M/s. Jeetsons Exports Pvt.Ltd, Pune V. Income-tax Officer, Ward - 14(1), Pune

ITA 2732/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2449 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-02-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 22-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RYA SHAH
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence; TDS
• Section: 40(a)(ia); 194C; 195

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM . / ITA NO.2732/PUN/2017 / ASSESSMENT YEAR : 2014-15 M/S. JEETSONS EXPORTS PVT. LTD., FLAT NO.901, 9 TH FLOOR, A-WING, DSK FRANGIPANI, BEHIND HOTEL WOODLAND, SADHU VASWANI CHOWK, PUNE-411001. PAN : AACCJ4636N . /APPELLANT VS. ITO, WARD 14(1), PUNE. . / RESPONDENT / APPELLANT BY : SHRI PRATIK SANDBHOR & MS. RYA SHAH / RESPONDENT BY : SHRI ACHAL SHARMA / DATE OF HEARING : 21.02.2019 / DATE OF PRONOUNCEMENT: 12.03.2019 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-7, PUNE DATED 15.09.2017 FOR THE ASSESSMENT YEAR 2014-15. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DISALLOWING THE PAYMENT OF RS.1,00,54,525/- , COMPRISING OF REIMBURSEMENT OF EXPENSES OF RS.83,30,972/-, TERMINAL HANDLING CHARGES OF RS.7,60,412/- AND OTHER CHARGES OF RS.9,63,141/-, U/S 40(A)(IA) ON THE GROUND THAT SINCE SERVICE TAX HAS BEEN DEDUCTED THE PAYMENT IS CONSIDERED AS CONTRACT U/S 194C AND CONSEQUENTLY THE ASSESSEE HAS FAILED TO MAKE SUCH TDS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE INVOICE/DEBIT NOTE SHOW SEPARATE AMOUNTS, ONE BEING AGENCY CHARGES ON WHICH SERVICE TAX IS CHARGED AND THE OTHER BEING FREIGHT CHARGES ON WHICH NO SERVICE TAX IS CHARGED WHICH IS NECESSARILY IN NATURE OF REIMBURSEMENT, AND THEREBY DISREGARDING THAT NO ITA NO.2732/PUN/2017 2 TDS IS DEDUCTIBLE ON FREIGHT AND SHIPPING CHARGES IN NATURE OF REIMBURSEMENT EXPENSES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE C&F AGENTS AS THE AUTHORIZED AGENTS OF THE FOREIGN SHIPPING LINES . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN IGNORING THE CBDT CIRCULAR NO.723 DATED 19-09-1995 , WHICH SPECIFICALLY STATES THAT SINCE THE AGENTS OF FOREIGN SHIPPING OWNERS OR CHARTERS ACTS ON BEHALF OF THEIR PRINCIPAL, THEY STEP INTO THE SHOES OF PRINCIPAL, AND ACCORDINGLY THE PROVISIONS OF SECTION 172 SHALL APPLY AND THOSE OF SECTION 194 AND 195 WILL NOT APPLY. 5. APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE AND / OR MODIFY ANY OR ALL OF THE AFORESAID GROUNDS OF APPEAL IN THE INTEREST OF NATURAL JUSTICE. 3. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF EXPORT OF GOODS. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.7,62,870/-. DURING THE ASSESSMENT PROCEEDINGS, THE ISSUE RELATING TO THE ALLOWABILITY OF FREIGHT AND SHIPPING CHARGES AMOUNTING TO RS.1,00,54,525/- CAME FOR DEEPER SCRUTINY BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER NOTICED THAT THE SAID PAYMENTS WERE MADE WITHOUT DEDUCTING ANY TDS AS PER THE PROVISIONS OF SECTION 194C OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER MADE AN ADDITION OF RS.1,00,54,525/- INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND ADDED THE SAME TO THE RETURNED INCOME OF THE ASSESSEE. 4. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE RELIED ON CERTAIN DECISIONS/JUDGEMENTS AS WELL AS CBDT CIRCULAR NO.723 OF 1995 ON THIS ISSUE UNDER CONSIDERATION AND SUBMITTED THAT THE ABOVE-SAID PAYMENTS DO NOT ATTRACT THE TDS PROVISIONS AS THE ASSESSEE IS A C&F AGENT AND AUTHORIZED AGENT OF THE FOREIGN SHIPPING LINES. FURTHER, THE ASSESSEE GAVE A BREAKUP FOR THE SAID AMOUNT AND SUBMITTED THAT THE MAJOR PART OF THE EXPENDITURE (I.E. RS.83,30,973/-) CONSTITUTES THE REIMBURSEMENT ONLY. NON- TAXABILITY OF THE SAID RECEIPTS UNDER THE PROVISIONS OF SERVICE TAX WAS ALSO RELIED ON BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE ALSO ARGUED THAT ITA NO.2732/PUN/2017 3 THE C&F AGENTS ARE AUTHORIZED AGENTS OF THE FOREIGN SHIPPING LINES. THEREFORE, THE PAYMENTS MADE ON FREIGHT CHARGES DO NOT ATTRACT THE TDS PROVISIONS. THE LD. COUNSEL HEAVILY RELIED ON THE SAID CIRCULAR DATED 19.09.1995 (SUPRA) RELATING TO THE AGENTS OF THE FOREIGN SHIPPING COMPANIES. THE CIT(A) DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE. EVENTUALLY, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE STATING THAT THE SAID CIRCULAR (SUPRA) DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE. THE CIT(A) HELD IN PARA 5.8 OF HIS ORDER THAT THE C&F AGENTS CANNOT BE TREATED AS INDEPENDENT AGENTS OF THE FOREIGN SHIPPING LINES. ACCORDINGLY, ADDITIONS, MADE BY THE ASSESSING OFFICER, WERE CONFIRMED AS PER THE DISCUSSION GIVEN IN PARAS 5.8 TO 5.9.2 OF THE ORDER OF CIT(A). FOR THE SAKE OF COMPLETENESS, THE SAID PARAS 5.8 TO 5.9.2 ARE EXTRACTED AS UNDER :- 5.8 IN VIEW OF THE ABOVE THE AFORESAID C&F AGENTS COULD BE TREATED AS INDEPENDENT AGENTS WHO ARE FORWARDING THE GOODS OF THE APPELLANT TO AUTHORIZED AGENT OF THE NON RESIDENT SHIPPING COMPANY. 5.9 ADMITTEDLY, THE APPELLANT HAS DEFAULTED IN NOT DEDUCTING TDS ON AMOUNT OF RS.9,63,141/-. THEREFORE, THE ACTION OF THE AO IN INVOLVING PROVISIONS OF SECTION 40(A)(IA) TO THE EXTENT OF RS.9,63,141/- IS UPHELD. 5.9.1 THE APPELLANT HAS CLAIMED THAT THE TERMINAL HANDLING CHARGES OF RS.7,60,412/- IS COVERED U/S. 172(8). THE APPELLANT HAS NOT ABLE TO DEMONSTRATE THAT THE AFORESAID C&F AGENTS ARE AUTHORIZED AGENTS OF NON-RESIDENT SHIPPING COMPANY , THEREFORE, THE PROVISIONS OF SECTION 172 WILL NOT BE APPLICABLE TO AFORESAID C&F AGENT. THEREFORE, THE ACTION OF THE AO IN INVOKING PROVISIONS OF SECTION 40(A)(IA) TO THE EXTENT OF RS.7,60,412/- IS UPHELD. 5.9.2 IN VIEW OF PARA 5.3 TO 5.8 THE TDS OUGHT TO HAVE DEDUCTED ON FREIGHT CHARGES OF RS.83,30,972/-. THEREFORE, THE ACTION OF THE AO IN INVOKING PROVISIONS OF SECTION 40(A)(IA) TO THE EXTENT OF RS.83,30,972/- IS UPHELD. 5. AGGRIEVED WITH THE ABOVE ORDER OF THE CIT(A), THE ASSESSEE FILED THE PRESENT APPEAL WITH THE GROUNDS EXTRACTED ABOVE. 