Prayas Engineering Limited, Anand V. The Addl.CIT.,Anand Range, Anand

ITA 2674/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94217 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 31-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADIPKUMAR MAJUMDAR
• Assessee Lawyers: M K PATEL
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER PRAYAS ENGINEERING LIMITED, ANAND SOJITRA ROAD, VALLABH VIDYANAGAR - 388120 GUJRAT PAN: AABCP5134E (APPELLANT) VS THE ADDL. COMMISSIONER OF INCOME TAX, ANAND RANGE, ANAND (RESPONDENT) ASSESSEE BY: S H RI M.K. PATEL , A.R. REVENUE BY: S H RI PRADIPKUMAR MAJUMDAR , SR. D.R. DATE OF HEARING : 31 - 07 - 2 015 DATE OF PRONOUNCEMENT : 07 - 08 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2008 - 09, ARISES FROM ORDER OF THE CIT(A) - IV, BARODA DATED 04 - 08 - 2011 IN APPEAL NO. CAB/IV - A - 138/2010 - 11, I T A NO . 2674 / A HD/20 11 A SSESSMENT YEAR 200 8 - 09 I.T.A NO. 2674 /AHD/20 11 A.Y. 2008 - 09 PAGE NO PRAYAS ENGINEERING LIMITED VS. ACIT 2 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; I N SHORT THE ACT. 2. THE ASSESSEE S SOLE SUBSTANTIVE GROUND READS AS UNDER: - 1. THE HON BLE CIT(A) HAS ER RED IN CONFIRMING OF RS. 11,33,13 4/ - U/S. 40(A)(IA) BEING THE REIMBURSEMENT OF EXPENSES PAID TO CLEARING AND & FORWARDING AGENTS, REIMBURSED TOWARDS STAMP CHARGES, DOCUMENTS CHARGES FOR CUSTOM, LOADING & UNLOADING CHARGES AND OTHER MISCELLANEOUS EXPENSES. THE SAID EXPENSES INCURRED ARE IN RESPECT OF REIMBURSEMENT AND HENCE NOT SUBJECT TO TDS. IN VIEW OF THIS, THE ACTION OF A.O. TO INVOKE PROVISION OF SEC. 40(A)(IA) IS UNJUST AND TO BE UNCONFIRMED. IT IS TO BE HELD SO NOW AND A.O. BE DIRECTED TO DELETE THE ADDITION. 3. THE ASSESSEE COMPANY MANUFACTURES AND SUPPLIES BELT CONVEYER PARTS. THE ASSESSING OFFICER TOO K UP SCRUTINY IN ITS CASE. H E FOUN D IT TO HAVE PAID A SUM OF RS. 16,56,989/ - TO M/S EXPRESS TRANSPORT PVT. LTD (ETPL); A CLEARING AND FORWARDING AGENT, WITHOUT DEDUCTING TDS THEREON. THE ASSESSEE INTER ALIA PLEADED ITS PAYEE S ROLE TO BE THAT OF CUSTOM HOUSE AGENT FOR IMPORT/EXPORT OF GO ODS , IT S SERVICES IN THE NATURE OF CO - ORDINATION ACTIVITIES FOR SHIPMENT WITH VARIOUS CONNECTED AGENCIES INCLUDING CUSTOM FORMALITIES, THE PAYMENT MADE TO BE R EIMBURSEMENT S ONLY ON ITS BEHALF NOT ELI GIBLE FOR TDS DEDUCTION U/S 194 C OF THE ACT. THE ASSESSI NG OFFICER FRAMED A REGULAR ASSESSMENT ON 01 - 11 - 2010. HE QUOTED ASSESSEE S AGREEMENT WITH THE PAYEE AND OBSERVED THAT THE IMPUGNED PAYMENTS OUGHT