AJMERA ENTERPRISES, MUMBAI V. ITO RG 12(1)(4), MUMBAI

ITA 2606/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93246 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2014
• Court: TRIBUNAL
• Department Lawyers: NEELIMA V NADKARNI
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 2606/M/2014 (AY: 2009 - 2010 ) M/S. AJMERA ENTERPRISES, 6 - A, AMBALA DOSHI MARG, HAMAM STREET, FORT, MUMBAI - 01. / VS. THE INCOME TAX OFFICER - 12(1)(4), MUMBAI. ./ PAN : A AGFA2600N ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRAKASH JOTWANI / RESPONDENT BY : MS. NEELIMA V. NADKARNI, DR / DATE OF HEARING : 25.06 .2015 / DATE OF PRONOUNCEMENT : 22 .07.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 17.4.2014 IS AGAINST THE ORDER OF THE CIT (A) - 23, MUMBAI DATED FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO AMOUNTING TO RS. 3,26,960/ - TOWARDS REIMBURSEMENTS OF PAYMENTS TO CLEARING AGENTS. (B) THE LD CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE RELATIONSHIP BETWEEN THE APPELLANT AND THE C & F AGENTS WAS THAT OF THE PRINCIPAL AND AGENT AND THAT THE EXPEN SES BEING REIMBURSED BY THE APPELLANT WERE INCURRED BY THE AGENTS ON BEHALF OF THE APPELLANT AND HENCE NOT SUBJECT TO APPLICABILITY OF DEDUCTION OF TAX SOURCE. (C) THE LD CIT (A) OUGHT TO HAVE APPRECIATED THE FACT, THAT YOUR APPELLANT HAS DEDUCTED TDS ON A GENCY CHARGES PAID TO THE AGENT FOR SERVICES RENDERED AGAINST THE BILL ISSUED TO YOUR APPELLANT. 2. THE LD CIT (A) OUGHT TO HAVE APPRECIATED THAT EXPENDITURE BECOMES DISALLOWABLE U/S 40(A)(IA) ONLY IF IT IS PAYABLE (OUTSTANDING / UNPAID) AS ON THE BALANC E SHEET DATE. SECTION 40(A)(I) AS WELL AS SECTION 40(A)(IA) STATE THAT ONLY THOSE EXPENSES, AS MENTIONED THEREIN WHICH ARE PAYABLE WILL BECOME NON - DEDUCTIBLE, IF TDS IS NOT MADE THEREON. HENCE, THE DISALLOWANCE IS NOT AT ALL WARRANTED WHEN THE EXPENSES ARE ACTUALLY PAID OUT DURING THE YEAR WITHOUT MAKING TDS. 2. THE ONLY ISSUE RAISED IN THIS APPEAL RELATES TO THE ADDITION OF RS. 3,26,960/ - INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR ASSESSEES FAILURE TO EFFECT TDS ON THE PAYMENTS MA DE TO THE C & F AGENTS. BRIEFLY STATED RELEVANT FACTS OF THE 2 CASE ARE THE ASSESSEE, WHO IS ENGAGED IN THE BUSINESS OF TRADING IN MACHINERY, FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 8,04,085/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF TH E ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 12,48,397/ - . IN THE ASSESSMENT, AO MADE CERTAIN ADDITIONS AND THE DISALLOWANCE OF RS. 3,26,960/ - MADE U/S 40(A)(IA) IS ONE SUCH ADDITION. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRS T APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DISMISSED THE APPEAL. AGAIN AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 3. DU RING THE PROCEEDINGS BEFORE THE TRIBUNAL, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID PAYMENTS WERE ACTUALLY MADE TO THE C & F AGENTS WITHOUT MAKING TDS AS THE SAID PAYMENTS ARE MERELY REIMBURSEMENTS OF EXPENDITURE. THE AO AND THE C IT (A) DID NOT APPRECIATE THE FACT THAT THE SAME ARE REIMBURSEMENTS. IT IS THE OPINION OF THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCES TO SHOW THAT THE AMOUNTS PAID TO THE AGENTS WERE PU RELY REIMBURSEMENTS AND THERE IS NO PROFIT ELEMENT INVOLVED IN SUCH REIMBURSEMENTS. IN SUCH CIRCUMSTANCES, THE PROVISIONS OF SECTION 194C APPLIES TO THE SAID PAYMENTS AND THEREFORE, THE ADDITION MADE BY THE AO U/S 40(A)(IA) OF THE ACT SHOULD BE SUSTAINED. 4. ON THE OTHER HAND, L D DR FOR T HE REVENUE BROUGHT MY ATTENTION TO THE VARIOUS DETAILS AND REASONED THAT THE REVENUE AUTHORITIES HAVE NO NOT RECEIVED EACH OF THE BILLS RAISED BY THE C & F AGENTS SUCH AS SADGURU INTERNATIONAL, O MTRANS LOGISTICS ETC. BEFORE ME , LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE BILL DATED 6.4.2008, FOR EXAMPLE, WHICH IS PLACED AT PAGE 3 OF THE PAPER BOOK, AND MENTIONED THAT THE SAID BILL RELATES TO THE IMPORT OF SECOND HAND MACHINERY VIDE INVOICE DATED 1.4.2008. THE MACHINERY HAS LANDED IN THE PORT ON 22.2.2008 , C & F AGENTS PLEADED THE JOB ON 1.4.2008. THE PAYMENTS WERE MADE BY THE C & F AGENTS BY THAT DATE. S UBSEQUENTLY, C & F AGENTS RAISED BILL IN THE NAME OF THE ASSESSEE ON 6.4.2008. THEREFORE, ABOVE CHRONOLOGY OF THE EVEN TS SUGGEST THAT THE C & F AGENT PLEADS THE JOB BEFORE HE RAISES THE BILL IN THE NAME OF THE ASSE SSEE. THESE TRANSACTIONS IMPLY THE C & F AGENTS INCURRED THE EXPENDITURE AND COLLECTS THE SAME FROM THE ASSESSEE SUBSEQUENTLY. SIMILARLY IS THE SITUATION IN ALL THE BILLS THAT AMO UNTS 3 TO ADDITION OF RS. 3,26,960/ - . HE SUBMITTED THAT IF ONE MORE OPPORTUNITY IS GIVEN, ASSESSEE SHALL DEMONSTRATE THE ABOVE DISCUSSION BEFORE THE AO. 5. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE AO AND THE CIT (A). 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED ON TO THE RECORD. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELEVANT MATERIAL, I FIND ONE MORE OPPORTUNITY SHOULD BE GRANTED TO THE ASSESSEE TO DEMONSTRATE THAT BILLS ARE RAISED ONLY TO RECOVER THE EXPENDITURE INCURRED BY THE C & F AGENTS. IN ANY CASE, THE ONUS IS ON THE ASSESSEE TO DEMONSTRATE THAT THE AMOUNTS INVOLVED ARE REIMBURSEME NTS. IN THESE CIRCUMSTANCES, I AM OF THE OPINI ON THAT THE MATTER MAY BE REMANDED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. I ORDER ACCORDINGLY. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES. ORDER PRONOU NCED IN THE OPEN COURT ON 22 ND JULY, 2015. SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 22 .7 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 4