The ACIT,Navsari Circle, Navsari V. Best Roses Biotech Pvt.Ltd., Navsari

ITA 283/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9542 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUTARIA
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV , JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO. 283/AHD/2013 ASSESSMENT YEAR :2009-10 ASST. COMMISSIONER OF INCOME-TAX NAVSARI CIRCLE, NAVSARI V/S . BEST ROSES BIOTECH PVT. LTD. AT. VILLAGE KUCHED, TAL. JALALPORE, DIST. NAVSARI PAN NO. AABCB7116Q (APPELLANT) .. (RESPONDENT) ! ' / BY REVENUE SHRI DEEPAK SUTARIA, SR. D.R. ' /BY ASSESSEE SHRI TUSHAR P. HEMANI, A.R. % ' /DATE OF HEARING 13.01.2016 &'() ' /DATE OF PRONOUNCEMENT 12.02.2016 O R D E R PER : SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER OF CIT(A), VALSAD, DATED 30.10.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF GROWING FLOWERS AND HAS SET UP A HIGH-TECH GREEN HO USE FLORICULTURE PROJECT. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 25.09.2009 DECLARING TOTAL LOSS OF RS.1,07,94,346/- AND TAXABLE INCOME AT RS. ITA NO.283/AHD/2013 A.Y. 09-10 [ACIT VS. BEST ROSES BIOTECH PVT. LTD.] PAGE 2 NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREA FTER ASSESSMENT WAS FRAMED U/S.143(3) VIDE ORDER DATED 23.12.2011 AND T HE TOTAL TAXABLE INCOME WAS DETERMINED AT RS.2,68,907/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 30.10.2012 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFOR E US AND HAS RAISED FOLLOWING EFFECTIVE GROUND: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING DISALLOWANCE OF RS.1,03,06,639/- MADE BY THE AO UNDER SECTION 40A(I A) OF THE ACT ON ACCOUNT OF PAYMENT FOR AIR FREIGHT EXPENSES, WITHOUT DEDUCT ION OF TAX AT SOURCE. 4. DURING COURSE OF ASSESSMENT PROCEEDINGS, ASSESSI NG OFFICER NOTICED THAT ASSESSEE HAS MADE AGGREGATE PAYMENT OF RS.1,03 ,06,639/- AS AIR FREIGHT EXPENSES TO SHREE DURGA INTERNATIONAL AND SHREE HER MES TRAVEL & CAGRO PVT. LTD. BUT WITHOUT DEDUCTION OF TDS U/S.194J OF THE ACT. ASSESSING OFFICER WAS OF THE VIEW THAT THE AIR FREIGHT THAT WAS PAID BY THE ASSESSEE WAS TO RESIDENTIAL COMPANIES HAVING THEIR PERMANENT ESTABL ISHMENT AND HEAD OFFICE IN INDIA AND THEREFORE, ASSESSEE WAS REQUIRED TO DE DUCT TDS AND SINCE, ASSESSEE HAD FAILED TO DEDUCT TDS, HE DISALLOWED TH E EXPENSES U/S.40(A)(IA) OF THE ACT. 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ADDITI ON BY HOLDING AS UNDER: 5.3 I HAVE CONSIDERED OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTION RAISED BY THE AR OF THE APPE LLANT IN THE WRITTEN SUBMISSION. THERE IS NO PLAUSIBLE REASON TO DISAGR EE WITH THE CONTENTION OF THE APPELLANT THAT THE PROVISIONS OF SECTION 194J R .W.S. 40(A)(IA) OF THE ACT ARE NOT APPLICABLE IN THE INSTANT CASE AS THE APPELLANT HAS PAID FREIGHT CHARGES TO ITA NO.283/AHD/2013 A.Y. 09-10 [ACIT VS. BEST ROSES BIOTECH PVT. LTD.] PAGE 3 THE C&F AGENTS WHICH IS NOT COVERED WITHIN THE MEAN ING OF FEES FOR PROFESSIONAL OR TECHNICAL SERVICES AS DEFINED AND PROVIDED IN SEC.194J OF THE INCOME TAX ACT, 1961. EVEN OTHERWISE, THE APPELLAN T IS NOT LIABLE TO MAKE DEDUCTION OF TAX AT SOURCE ON REIMBURSEMENT OF EXPE NSES BECAUSE IF THE PAYMENTS ARE MADE ON ACCOUNT OF REIMBURSEMENT, THEN NO TDS IS LIABLE TO BE DEDUCTED ON BEHALF OF THE PAYER I.E. ASSESSEE. THE FACT REMAINS THAT WHATEVER AMOUNT WAS PAID BY THE AGENT TOWARDS FREIG HT WAS REIMBURSED BY THE APPELLANT. THEREFORE, THERE WAS NO INCOME COMP ONENT IN THE HANDS OF AGENT. THE FACTS OF THE CASE ARE COVERED BY THE DE CISION IN CASE OF ACIT V/S MINPRO INDUSTRIES 143 TTJ 331 (ITAT JODHPUR) AND DC IT V/S HASMUKH J. PATEL 49 SOT 197 (ITAT AHMEDABAD) . WHAT THE ASSESSEE HAD PAID WAS NOTHING BUT REIMBURSEMENT OF FREIGHT CHARGES FOR WHICH NECESSARY MEMOS WERE ISSUED BY THE AGENTS. I AM THEREFORE, INCLINE D TO DELETE THE DISALLOWANCE OF RS.1,03,06,639/- MADE BY THE AO BY INVOKING PROV ISIONS OF SECTION 194J R.W.S. 40(A)(IA) OF THE I.T. ACT, 1961. THUS, THIS GROUND OF APPEAL IS ALLOWED . 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF ASSE SSING OFFICER. ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MAD E BEFORE THE ASSESSING OFFICER AND LD. CIT(A) AND FURTHER SUBMITTED THAT A SSESSEE WAS NOT REQUIRED TO DEDUCT TDS FROM PAYMENT WHICH WERE IN THE NATURE OF REIMBURSEMENT OF ACTUAL EXPENDITURE INCURRED BY C & F AGENTS ON BEHA LF OF THE ASSESSEE AND THAT THERE WAS NO INCOME ELEMENT INVOLVED IN THE EX PENDITURE. HE FURTHER SUBMITTED THAT ASSESSEE HAD MERELY REIMBURSED THE E XPENDITURE TO C& F AGENTS. HE FURTHER SUBMITTED THAT THE PAYMENT NEIT HER FALLS WITHIN THE AMBIT OF FEES FOR TECHNICAL SERVICES U/S.194J NOR THERE WA S ANY CONTRACT BETWEEN THE ASSESSEE AND THE C&F AGENTS AND THEREFORE ALSO ASSE SSEE WAS NOT REQUIRED TO DEDUCT TDS U/S.194J. HE FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX III VS. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. IN TAX APPEAL NO. 315 OF 2013. HE ALSO ITA NO.283/AHD/2013 A.Y. 09-10 [ACIT VS. BEST ROSES BIOTECH PVT. LTD.] PAGE 4 PLACED ON RECORD A COPY OF THE AFORESAID DECISION. HE, THUS, SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RES PECT TO DISALLOWANCE U/S.40(A)(IA) OF THE ACT. WE FIND THAT LD. CIT(A) VIDE DELETING THE ADDITION HAS GIVEN A FINDING THAT THE AMOUNT THAT WAS PAID BY TH E ASSESSEE TO THE AGENTS WERE TOWARDS FREIGHT REIMBURSEMENTS AND THAT THERE WAS NO INCOME COMPONENT IN THE HANDS OF AGENTS AND THE ISSUE WAS COVERED BY THE DECISIONS OF TRIBUNAL CITED IN THE ORDER. WE FURTHER FIND TH AT HONBLE GUJARAT HIGH COURT ON IDENTICAL FACTS, IN CASE OF COMMISSIONER OF INCOME TAX III VS. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. (SUPRA), ORDER DATED 25.06.2013 HAD DISMISSED THE APPEAL OF REVENUE BY HOLDING AS UNDER : IN AN APPEAL BY THE ASSESSEE THE COMMISSIONER (APP EALS) ALLOWED SUCH DEDUCTIONS OBSERVING THAT SO FAR AS THE AMOUNT OF RS.6,93,372/- IS CONCERNED AS SUCH THE AGENT HAD ALREADY DEDUCTED TH E TDS AND DEPOSITED IN THE GOVERNMENT AND, THEREFORE, THERE WAS NO FURTHER LIABILITY OF THE ASSESSEE TO DEDUCT THE TDS. WITH RESPECT TO RS.76,00,509/-, THE CIT(A) OBSERVED THAT THE SAID AMOUNT WAS