TO HAVE BEEN SUBJECTED TO TDS DEDUCTION EVEN IF THE SAME WERE IN THE NATURE OF REIMBURSEMENT AS PER THE BOARD S CIRCULAR NO. 715 DATED 08 - 08 - 1995. HE OPINED THAT IT WAS AN IMMATERIAL AS TO WHETHER THERE WAS ONLY ONE BILL FOR AGENCY COMMISSION FOR C & F AGENCY AND ANOTHER FOR I.T.A NO. 2674 /AHD/20 11 A.Y. 2008 - 09 PAGE NO PRAYAS ENGINEERING LIMITED VS. ACIT 3 REIMBURSEMENT FOR ACTUAL EXPENSES. THIS MADE HIM TO DISALLOW THE ASSESS EE S PAYMENT OF RS. 11,33,134/ - U/S. 40(A)( A I) OF THE ACT. 4. THE ASSESSEE S PREFERRED A PPEAL. THE CIT(A) HAS PARTLY ACCEPTED ITS GROUNDS AS UNDER : - 3.2 AT THIS PLACE IT MAY BE MENTIONED THAT THE LD. CIT(A)IV, BARODA I.E. MY PREDECESSOR HAS DECIDED SIMILAR ISSUE (I .E. DISALLOWANCE OF PAYMENTS U/S 40(A) (IA) AS MADE TO CUSTOM CLEARING AND FORWARDING AGENT) IN THE CASE OF APPELLANT ITSELF FOR A.Y 2007 - 08 IN FAVOUR OF DEPARTMENT. WHILE DECIDING THE ISSUE, THE LD. CIT(A) HAS HELD SECTION 194C AND 194J REFER 'TO ANY SUM' PAID AND THEREFORE TAX SOURCE UNDER THESE SECTIONS IS TO BE DEDUCTED FROM THE SUM PAID AND REIMBURSEMENT CANNOT BE SEPARATED OUT OF BILL AMOUNT FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE. BUT AT THIS PLACE I DO NOT FULLY AGREE WITH THE DECISION/OBSERVA TION OF MY LD. PREDECESSOR. IN MY OPINION IF ANY PAYMENTS ARE MADE BY THE APPELLANT TOWARDS CUSTOM DUTY OR ANY OTHER GOVERNMENT DUES THROUGH CUSTOM CLEARING AND FORWARDING AGENT FOR CLEARING THE IMPORTED GOODS ETC. THEN IT IS NOT REQUIRED TO DEDUCT THE TAX AT SOURCE ON SUCH PAYMENTS AS NO ELEMENT OF INCOME IS EMBEDDED IN REIMBURSEMENT OF SUCH EXP ENSES. IN THIS REGARD THE HON'BL E DELHI ITAT IN APPE AL NO. ITA NO. 1208/2009 IN THE CASE OF ACIT V GRAND PRIX FAB P LTD. HAS CLEARLY HELD THAT APPELLANT IS NOT OBLI GED TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE BY IT TO THE CLEARING AGENT TOWARDS CUSTOMS DUTY AND OTHER EXPENSES PAID BY THEM LAT ER WHILE CLEARING THE IMPORTED OR EXPORTED GOODS ON BEHALF OF THE APPELLANT AS NO ELEMENT OF INCOME IS EMBEDDED IN REIMBU RSEMENT OF EXPENSES AND THEREFORE IMPUGNED PAYMENTS COULD NOT BE DISALLOWED U/S 40(A)(IA) . IN VIEW OF THIS JUDGEMENT OF HON'BLE DELHI HIGH COURT, THE APPE LLANT IS NOT REQUIRED TO MAKE TDS ON REIMBURSEMENTS OF PAYMENTS WHICH HAVE BEEN MADE ON ACCOUNT OF CU STOM DUT Y. WITH REGARD TO OTHER PAYMENT INCLUDING SHIPPING LINE BILLS WHICH ARE NOT IN T HE NATURE OF ANY CUSTOM DUTY ETC. MADE TO CUSTOM ER DEPARTMENT, THE TAX IS REQUIRED TO BE MADE ON THE SAME. IN VIEW OF THESE FACTS, THE A.O. IS DIRECTED TO EXCLUDE THE PAYMENTS WHICH ARE MADE TO CUSTOM DEPARTME NT THROUGH CLEARING AND FORWARD AGENTS ON ACCOUNT OF DUTY ETC. FROM THE TOTAL PAYMENTS OF RS. 11,33,134/ - AS I.T.A NO. 2674 /AHD/20 11 A.Y. 2008 - 09 PAGE NO PRAYAS ENGINEERING LIMITED VS. ACIT 4 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE LAW. THE SOLE ISSUE IN THE PRESENT CASE IS THAT OF TDS D EDUCTION. THE ASSESSEE PAID GROSS AMOUNT OF RS. 16,56,989/ - TO M/S ETPL, ITS CLEARING AND FORWARDING AGENT. IT DEDUCTED TDS QUA A SUM OF RS. 5,23,855/ - . THE BALANCE AMOUNT IN QUESTION OF RS. 11,33,134/ - WAS STATED TO BE REIMBURSEMENT OF MIS CELLANEOUS EXPENDITURE O NLY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAME HAD TO BE SUBJECTE D TO TDS U/S. 194C OF THE ACT E VEN IN CASE OF REIMBURSEMENT . THE CIT(A) ADOPTS A DIFFERENT VIEW IN THE IMPUGNED ASSESSMENT TO THAT IN THE PRECEDING ASSESSM ENT YEAR FOR HOLDING THAT NO TDS IS REQUIRED TO BE DEDUCTED IN CASE OF REIMBURSEMENTS IN QUESTION SINCE THERE IS NO INCOME ELEMENT EMBEDDED THEREIN. HOWEVER, HE HOLDS THAT THE ASSESSEE S SHIP LINE BILLS ETC. ARE TO BE SUBJECTED TO TDS. WE FIND THIS LATTE R OBSERVA TION TO BE NOT CORRECT . THE ASS ESSEE S STAND THROUGHOUT HAS BEEN THAT SUCH SHIPPING PAYMENT S DO NOT REQUIRE TDS DEDUCTION AS PER THE BOARDS CIRCULAR NO. 723 DATED 01 - 09 - 1995 EXCLUDING OPERATION OF THE RELEVA NT TDS PROVISION S . BOTH THE LOWER AUTHO RITIES FAIL TO REBUT THIS CONTENTION ON FACTS AND LAW. WE ACCORDINGLY HOLD THAT THE CIT(A) ERRED IN DIRECTING THE ASSESSING O FFICER TO CONSIDER ASSESSEE S SHIPPING LINE BILLS FOR THE PURPOSE OF TDS DEDUCTION. THE CASE FILE REVEALS THAT A CO - ORDINATE BENC H OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR PRECEDING ASSESSMENT YEAR IN ITA 2825/AHD/2010 DECIDED ON 29 - 04 - 2014 HOLDS SIMILAR REIMBURSEMENT S MADE TO BE VERY PAYEE AS NOT COVERED BY TDS PROVISIONS. THE REVENUE FAILS TO POIN T OUT ANY DISTINCTION ON FACTS. WE OBSERVE IN THESE CIRCUMSTANCES THAT THE COMMISSIONER OF INCOME TAX(A) S ACTION IN PART IS NOT LIABLE TO BE UPHELD ON BOTH COUNTS I.E. MERITS AS WELL AS JUDICIAL CONSISTENCY. THE ASSESSEE S SOLE S UBSTANTIVE GROUND SUCCEEDS. I.T.A NO. 2674 /AHD/20 11 A.Y. 2008 - 09 PAGE NO PRAYAS ENGINEERING LIMITED VS. ACIT 5 6. THIS ASSESSEE S APPEAL IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 07 - 08 - 2015 SD/ - SD/ - ( ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 07 /08 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,