UNIDAC IMPEX P.LTD, MUMBAI V. ITO 7(3)(2), MUMBAI

ITA 2934/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6530 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 18-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Court: TRIBUNAL
• Section: 194C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K ** ,Q U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI JH TH + ,L + IUUW] YS[KK LNL; ,OA JH VFER KQDYK] U;KF;D LNL; DS LE{KA BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER VK;DJ VIHY LA[;K@ ITA NO 2934 /MUM/201 2 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2007 - 08 ) UNIDAC IMPEX PVT. LTD. NITCO HOUSE, 01 ST FLOOR, RECONDO ESTATE, BMC COMPOUND, S.K. AHIRE MARG, WORLI, MUMBAI 400 030. VS.` THE INCOME TAX OFFICER - 7(3)(2), 6 TH FLOOR, ROOM NO. 671, AAYKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. LFKK;H YS[KK LA[;K@TH VKB VKJ LA[;K@ PAN/GIR NO. AAACU0548A APPELLANT RESPONDENT ORDER PER G.S. PANNU, AM THE CAPTIONED APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS THE CIT(A) DATED 16.12.2011 WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S 1 43(3) OF THE INCOME TAX ACT, 1961( HEREINAFTER REFERRED TO AS THE ACT) DATED 24.12.2009 PERTAINING TO ASSESSMENT Y EAR 2007 - 08. FU/KZKFJFR FD VKSJ LS @ ASSESSEE BY SHRI S.M. BANDI JKTLO FD VKSJ LS @ RE VENUE BY SHRI PAVAN KUMAR BEERLA LQUOKBZ FD RKJH[K @ DATE OF HEARING 30.04.2015 ?KKSK.KK FD RKJH[K@ DATE OF PRONOUNCEMENT 15 .5.2015 VK;DJ VIHY LA[;K@ ITA NO 2934/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2007 - 08) 2 | P A G E 2 IN THIS APPEAL, ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE G ROUNDS OF APPEAL BUT THE SOLITARY GRIEVANCE IS WITH RESPECT TO A D ISALLOWANCE OF RS. 8,95,482/ - MADE BY THE INCOME TAX AUTHORITIES BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 3. BRIEFLY PUT , THE RELEVANT FACTS ARE THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956, AND IS INTER ALIA ENGAGED IN THE BUSINESS OF EXPORT OF PHARMA PRODUCTS. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2007 - 08, THE ASSESSING OFFICER NOTED THAT A SUM OF RS. 8,95,482/ - WAS DEBITED IN THE PROFIT & LOSS ACCOUNT UNDER THE HEAD CLEARING AND FORWARDING CHARGES. THE ASSESSING OFFICER NOTED THAT THE REQUISITE TAX WAS NOT DEDUCTED AT SOURCE ON SUCH PAYMENT AND, THEREFORE, T HE AFORESAID AMOUNT CANNOT BE ALLOWED AS A DEDUCTION WHILE COMPUTING INCOME, HAVING REGARD TO THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE CIT(A) HAS ALSO AFFIRMED THE STAND OF THE ASSESSING OFFICER TO THE EFFECT THAT NON DEDUCTION OF THE REQUISITE TDS WOULD INVITE THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 4. IN THE ABOVE BACKGROUND, WE HAVE CONSIDERED THE RIVAL STANDS. THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL ON RECORD REVEALS THAT THE AFORESAID SUM WAS CLAIMED AS EXPENDITURE ON ACCOUNT OF FREIGHT CHARGES INCURRED ON EXPORT CONSIGNMENTS. TH E SAID AMOUNT OF RS. 8,95,482/ - WAS PAID TO ONE M/S ALLSTAR SHIPPING PVT. LTD., TO WHOM THE ASSESSEE HAD ENGAGED AS ITS CLEARING AND FORWARDING AGENT. THE SAID CONCERN IN - TURN PAID THE AFORESAID SUM AS AIR FREIGHT CHARGES TO ETHIOPIAN AI RLINES 6,21,284/ - AND SEA - FREIGHT CHARGES TO PAREKH MARINE AGENCY 2,74,198/ - . IT HAS BEEN EXPLAINED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT VK;DJ VIHY LA[;K@ ITA NO 2934/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2007 - 08) 3 | P A G E ETHIOPIAN AIRLINES IS A FOREIGN CARRIER OF GOODS AND PAREKH MARINE AGENCY WAS THE AGENT OF SHIPPING VESSEL DELMAS FRAN CE V.720. THE ASSESSEE