TOWARDS THE REIMBURSEMENT OF TH E EXPENSES TO THE CONSIGNMENT AGENT, WHICH WAS IN FACT INCURRED ON BE HALF OF THE ASSESSEE AND THERE WAS NO PROFIT ELEMENT. THE CIT(A) HELD THAT T HE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TDS ON SUCH REIMBURSEMENT AN D, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE A BOVE DISALLOWANCE AND ACCORDINGLY DIRECTED TO DELETE THE SAME. BEING AGGR IEVED AND DISSATISFIED WITH THE ORDER PASSED BY THE CIT(A) IN HOLDING THE ABOVE , THE APPELLANT-REVENUE PREFERRED APPEAL BEFORE THE INCOME TAX APPELLATE TR IBUNAL AND BY THE IMPUGNED ORDER THE INCOME TAX APPELLATE TRIBUNAL HA S CONFIRMED THE ORDER PASSED THE CIT(A). IT IS REQUIRED TO BE NOTED THAT WHILE CONFIRMING THE ORDER PASSED BY THE CIT(A) AND DELETING THE DISALLOWANCE, IT HAS BEEN SPECIFICALLY OBSERVED BY THE TRIBUNAL THAT IN FACT THE EXPENSES WERE INCURRED BY THE AGENT ON BEHALF OF THE ASSESSEE FOR TRANSPORTATION AND OT HER CHARGES, WHICH HAS BEEN SPELT OUT IN THE BILL ITSELF INCLUDING THE COM MISSION TO THE AGENT. THE LEARNED TRIBUNAL ALSO OBSERVED THAT THE RELATION BE TWEEN THE ASSESSEE AND THE AGENT IS PRINCIPAL AND AN AGENT. THE LEARNED TRIBUN AL ALSO OBSERVED THAT SO FAR AS THE OBLIGATION TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF TRANSPORT CHARGES AND OTHER CHARGES IS CONCERNED THE SAME WAS COMPLIED WITH BY THE ITA NO.283/AHD/2013 A.Y. 09-10 [ACIT VS. BEST ROSES BIOTECH PVT. LTD.] PAGE 5 AGENT, WHO HAD MADE PAYMENT ON IT'S BEHALF. ON THE AFORESAID FACTS THE LEARNED TRIBUNAL ALSO OBSERVED THAT THE CIRCULAR RE LIED UPON BY THE REVENUE THAT IT IS THE LIABILITY OF THE ASSESSEE AS PRINCIPAL AG ENT TO DEDUCT THE IDS WILL NOT BE APPLICABLE AND THE SAID CIRCULAR WOULD BE APPLICABL E FOR PAYMENT MADE TO PRINCIPAL TO PRINCIPAL. CONSIDERING THE AFORESAID F ACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE LEARNED TRIBUNAL HAS CONFIRMED THE O RDER PASSED BY THE CIT(A) QUASHING AND SETTING ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER IN DELETING THE DISALLOWANCE OF RS.6,93,372/-AND RS.76 ,00,509/- CLAIMED BY THE ASSESSEE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, WE SEE NO REASON TO INTERFERE WITH THE SAME. NO ERROR HAS BEEN COMMITTE D BY THE LEARNED TRIBUNAL IN CONFIRMING THE ORDER PASSED BY THE CIT(A). NO QU ESTION OF LAW, MUCH LESS SUBSTANTIAL QUESTION OF LAW, ARISES IN THE PRESENT APPEAL. HENCE, THE PRESENT APPEAL DESERVES TO BE DISMISSED AND IS ACCORDINGLY DISMISSED. BEFORE US, REVENUE HAS NOT BROUGHT ANY CONTRARY BIN DING DECISION IN ITS SUPPORT NOR HAS CONTROVERTED THE FINDINGS OF LD. CI T(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF LD. CIT(A) AND THUS, THE GROUND OF REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 12/02/2016 SD/- SD/- ( SHAILENDRA KUMAR YADAV ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBE R TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- *+ , -. / APPELLANT /+ 01-. / RESPONDENT 2+ 345 6 / CONCERNED CIT 4+ 6- , / CIT (A) 9+ :; < 045 , 45) = 3 / DR, ITAT, AHMEDABAD >+ < ?@ A B / GUARD FILE. BY ORDER/ ,/= ,! , 45) = 3