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE PAPER BOOK FILED BY THE ASSESSEE AND SUBMITTED THAT THE PAYMENTS MADE CONSTITUTE THE REIMBURSEMENT OF EXPENSES IN WHICH CASE, THE TDS PROVISIONS DO NOT APPLY. HE RELIED ON VARIOUS DECISIONS/JUDGEMENTS SUCH AS (I) DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. ITA NO.2732/PUN/2017 4 M/S. PARAMOUNT FORGE (ITA NO.4580/MUM/2012 DATED 24.02.2015); (II) JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ACIT VS. SWASTIK PIPES LTD. (98 TAXMANN.COM420); AND, (III) JUDGEMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. M/S. DLF COMMERCIAL PROJECT CORPORATION (ITA 627/2012 DATED 15.07.2015) ETC. FURTHER, BRINGING OUR ATTENTION TO THE BILL OF LADING IN CORRESPONDENCE WITH THE INVOICES OF C&F AGENTS PROVIDED AT PAGE NO.3 TO 22 OF THE PAPER BOOK, THE LD. COUNSEL MENTIONED THAT THE SAME CONSTITUTES ADDITIONAL EVIDENCES WHICH PROVE THAT THE PAYMENTS WERE MADE TO THE INDEPENDENT AGENTS OF THE FOREIGN SHIPPING LINES. IN THIS REGARD, THE ASSESSEE FILED A LETTER AND MADE PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCES. THE ADDITIONAL EVIDENCES ALSO INCLUDE THE CONFIRMATION OF C&F AGENTS AND THE ACKNOWLEDGEMENT OF INCOME-TAX RETURN OF THE C&F AGENTS. INVOKING THE PROVISIONS OF RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963, LD. COUNSEL PRAYED FOR ADMITTING THE ADDITIONAL EVIDENCES. 7. ON THE OTHER HAND, LD. DR FOR THE REVENUE HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. THE LD. DR FURTHER SUBMITTED THAT IF THE ADDITIONAL EVIDENCES ARE ADMITTED, THEN THE IMPUGNED ISSUES ARE REQUIRED TO BE REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 8. ON THE ISSUE OF ADMITTING THE ADDITIONAL EVIDENCE, WE FIND THESE EVIDENCES GO TO THE ROOT OF THE MATTER. HENCE, ADMITTING THE SAME IS IN THE INTEREST OF THE ADMINISTRATION OF JUSTICE. FURTHER, CONSIDERING THE SET PRINCIPLES OF NATURAL JUSTICE ON THE PRIMARY ISSUE OF ADMITTING THE ADDITIONAL EVIDENCES, WE FIND MATTER SHOULD BE REMANDED TO THE FILE OF THE ASSESSING OFFICER. WE FIND THE PAYMENTS WERE MADE TO THE C&F AGENTS. THE SAID C&F AGENTS NOW CONFIRMED THE SAME BY FILING THE SAID ADDITIONAL EVIDENCES. THE C&F AGENTS ALSO CLAIMED TO HAVE REFLECTED THE SAID RECEIPTS ITA NO.2732/PUN/2017 5 IN THEIR RESPECTIVE RETURNS OF INCOME. APPLICABILITY OF THE CIRCULAR (SUPRA) AND THE INDEPENDENT STATUS OF THE AGENTS ETC ARE THE ISSUES WHICH GOES TO ESTABLISH IF PAYMENTS MADE BY THE ASSESSEE ATTRACTS THE PROVISIONS OF SECTION 194C OF THE ACT OR OTHERWISE. THEREFORE, WE FIND, IN THE INTEREST OF JUSTICE, THE SAID ADDITIONAL EVIDENCES ALONG WITH THE ISSUES RAISED IN THE GROUNDS, SHOULD BE REMANDED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 12 TH DAY OF MARCH, 2019 SD/- SD/- (SUSHMA CHOWLA) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 12 TH MARCH, 2019. SUJEET / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-7, PUNE; 4. THE CCIT, PUNE; 5. , , / DR A, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE