ASST CIT CIR 2, KALYAN V. VICKY SABHAGCHAND MOTWANI, MUMBAI

ITA 2839/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9033 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 13-05-2015
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Assessee Lawyers: SB SHETHIA
• Keywords: Residential status; Double taxation relief; Corroborative evidences
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI JOGINDER SINGH(JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.2839/MUM/2015 (ASSESSMENT YEAR : 2011-12) ACIT, CIR.2, KALYAN VS SHRI VICKY SABHAGCHAND MOTWANI, PROP TOPAZ INTERNTIONAL, 606, 6 TH FLOOR, RATAN GALAXY, NR. MEHUL CINEMA, J.N. ROAD, MULUND (W) MUMBAI 400 080 PAN : AABAT4497N PAN : ALIPM0562C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI N.P. SINGH CIT(DR) RESPONDENT BY SHRI SB SHETHIA DATE OF HEARING : 09-01-2017 DATE OF ORDER : 13 -01-2017 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- 3, THANE [HEREINAFTER CALLED CIT(A)] DATED 27-03-2015 FOR A. Y. 2011-12 ON THE FOLLOWING GROUNDS:- 1. WHETHER IN LAW AND FACTS OF THE CASE, THE IND. CIT (A) ERRED IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE T O DEDUCT TAX ON REIMBURSEMENT OF SHIPPING EXPENSES PAID TO D OLPHIN 2 I.T.A. NO.2839/MUM/2015 MARITIME AGENCY PVT. LTD., WHO IS NOT SHIPPING AGEN T OF NON RESIDENT SHIP OWNER BUT AN INDEPENDENT SHIPPING AGE NT. 2. WHETHER IN LAW AND FACTS OF THE CASE THE IND CIT (A ) ERRED IN HOLDING THAT THE REIMBURSEMENTS TO DOLPHIN MARITIME AGENCY PVT. LTD. ARE NOT LIABLE FOR TAX DE DUCTION AT SOURCE WITHOUT APPRECIATING THE FACT THAT SECTIO NS 194C AND 194] REFER TO ANY SUMS PAID AND THAT CIRCULAR N O. 715 OF THE C.B.D.T DATED 08.08.1995 ANSWERS THIS QUESTION IN THE AFFIRMATIVE AT QUESTION NUMBER 30. 3. APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE REV ERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 . DURING THE COURSE OF HEARING NONE APPEARED ON BEH ALF OF THE ASSESSEE. LD. DR RELIED UPON THE ORDER OF THE AO. 3. THE SOLITARY ISSUE RAISED IN THIS APPEAL BY THE REV ENUE IS THAT WHETHER THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE AO ON THE GROUND THAT ASSESSEE FAILED IN DEDUCT ING TAX ON THE PAYMENTS MADE ON ACCOUNT OF REIMBURSEMENT OF SHIPPI NG EXPENSES TO M/S DOLPHIN MARITIME AGENCY PVT LTD. 4. THE BRIEF BACKGROUND OF THE ISSUER IS THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORTS OF GENERAL ITEMS MAINLY TO AFRICAN COUNTRIES, PARTICULARLY TO CONGO. DURING THE YEAR UNDER CONSI DERATION, THE ASSESSEE MADE PAYMENT TO DOLPHIN MARITIME AGENCY PV T LTD ON ACCOUNT OF REIMBURSEMENT OF SHIPPING EXPENSES WHICH WAS DISALLOWED BY THE AO ON THE GROUND THAT ASSESSEE FAILED IN DEDUCT ING TAX AT SOURCE. DURING THE COURSE OF APPEAL BEFORE LD. CIT(A), DETA ILED SUBMISSIONS WERE MADE BY THE ASSESSEE, WHICH WERE CONSIDERED BY LD.C IT(A) AND IT WAS FOUND THAT TAX WAS NOT REQUIRED TO BE DEDUCTED ON T HESE PAYMENTS. RELEVANT PART OF THE ORDER OF THE LD. CIT(A) IS REP RODUCED BELOW:- 5.4. I HAVE CAREFULLY CONSIDERED THE CONTENTS OF T HE ABOVE BILL AND OTHER SIMILAR BILLS AND NOTICED THAT THE C & F AGENT NAMELY, DOLPHIN MARITIME AGENCY PVT. LTD.. HAD RAIS ED SEPARATE BILL FOR FREIGHT / SHIPPING CHARGES, IN TH E NAME OF CMA & CGM AGENCY (INDIA) PVT. LTD., HAMILTON HOUSE, BAL LARD ESTATE, MUMBAI - 400 038. THE BILL WAS RAISED IN DO LLARS. THE C & F AGENT ALSO ATTACHED THE BILL RAISED BY TH E ABOVE 3 I.T.A. NO.2839/MUM/2015 SHIPPING COMPANY AGAINST C& F AGENT. THE SAME HAS B EEN VERIFIED AND FOUND THAT THE FOREIGN SHIPPING COMPAN Y HAD ALSO RAISED BILL ON C & F AGENT, EXACTLY OF SAME AM OUNT. THE LD. AR ALSO FILED A COPY OF DECLARATION DATED 1.4.2 010, ISSUED BY THE ABOVE SHIPPING COMPANY AND THE SAME HAS BEEN CONSIDERED. THE RELEVANT PART OF THE SAME IS REPROD UCED, HERE AS UNDER: WE CMA CGM AGENCIES (INDIA) PRIVATE LIMITED ARE THE AGENT FOR CMA CGM, 4 QUAI D'ARENC, MARSEILLES (FRANCE) IN INDIA. WE HEREBY CONFIRM THAT AS PER TH E PROVISION OF THE INCOME TAX ACT, 1961 CMA CGM S.A. FRANCE IS NON-RESIDENT SHIPPING COMPANY ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS IN INTERNATIONAL TRA FFIC. THE PLACE OF EFFECTIVE MANAGEMENT IS SITUATED IN FRANCE AND THE SAID SHIPPING COMPANY IS TAX RESIDENT IN FRANCE . WE HEREBY CONFIRM THAT WE ARE COVERED UNDER SECTION 172 OF INCOME TAX ACT,1961. WE FURTHER CONFIRM THAT THE ENTIRE AMOUNT PAYABLE TO US TOWARDS FREIGHT & OTHER ANCILLARY CHARGES IN OUR CAPACITY AS THE AGENTS OF CMA CGM S. A. FRANCE DURING THE FINANCIAL YEAR 1ST APRIL, 2010 TO 31ST MARCH, 2011 SHALL BE INCLUDE IN THE RETURN OF INCOME TO BE FILED BY US UNDER SECTION 172 ON BEHALF OF CMA CGM S. A. FRANCE AND WE SHALL BE ENTIRELY RESPONSIBLE FOR THE PAYMENT OF ANY APPLICABLE TAX O N SUCH FREIGHT & OTHER ANCILLARY CHARGES. IN VIEW OF CBDT CIRCULAR NO. 723 DATED 19.09.1995, THE PROVISION OF SECTION 194 C AND 195 OF THE INCOME TA X ACT, 1961, WHICH PROVIDES FOR DEDUCTION OF TAX AT SOURCE ON CERTAIN TYPES OF PAYMENTS, ARE NOT APPLICABLE IN TH E PRESENT CASE. WE SHALL INDEMNIFY YOU AGAINST ANY LIABILITIES THAT MAY DEVOLVE ON YOU AT A LATER DATE UNDER INCOME TAX ACT , 1961DUE TO NON-DEDUCTION/WITHHOLDING OF TAX FROM PA YMENTS MADE TO US.' 5.5. LIKEWISE, ANOTHER SHIPPING COMPANY MAERSK INDI A PVT. LTD., HAS ALSO ISSUED A SIMILAR LETTER, THE CONTENT S OF THE SAME ARE REPRODUCED HERE AS UNDER: 'WE MAERSK INDIA PRIVATE LIMITED ARE SHIPPING AGENTS FO R A. P. MOLLER MAERSK - A/S (HEREBY KNOWN AS THE 'PRINCI PAL'). WE HEREBY CONFIRM THAT AS PER THE PROVISIONS OF THE INDIAN INCOME TAX ACT, 1961,('THE ACT') OUR PRINCIPAL'S RESIDENTIAL STATUS IS 'NON-RESIDENT' AND THEY ARE E NGAGED IN OPERATION OF SHIPS. PLEASE NOTED THAT OUR PRINCIPAL ARE THE RESIDENTS O F DENMARK R 4 I.T.A. NO.2839/MUM/2015 AND UNDER ARTICLE 9 (SHIPPING) OF THE AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION BETWEEN INDIA AND DENM ARK, THE PROFITS DERIVED BY OUR PRINCIPAL FROM THE OPERA TION OF SHIPS IN INTERNATIONAL TRAFFIC ARE TAXABLE ONLY IN DENMARK. FURTHER WE ARE REGULARLY FILING RETURNS OF INCOME B ASED ON THE PROVISIONS OF SECTION 139/172 OF THE ACT FOR THE FREIGHT CHARGES, TERMINAL CHARGES, TERMINAL HANDLING CHARGE S (THC) AND ANY OTHER AMOUNT OF A SIMILAR NATURE COLLECTED BY US ON BEHALF .OF OUR PRINCIPAL IN RESPECT OF GOODS SHIPPE D AT A PORT IN INDIA. WE FIEREBY CONFIRM THAT THE ENTIRE AMOUNT PAYABLE BY YOU TO US TOWARDS FREIGHT AND OTHER CHARGES MENT IONED ABOVE FOR THE FINANCIAL YEAR 2010-11 HAS BEEN OR SH ALL BE INCLUDED IN THE RETURNS FILED OR TO BE FILED BY US UNDER SECTION 172 OF THE ACT. IN THESE RETURNS AFTER TAKING INTO ACCOUNT THE PROVISIONS OF THE AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION BETWEEN INDIA & DENMARK, TAX APPLICABLE, IF ANY, HA S BEEN OR WILL BE PAID. IN VIEW OF THE ABOVE AND CLARIFICATION GIVEN BY CBDT, VIDE ITS CIRCULAR NO. 723 DATED 191H SEPTEMBER, 1995 (COPY ATTACHED) THE PROVISIONS OF SECTIONS 194C AND 195 OF INCOME-TAX ACT, 1961 FOR DEDUCTION TO TAX AT SOURCE SHALL NOT APPLY IN RESPE CT OF FREIGHT CHARGES, THC CHARGES, IHC CHARGES AND ANY OTHER AMOUNT OF A SIMILAR NATURE PAYABLE TO US BY YOU. ACCORDINGLY, TAX AT SOURCE IS NOT DEDUCTIBLE F ROM THE ABOVE MENTIONED PAYMENTS.' 5.6. THE LD. AR ALSO PRODUCED COPY OF LETTER DATED 12.03.2010, ISSUED BY THE ASSTT. DIRECTOR OF INCOME -TAX (INTERNATIONAL TAXATION)-2(1), MUMBAI. THE CONTENTS OF THE SAME ARE REPRODUCED, HERE AS UNDER: M/S. SAFMARINE CONTAINER LINES N. V. BELGIUM (HERE IN REFERRED AS PRINCIPAL) HAS APPLIED FOR 100% DII REL IEF THROUGH ITS AGENT IN INDIA MAERSK INDIA PCT LTD (HEREIN REF ERRED AS THE APPLICANT) ON 26/02/2010. IT HAS BEEN CONTENDED BY THE APPLICANT ON BEHALF OF THE PRINCIPAL THAT THE PRINC IPAL IS A TAX RESIDENT OF BELGIUM AND IS ENTITLED TO THE BENEFIT OF ARTICLE 8 OF THE DTAA BETWEEN INDIA AND BELGIUM. TH E APPLICANT HAS FILED THE COPY OF TAX RESIDENCY CERTI FICATE AND OTHER DOCUMENTS IN SUPPORT OF ITS CLAIM. THE APPLICATIONS AS WELL AS THE DOCUMENT, FILED IN THIS REGARD WERE PERUSED. ON PRIMA FACIE EXAMINATION OF THE DOCUMENTS AND DETAILS FILED, IT APPEARS THAT THE PR INCIPAL 5 I.T.A. NO.2839/MUM/2015 IS ENTITLED FOR THE BENEFIT OF ARTICLE 8 OF THE DTA A BETWEEN INDIA AND BELGIUM. IN VIEW OF THIS, THE PRINCIPAL I S ENTITLED FOR 100% DIT RELIEF ON ACCOUNT OF INCOME FROM OPERATION OF THE VESSELS AS PER ANNEXURE ATTACHED HEREWITH OPERATING IN THE INTERNATIONAL TRAFFIC WHICH IS EIT HER OWNED OR CHARTERED BY THE PRINCIPAL FOR TRANSPORTAT ION OF PASSENGERS, MAIL LIVESTOCK OR GOODS CARRIED ON BY T HE PRINCIPAL FROM THE INDIAN PORTS. HOWEVER, ANY INCOM E EARNED FOR THE TRANSPORTATION OF PASSENGERS, MAIL L IVESTOCK OR GOODS FROM ONE PLACE TO ANOTHER PLACE WITHIN IND IA IS NOT COVERED BY THIS DIT RELIEF CERTIFICATE. THE CERTIFICATE IS ISSUED AND WILL BE RELEVANT ONLY TO M/S. SAFMARINE CONTAINER LINES N.V. BELGIUM AND NOT APPL ICABLE TO ANY OTHER SHIPPING LINES. THIS CERTIFICATE IS VALID FOR F.Y. 2010- 11 UNLESS IT IS CANCELLED OR MODIFIED BEFORE THE EX PIRY OF THE SAID FINANCIAL YEAR. THE FACT OF THE CANCELLATION O R MODIFICATION WILL BE INTIMATED TO YOU. 5.7. THE LD. AR FURTHER PLACED COPY OF CIRCULAR NO. 715 DATED 8.8.1995, ISSUED BY THE CBDT, NEW DELHI, IN REGARD TO DEDUCTION OF TDS AGAINST REIMBURSEMENT OF SHIPPING CHARGES TO THE FOREIGN SHIPPING COMPANIES AND ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE ITAT, JAIPUR BENCH, IN THE CASE OF SHRI MAN OJ KUMAR JOHN VS. DCIT IN ITA NO. 1111/JP/2011_AND ITA NO. 133/JP/2012, DECISION OF THE ITAT CHENNAI IN THE CA SE OF ACIT V. VELAVAN LMPEX PVT. LTD. - MDS/2012 AND ITAT, BAN GALORE BENCH 'B' IN THE CASE OF DCIT VS. DHAANYA SEEDS (P) LTD. IN ITA NO. 1523 (BANG) OF 2012, WHEREIN, THE SIMILAR ISSUE S HAVE BEEN DECIDED IN FAVOUR OF THE APPELLANT. THE RELEVANT PA RT OF THE DECISION OF THE HON'BLE ITAT, BANGALORE BENCH, IN T HE ABOVE REFERRED CASE, IS REPRODUCED, WHICH HAVE DIRECT BEA RING ON THE ISSUE, , HERE AS UNDER: '4.6 AS REGARDS THE AMOUNT OF RS. 4,78,499 TOWARDS REIMBURSEMENT OF ACTUAL EXPENSES, THE ASSESSING OFFICER RELIED ON THE BOARD'S CIRCULAR NO . 715 DATED 8.8.1995. I HAVE CONSIDERED THE SAID CIRCULAR AND ALSO THE VARIOUS DECISIONS RELIED ON B Y THE APPELLANT IN THIS REGARD. THERE IS NO DISPUTE 6 I.T.A. NO.2839/MUM/2015 ABOUT THE NATURE OF EXPENDITURE CLAIMED BY THE APPELLANT. IT IS TOWARDS THE REIMBURSEMENT OF EXPENSES INCURRED BY THE C& F AGENTS ON BEHALF OF THE APPELLANT. AS EXPLAINED BY THE APPELLANT, THESE EXPENSES WERE INCURRED BY THE C&F AGENTS ON BEHALF OF THE APPELLANT AND CLAIMS WERE MADE IN THEIR BILL S ON ACTUAL BASIS AND THE AMOUNTS WERE SHOWN SEPARATELY SUPPORTED BY NECESSARY EVIDENCE. THEREFORE, THESE PAYMENTS WERE MADE ON ACTUAL BASIS AND THEY DO NOT CONTAIN ANY ELEMENT OF INCOME. HENCE, SUCH A PAYMENT IS NOT LIABLEFOR DEDUCTION OF TAX UNDER SECTION 195 OF THE ACT. FURTHER THE BOARD'S CIRCULAR IS APPLICABLE ONLY WHERE THERE IS NO. INDICATION ABOUT THE REIMBURSABLE AMOUNTS IN THE BILLS SEPARATELY. IN TH AT CAE, THE GROSS AMOUNT HAS TO BE CONSIDERED FOR DEDUCTION OF TAX. IN VIEW OF THIS FACTUAL AND LEGAL POSITION, THE AMOUNT OF RS. 4,78,499 IS NOT LIABLE FOR TDS. HENCE, IT CANNOT BE DISALLOWED UNDER SECTION 40(A)(IA).' 6.4.3 IN THE CASE ON HAND, AS POINTED OUT BY THE LEARNED CIT (APPEALS), THE EXPENSES HAVE BEEN INCURRED BY THE C&F AGENTS ON BEHALF OF THE ASSESSEE; THE CLAIMS WERE MADE ON ACTUAL BASIS AND THE AMOUNTS WERE SEPARATELY SHOWN WITH PROPER EVIDENCE. THE FACT THAT THE REIMBURSEMENT OF EXPENSES HAVE BEEN SEPARATELY BILLED, IN THE CASE ON HAND, IS NOT DISPUTED. THE C&F AGENTS ARE APPOINTED TO PROVIDE THE SERVICE OF CARRYING OUT SALES FOR WHICH THEY ARE PAID SERVICE CHARGES ON WHICH TDS HAS BEEN MADE AND NOT FOR THE PURPOSE OF INCURRING EXPENSES ON BEHALF OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, THE REIMBURSEMENT OF EXPENSES BY C&F AGENTS CANNOT BE HELD TO BE CONTRACT / SERVICE ON. WHICH THE PROVISION OF SECTION 194C OF THE ACT WOULD COME INTO PLAY AND APPLY. IN VIEW OF THE FACTUAL POSITION AS LAID OUT ABOVE AND FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF VAN OORD ACZ INDIA (P.) LTD. (SUPRA), WE 7 I.T.A. NO.2839/MUM/2015 HOLD THAT- THERE IS NO NEED TO DEDUCT TDS ON REIMBURSEMENT OF EXPENSES TO C&F AGENTS WHICH ARE SEPARATELY BILLED AND ACCORDINGLY UPHOLD THE ORDER OF THE LEARNED CIT (APPEALS). CONSEQUENTLY, W E DISMISS GROUND NO. 2 RAISED BY REVENUE.' 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E, ABOVE SUBMISSIONS OF THE LD. AR AND NOTICED THAT THE C&F AGENT HAS RAISED BILLS, REFLECTING SEPARATE AMOUNT FOR SH IPPING OF GOODS. THE EXACT AMOUNT, AS HAS BEEN RAISED BY THE C & F AGENT, TO THE APPELLANT, HAS ALSO BEEN RAISED BY TH E SHIPPING COMPANIES TO THE C & F AGENTS FOR SHIPPING OF GOODS . ACCORDINGLY, IT IS CLAIMED THAT THERE IS NO CASE OF ANY INCOME ELEMENT IN THE HANDS OF THE C & F AGENTS. THE COPY OF BILLS OF ABOVE SHIPPING COMPANY IS PLACED ON RECORD AND VERI FIABLE. IN VIEW OF THE FACTUAL POSITION, AS LAID OUT ABOVE AND RESPECTIVELY, FOLLOWING THE ABOVE DECISIONS, AS CITED BY THE LD. AR, I HEREBY HOLD THAT THE APPELLANT IS NOT LIABLE TO DEDUCT TAX ON REIMBURSEMENT OF SHIPPING EXPENSES PAID TO C & F AG ENTS (WHICH . ARE SEPARATELY BILLED), ON BEHALF OF THE FOREIGN SH IPPING COMPANIES. THE AO, IS THEREFORE DIRECTED. TO ALLOW RELIEF TO THE EXTENT OF AMOUNT PAID (FOR SHIPPING OF GOODS TO FOR EIGN SHIPPING COMPANIES THROUGH C & F AGENT) AS REIMBURSEMENT. THE APPELLANT IS HEREBY DIRECTED TO FURNISH THE WORKING OF DETAILS OF REIMBURSEMENT OF SHIPPING EXPENSES, WITH SUPPORTING EVIDENCES, BEFORE THE AO. THIS GROUND OF APPEAL, IS THEREFORE, ALLOWED' ACCORDINGL Y. 5. IT IS NOTED BY US THAT THE LD.CIT(A) HAS CONSIDERED BOARDS CIRCULAR NO.715 DATED 08-08-1995 WHICH IS ON THE ISSUE OF DE DUCTION OF TAX AT SOURCE ON THE PAYMENTS MADE FOR REIMBURSEMENT OF SH IPPING CHARGES AND ALSO CONSIDERED AFORESAID JUDGMENTS OF TRIBUNAL. I T IS NOTED THAT THE LD. CIT(A) HAS MERELY SENT THE ISSUE BACK TO THE FILE O F THE AO TO VERIFY THE FACTS WITH THE DIRECTION THAT DISALLOWANCE SHALL BE DELETED ONLY IF THE AMOUNT PAID BY THE ASSESSEE REPRESENTS THE AMOUNT O F REIMBURSEMENT. 6. DURING THE COURSE OF HEARING BEFORE US, NOTHING HAS BEEN POINTED 8 I.T.A. NO.2839/MUM/2015 OUT BY LD. DR IN THE DIRECTIONS AND FINDINGS OF LD. CIT(A) WHICH IS INCORRECT ON FACTS OR ON LAW. UNDER THESE CIRCUMSTANCES, IN ABSENCE OF ANYTHING INCORRECT OR WRONG HAVING BEEN POINTED OUT IN THE F INDINGS OF LD.CIT(A), WE FIND THAT NO INTERFERENCE IS CALLED FOR IN THE O RDER OF THE LD.CIT(A) AND, THEREFORE, THE SAME IS UPHELD. 7. AS A RESULT, APPEAL FILED BY THE REVENUE IS DISMISS ED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 13 TH JANUARY, 2017 PATEL/PS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , B-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES