBMITTED THAT SUCH PAYMENT WAS BELOW RS. 20,000/- AND TDS PROVISIONS WERE NOT ATTRACTED. IN FEW CASES, ASSES SEE DEDUCTED TAX ON MAJOR PORTION OF THE PAYMENTS MADE AND THEREFORE, A O IS NOT JUSTIFIED IN I.T.A. NO. 224/HYD/2012 SURYAVANSHI SPINNING MILLS LIMITED :- 5 -: DISALLOWING THE ENTIRE PAYMENT WITHOUT EXCLUDING TH E AMOUNTS IN RESPECT OF WHICH TDS WAS MADE BY ASSESSEE. 9. LD. CIT(A) AFTER EXAMINING THE DETAILS SUBMITTED BY ASSESSEE ACCEPTED THE CONTENTION OF ASSESSEE IN RESPECT OF V ARIOUS PAYMENTS. ONLY WITH REFERENCE TO THREE PARTIES TO WHOM ASSESSEE HA S REIMBURSED LOCAL AUTO/HAMALI CHARGES, HE HAS HELD THAT ASSESSEE HAS DEBITED THE PAYMENT IN THE NAMES OF RESPECTIVE CONSIGNEES AND N OT UNDER THE HEAD HAMALI CHARGES/PAYMENT TO LOCAL AUTOS. HE ALSO HEL D THAT EVEN THOUGH ASSESSEE CLAIMED THAT PAYMENTS WERE NOT SUBJECT TO TDS, ASSESSEE HIMSELF DEDUCTED TAX AT SOME CASES. HE ACCORDINGLY UPHELD THE DISALLOWANCE ON THE FOLLOWING THREE PARTIES AS UNDE R: I. SHANTI TRADERS - RS. 1,69,627/- II. SYENRGY TEXTILES LTD., - RS. 3,56,220/- III. VAMSHI ENTERPRISES - RS. 1,07,360/- 10. IT WAS THE CONTENTION OF LD. COUNSEL THAT AO HA S DISALLOWED THE AMOUNTS AS UNDER AND LD. CIT(A) WRONGLY CONFIRMED H IGHER AMOUNTS. THE AMOUNTS DISALLOWED BY THE AO WERE SUBMITTED AS UNDER: I. SHANTI TRADERS - RS. 1,10,202/- II. SYENRGY TEXTILES LTD., - RS. 3,45,202/- III. VAMSHI ENTERPRISES - RS. 33,422/- 11. SUBJECT TO VERIFICATION OF THE ACTUAL DISALLOWA NCE TO BE MADE, IT WAS SUBMITTED THAT CIT(A) SHOULD HAVE APPRECIATED T HE CLAIMS MADE WITH REFERENCE TO THE MARKET PRACTICE IN RESPECT OF CONSIGNMENT SALES I.T.A. NO. 224/HYD/2012 SURYAVANSHI SPINNING MILLS LIMITED :- 6 -: WHERE THE CONSIGNEES INCUR EXPENDITURE INITIALLY AN D OBTAIN REIMBURSEMENT FROM THE CONSIGNOR AND ACCORDINGLY, L D. CIT(A) OUGHT TO HAVE DIRECTED THE DELETION OF DISALLOWANCE. LD. DR SUPPORTED THE ORDER OF AO AND CIT(A). 12. AFTER EXAMINING THE RIVAL CONTENTIONS, WE ARE O F THE OPINION THAT AO HAS TO VERIFY WHETHER THE AMOUNTS CONFIRMED BY T HE CIT(A) ARE CORRECT OR NOT? AS SUBMITTED, THERE SEEMS TO BE DI SCREPANCY IN THE AMOUNTS AS CONFIRMED BY THE CIT(A), WHEREIN AO IT S EEMS HAS DISALLOWED ONLY LESSER AMOUNTS. THESE ARE TO BE VERIFIED BY T HE AO. 13. COMING TO THE ISSUE WHETHER AMOUNTS ARE COVERED BY THE PROVISIONS OF TDS OR NOT? FIRST OF ALL, AO HAS TO ESTABLISH THAT THE PAYMENTS MADE ARE COVERED BY THE PROVISIONS OF TDS. IT WAS SUBMITTED THAT THESE ARE HAMALI CHARGES/LOCAL AUTO CHARGES AN D THESE PAYMENTS WERE BELOW RS. 20,000/-. IN CASE ASSESSEE REIMBURS ES SAID AMOUNTS, THERE IS NO NEED FOR DEDUCTION OF TDS. JUST BECAUS E SINGLE DEBIT ENTRY WAS MADE, IT CANNOT BE AUTOMATICALLY CONSIDERED THA T AMOUNT IS COVERED BY PROVISIONS OF SECTION 40(A)(IA). AO IS BOUND TO EXAMINE THE PAYMENTS MADE AND WHETHER EACH AMOUNT IS LIABLE FOR DEDUCTIO N OF TAX OR NOT, THEREFORE EVEN IN THE ABOVE THREE CASES, AO HAS TO ESTABLISH THAT THE AMOUNTS PAID ARE REQUIRED TO BE COVERED UNDER THE P ROVISIONS OF TDS. THEREFORE, WE RESTORE THE EXAMINATION OF THE AMOUNT S TO THE FILE OF AO TO EXAMINE WHETHER THE SAID REIMBURSEMENT MADE BY THE ASSESSEE ARE COVERED BY THE PROVISIONS OF TDS SO AS TO ATTRACT D ISALLOWANCE U/S. 40(A)(IA). ASSESSEE SHOULD BE GIVEN DUE OPPORTUNIT Y TO MAKE ITS CONTENTIONS. WITH THESE DIRECTIONS, THE ISSUE IS R ESTORED TO THE FILE OF AO WHO IS NOT ONLY DIRECTED TO RESTRICT THE AMOUNTS TO THE ORIGINALLY DISALLOWED AMOUNTS BY THE AO BUT ALSO TO EXAMINE TH E NATURE OF PAYMENTS AND ESTABLISH THAT THOUGH THE AMOUNTS PAID ARE REQUIRED TO BE COVERED BY THE PROVISIONS OF TDS. ONLY IN THAT EVE NT, DISALLOWANCE U/S. I.T.A. NO. 224/HYD/2012 SURYAVANSHI SPINNING MILLS LIMITED :- 7 -: 40(A)(IA) IS WARRANTED. THE GROUNDS ARE ACCORDINGL Y CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 23 RD SEPTEMBER, 2015 TNMM COPY TO : 1. SURYAVANSHI SPINNING MILLS LIMITED, 6 TH FLOOR, SURYA TOWERS, 105, S.P. ROAD, SECUNDERABAD. 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYD ERABAD. 3. CIT (APPEALS)-IV, HYDERABAD. 4. CIT-III, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.