EXPLAINED THAT IT HAD REIMBURSED ALLSTAR SHIPPING PVT. LTD FOR RS. 6,21284/ - / - TOWARDS THE AIR FREIGHT PAYABLE TO ETHIOPIAN AIRLINES AND RS. 2,74,198/ - TOWARDS SE A FREIGHT PAYABLE TO PA REKH MARINE AGENCY PVT. LTD. ON E OF THE POINT S RAISED BY THE ASSESSEE WAS THAT , BOTH , ETHIOPIAN AIRLINES AND PAREKH MARINE AGENCY PVT. LTD , WERE ISSUED CERTIFICATES U/S 197 OF THE ACT BY COMPETENT INCOME TAX AUTHORITIES, AUTHORIZING THEM TO RECEIVE INCOMES IN INDIA WITHOUT DEDUCTION OF TAX AT SOURCE. ON THE STRENGTH OF THE AFORESAID, IT WAS CANVASSED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE IMPUGNED EXPENDITURE WHICH REFLECTED PAYMENTS MADE TO ETHIOPIAN AIRLINES AND PARE KH MARINE AGENCY PVT. LTD. WERE, THEREFORE, NOT REQUIRED TO BE SUBJEC TED TO TAX DEDUCTION AT SOURCE. IT WAS THUS CONTENDED THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, WERE NOT ATTRACTED. 5. THE AFORESAID PLEA OF THE ASSESSEE HAS BEEN REJECTED BY THE ASSESSING OFFICER AS WELL AS THE CIT(A) PRIMARILY ON THE GROUND THAT THE FREIGHT EXPENSES IN QUESTION ARE PAID BY THE ASSESSEE TO AN INDIAN COMPANY I.E. M/S ALLSTAR SHIPPING PVT. LTD AND THE ASSES SEE COULD NOT BE SAID TO HAVE MADE PAYMENTS TO ETHIOPIAN AIRLINES AND/OR PAREKH MARINE AGENCY PVT. LTD. SO AS TO ESCAPE THE RIGORS OF DEDUCTION OF TAX AT SOURCE. 6. IN THE AFORESAID BACKGROUND, THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT BEF ORE US THAT THE CLEARING AGENT OF THE ASSESSED, I.E. , ALLSTAR SHIPPING PVT. LTD HAD SOUGHT REIMBURSEMENT OF FREIGHT CHARGES PAYABLE TO ETHIOPIAN AIRLINES AND PAREKH MARINE AGENCY PVT LTD. ON THE STRENGTH OF SPECIFIC INVOICES RAISED BY THE VK;DJ VIHY LA[;K@ ITA NO 2934/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2007 - 08) 4 | P A G E TWO CONCERNS, WHI CH RELATED TO EXPORT CONSIGNMENTS OF THE ASSESSEE. IN THIS CONTEXT OUR ATTENTION HAS BEEN DRAWN TO THE RELEVANT PAPERS PLACED IN THE PAPER BOOK, WHEREIN, THE INVOICES OF ALLSTAR SHIPPING PVT. LTD DEPICTING REIMBURSEMENT OF AIR FREIGHT CHARGES HAS BEE N PLA CED ALONG WITH RESPECTIVE A IRWAY BILL ISSUED BY THE ETHIOPIAN AIRLINES FOR AN IDENTICAL AMOUNT WITH RESPECT TO THE EXPORT CONSIGNMENTS OF ASSESSEE. SIMILARLY, THE RELEVANT DOCUMENTATION IN RESPECT OF THE PAYMENTS MADE TO PAR EKH MARINE AGENCY PVT. LTD., HAV E ALSO BEEN PLACED ON RECORD. ON THE STRENGTH OF THE AFORESAID, IT IS SOUGHT TO BE POINTED OUT THAT M/S ALLSTAR SHIPPING PVT. LTD., HAS MERELY ACTED AS AGENT OF THE RESPECTIVE AIRLINES/SHIPPING COMPANY AND HAS NOT RECEIVED THE FREIGHT PAYMENTS IN ITS OWN R IGHT. THEREFORE, IN THESE CIRCUMSTANCES, IT HAS TO BE UNDERSTOOD THAT THE PAYMENTS TO THE TWO RESPECTIVE CONCERNS , NAMELY ETHIOPIAN AIRLINES AND PAREKH MARINE AGENCY PVT. LTD., AS FREIGHT CHARGES WERE INDEED PAID BY THE ASSESSEE . O N THE STRENGTH OF THE CER TIFICATE S ISSUED BY THE COMPETENT INCOME TAX AUTHORITIES U/S 197 OF THE ACT, THE AFORESAID TWO ENTITIES WERE ENTITLED TO RECEIVE PAYMENTS FROM THE ASSESSEE WITHOUT DEDUCTION OF TAX AT SOURCE. THUS , UNDER THESE CIRCUMSTANCES, THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT ARE NOT ATTRACTED. 7. ON THE OTHER HAND, THE STAND OF THE REVENUE IS TO THE EFFECT THAT THE OBLIGATION OF THE ASSESSEE TO DEDUCT TAX AT SOURCE UNDER THE RELEVANT PROVISIONS IS TO BE EXAMINED ON THE FOOTING THAT PAYMENTS HAVE BEEN MADE TO ALLSTAR SHIPPING PVT. LTD. FOR RENDERING SERVI CES TO THE ASSESSEE. ACCORDING TO THE LD. DR , IF THE NATURE OF PAYMENTS IS SEEN IN THE SAID LIGHT, THE ASSESSEE COMPANY WAS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE IN TERMS OF SECTION 194C OF THE ACT, AND ON HAVING FAILED TO DO SO , THE LOWER AUTHORITIES HAVE RIGHTLY DISALLOWED THE IMPUGNED EXPENDITURE U/S 40(A)(IA) OF THE ACT. VK;DJ VIHY LA[;K@ ITA NO 2934/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2007 - 08) 5 | P A G E 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. UNDISPUTEDLY, THE EXPENDITURE IN QUESTION HAS BEEN INCURRED BY THE ASSESSEE ON ACCOUNT OF FREIGHT CHARGES FOR THE EXPORT CONSIGNMENTS. IN THIS CONTEXT, WE HAVE PERUSED THE A IRWAY BILL ISSUED BY THE ETHIOP IAN AIRLINES, A COPY OF WHICH HAS BEEN PLACED AT PAGE 27 OF THE PAPER BOOK. IN TERMS THEREOF, THE SHIPPER OF THE CONSIGNMENT IS STATED TO BE THE ASSESSEE BEFORE US. HOWEVER, THE PAYMENT FOR SUCH AIR FREIGHT WAS STATED TO HAVE BEEN PAID BY M/S ALLSTAR SHIPP ING PVT. LTD, ASSESSEES CLEARING AND FORWARDING AGENT. THE ASSESSEE IN TURN REIMBURSED SUCH AIR FREIGHT CHARGES TO M/S ALLSTAR SHIPPING PVT. LTD. IN THIS BACKGROUND, THE CASE SET UP BY THE REVENUE IS THAT THE IMPUGNED PAYMENT CANNOT BE SAID TO HAVE BEEN MADE BY THE ASSESSEE TO ETHIOPIAN AIRLINES AND, THEREFORE, ASSESEE CANNOT TAKE THE BENEFIT OF THE CERTIFICATE U/S 197 OF THE ACT, ISSUED TO ETHIOPIAN AIRLINES. NOTABLY, THE SAID CERTIFICATE IS ISSUED BY THE COMPETENT INCOME TAX AUTHORITIES ENABLING A CONCE RN TO RECEIVE INCOME IN INDIA WITHOUT DEDUCTION OF TAX AT SOURCE. IN OUR CONSIDERED OPINION, THE CASE SET UP BY THE REVENUE IS QUITE M YOPIC AND IS FAR FROM THE REALITIES. UNDISPUTEDLY, THE EXPENDITURE HAS BEEN INCURRED ON ACCOUNT OF AIR - FREIGHT WHICH IS PA ID TO ETHIOPIAN AIRLINES AND LIKEWISE IN THE CASE OF SEA FREIGHT , THE PAYMENT IS TO M/S PAREKH MARINE AGENCY PVT. LTD . S O FAR AS THE POSITION OF M/S ALLSTAR SHIPPING PVT. LTD. IS CONCERNED, THE SAME IS MERELY A P ASS - THROUGH AGENT. IN FACT, THE INVOICES RAI SED BY THE M/S ALLSTAR SHIPPING PVT. LTD. MAKES OUT THAT IT IS FOR REIMBURSEMENT OF AMOUNT PAID TO ETHIOPIAN AIRLINES AND SUPPORTED BY THE A IRWAY BILL ISSUED BY THE ETHIOPIAN AIRLINE, WHICH CONFIRMS THE ASSESSEE BEING THE SHIPPER OF THE CONSIGNMENT . SIMILA R IS THE FACT SITUATION IN RELATION TO SE A FREIGHT CHARGES INCURRED BY WAY OF PAYMENTS TO PAREKH MARINE AGENCY PVT. LTD. THEREFORE, IN OUR VIEW, HAVING REGARD TO THE CERTIFICATES ISSUED BY THE RESPECTIVE INCOME TAX AUTHORITIES U/S 197 OF THE ACT TO ETHIOPI AN AIRLINE AND VK;DJ VIHY LA[;K@ ITA NO 2934/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2007 - 08) 6 | P A G E PAREKH MARINE AGENCY PVT. LTD, COPIES OF WHICH HAVE BEEN PLACED AT PAGES 34 AND 35 OF THE PAPER BOOK RESPECTIVELY, THE IMPUGNED PAYMENTS MADE TO THEM WERE NOT LIABLE FOR TAX DEDUCTION AT SOURCE. AS A CONSEQUENCE, THE LOWER AUTHORITIES ERRED IN INVOKING SECTION 40(A)(IA) OF THE ACT IN DISALLOWING THE IMPUGNED SUM. ACCORDINGLY , WE SET ASIDE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 8,95,482/ - 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCE IN THE OPEN COURT ON THIS 15 TH DAY OF MAY 2015. SD/ - SD/ - (AMIT SHUKLA) (G.S. PANNU) (JUDICIAL MEMBER/ U;KF;D LNL; ) (ACCOUNTANT MEMBER/ YS[KK LNL; ) MUMBAI DATED 15 - 05 - 2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI VK;DJ VIHY LA[;K@ ITA NO 2934/MUM/2012 ( FU/KKZJ.K OKZ / ASSESSMENT YEAR: 2007 - 08) 7 | P A G E S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 12.05.2015 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 13.05.2015 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 07.05.2015 SR. PS/PS 7 FILE SENT TO BENCH CLERK .5.2015 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER