THREE CIRCLE EXPORTS, MUMBAI V. ITO WD 20(3)-1, MUMBAI

ITA 3139/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8529 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 17-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SHRIVASTAVA
• Assessee Lawyers: SATENDRA PANDEY; K GOPAL MR JITENDRA SINGH
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI . , BEFORE SHRI B.R.JAIN , A M & SHRI VIVEK VARMA , J M ITA NO. 3139 / MU M/ 20 1 0 ( ASSESSMENT YEAR : 200 6 - 20 0 7 ) THREE CIRCLE EXPORTS, 241 - D, CRYSTAL PLAZA, B - 4/5, NEW LINK ROAD, ANDHERI (W) , MUMBAI - 53 VS. ITO ,WARD 20(3) - 1, MUMBAI - 12 PAN/GIR NO. : AABFT 6190 R ( AP PELLANT ) .. ( RESPONDENT ) /A SSESSEE BY : MR. K.GOPAL, MR. JITENDRA SINGH & MR. SATENDRA PANDEY /RE VENUE BY : MR. S.D.SHRIVASTAVA DATE OF HEARING : 1 7 TH OCT ., 2012 DATE OF PRONOUNCEMENT : 19 TH OCT.,2012 O R D E R PER B.R. JAIN ( A .M. ) : THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 8 - 2 - 2011 OF LEANED CIT(A) - 31 , MUMBAI, RAISES FOLLOWING GROUNDS : - 1. THE LD. CIT(A) ERRED IN CONFIRMING THE FOLLOWING DISALLOWANCES MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. A. DISALLOWANCE OF PAYMENTS TO AGENTS OF AIRLINES RS.4,40,90.896/ - B. DISALLOWANCE OF CLEA RING AND FORWARDING CHARGES RS.68.491/ - A. DISALLOWANCE OF PAYMENTS TO AGENTS OF AIRLINES RS.440,90896/ - 2. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY AO AMOUNTING TO RS. 4.40,90,896/ - INVOKING THE PROVISIONS OF 40(A)(IA) OF THE ACT WITH OUT APPRECIATING THE FACT THAT THE PAYMENTS ARE I,IADE ITA NO. 3139 /20 1 0 2 TO THE AGENTS OF VARIOUS AIRLINES AS FREIGHT. HENCE, THE PROVISIONS OF CHAPTER XVII OR PROVISIONS OF DEDUCTION OF TAX AT SOURCE ARE NOT APPLICABLE TO THE IMPUGNED TRANSACTIONS. THEREFORE, THE DISALLOWA NCE OF 4,40,90.896/ - IS NOT AT ALL JUSTIFIED AND THE SAME MAY BE DELETED. 3. WITHOUT PREJUDICE TO THE ABOVE THE ID. CIT(A). FAILED TO APPRECIATE THAT THE EXPENDITURE TOWARDS FREIGHT IS INCURRED ON BEHALF OF THE FOREIGN CUSTOMERS OF THE APPELLANT AND THE S AME IS REIMBURSED BY THEM. HENCE. THE PAYMENTS MADE ON ACCOUNT OF FREIGHT ARE NOT APPELLANTS EXPENDITURE. THUS THE DISALLOWANCE OF RS. 4.40.90,896/ - WITHOUT ANY BASIS AND THE SAME MAY BE DELETED. 4. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT(A) FAILED TO APPRECIATE THAT THE PAYMENTS MADE TO THE AGENTS OF FOREIGN AIRLINES ARE NOT TAXABLE IN INDIA HENCE THE PROVISIONS OF SECTION 194C IS NOT APPLICABLE AND ACCORDINGLY PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED. HENCE. THE DISALLOWANCE OF PAYMENTS MADE TO AGENTS OF THE FOREIGN AIRLINES IS NOT AT ALL JUSTIFIED AND THE SAME MAY BE DELETED. B. DISALLOWANCE OF CLEARING AND FORWARDING CHARGES RS.68,491/ - : 5. THE ID. C1T(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 68,491/ - BEING EXPENDITURE INCURRED ON A CCOUNT OF CLEARING AND FORWARDING AGENTS. THE PROVISIONS OF TAX DEDUCTED AT SOURCE ARE NOT APPLICABLE TO THE IMPUGNED TRANSACTION AS DISALLOWANCE IS NOT AT ALL JUSTIFIED. C . LEVY OF INTEREST U/S 234B, 234C & 234D IS NOT JUSTIFIED. 6 . THE ID. C1T(A) ERRE D IN CONFIRMING THE ACTION OF THE AO OF LEVYING INTEREST UNDER THE ABOVE MENTIONED SECTION WITHOUT APPRECIATING THE FACT THAT THE APPELLANT DENIES THE LEVY OF THE SAME. 2. BRIEFLY THE FACTS STATED ARE THAT THE ASSESSEE IS A SELLER AND EXPORTER OF VEGETA BLES . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS BOOK ED THE EXPORT COMMODITY I.E. VEGETABLES TO HIS FOREIGN BUYERS THROUGH CARGO COMPANIES AND PAID FREIGHT THEREON. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE H AS NOT DEDUCTED TAX AT SOURCES THEREON AS REQUIRED UNDER SECTION 194C OF THE ACT OF 1961. THE ASSESSEES EXPLANATION THAT THE PAYMENT MADE FOR FREIGHT IS ON BEHALF OF THE FOREIGN BUYER ITA NO. 3139 /20 1 0 3 WHICH STOOD REIMBURSED TO HIM ON A SUBSEQUENT DATE, TAX AT SOURCE WAS N OT REQUIRED TO BE DEDUCTED . THIS CLAIM, HOWEVER, WAS NOT APPRECIATED BY THE AUTHORITIES BELOW AND THUS, FOR NON - DEDUCTION OF TAX AT SOURCE, THE ENTIRE EXPENDITURE OF RS. 4,40,90,896/ - AND LIKEWISE PAYMENT MADE FOR CLEARING AND FORWARDING FOR RS. 68,491/ - , ST OOD DISALLOWED BY APPLICATION OF PROVISION OF SECTION 40A (IA) OF THE ACT OF 1961. 3. BEFORE US, THE ASSESSEES COUNSEL VEHEMENTLY ARGUED THAT THE ASSESSEE RECEIVED EXPORTER ORDERS TELEPHONICALLY . THE COMMODITIES BEING VEGETABLES, THE SAME ARE PERISHABLE . THE VALUE OF GOODS THAT HAVE BEEN EXPORTE D IS MUCH LESS THAN THE AMOUNT OF FREIGHT PAID FOR EACH CONSIGNMENT. THE FREIGHT PAID BY THE ASSESSEE IS ON BEHALF OF THE FOREIGN BUYERS AND THE AMOUNT THEREOF HAS BEEN REIMBURSED TO THE ASSESSEE BY ITS CUSTOMERS. A REFERENCE HAS BEEN MADE TO A SAMPLE OF THE BILL PLACED AT ASSESSEES PAPER BOOK AT PAGE 147, WHICH HAS BEEN RAISED FOR THE VALUE OF GOODS AND INDICATING SEPARATELY THE AMOUNT OF FREIGHT PAID BY THE ASSESSEE. FURTHER REFERENCE HAS BEEN MADE TO THE ASSES S EES PAPER BOOK AT PAGE 148, WHERE FREIGHT RECEIPT HAS BEEN ISSUED IN THE NAME OF ASSESSEE BY THE CARGO COMPANY. THE SHORT ARGUMENT OF THE ASSESSEE, THUS, IS THAT THE ASSESSEE INCURS EXPENDITURE ON BEHALF OF THE EXPORTER AND THERE BEING NO ELEMENT OF PROFI T THEREIN , THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE THEREON. REFERENCE HAS BEEN PLACED ON THE JUDGMENT BY THE APPELLATE TRIBUNAL VIDE ORDER DATED 19 - 4 - 2010 IN ITA NO. 2561/M/2009 IN THE ITA NO. 3139 /20 1 0 4 CASE OF M/S UTILITY POWERTECH LTD. VS. ACIT . THIS ORDER WAS RENDERED AFTER FOLLOWING THE JUDGMENT BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SIEMENS AKITONGESELLSCHAFT IN I.T.REF.NO.251 OF 1988, 310 ITR 320 (BOM.) . 4. IN THE ALTERNATE, ASSESSEES COUNSEL CONTENDS THAT THE ENTIRE EXPENDITURE C ANNOT BE DISALLOWED . I T IS ONLY THE AMOUNT I.E. PAYABLE AS AT THE END OF THE YEAR OR NOT PAID BEFORE THE DUE DATE OF FILING OF THE RETURN, COULD ALONE BE DISALLOWED IN THE LIGHT OF THE JUDGMENT RENDERED BY THE SPECIAL BENCH IN MERILYN SHIPPING & TRANSPORT VS. ACIT, [2012] 136 ITD 23 (VIZAG)(SB) . 5. ON THE OTHER HAND, LEARNED DR CONTENDS THAT THE ASSESSEE HAS NOT LAID ANY DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE PAYMENT OF FREIGHT HAS BEEN MADE BY THE ASSESSEE ON BEHALF OF THE FOREIGN BUYERS. T HE FREIGHT RECEIPT HAS BEEN ISSUED IN THE NAME OF THE ASSESSEE AND THE AMOUNT PAYABLE ALSO STAND S CREDITED IN THE ASSESSEES ACCOUNT S . THE ASSESSEE IN PROCEEDING S BEFORE THE TRIBUNAL HIMSELF ADMITS THAT IN SUBSEQUENT YEAR S , HE HAS DEDUCTED TAX AT SOURCE ON SUCH PAYMENT S AND PAID THE SAME. THE ASSESSEES PLEA THAT THE FREIGHT PAID IS MORE THAN THE VALUE OF GOODS SUPPLIED IS ALSO NOT BORNE OUT FROM THE BILL PLACED AT ASSESSEE PAPER BOOK AT PAGE 147 READ WITH BILL OF POMANA CARGO MOVERS, THE FREIGHT FORWARDERS . THERE IS NO MERIT IN THE ASSESSEES GROUND THAT TAX AT SOURCE O N BOTH THE PAYMENTS FOR ITA NO. 3139 /20 1 0 5 FREIGHT AS WELL AS CLEARING AND FORWARDING CHARGES ARE NOT LIABLE TO DEDUCT ION OF TAX AT SOURCE. 6. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. THE PERUSAL O F DOCUMENTS LAID ON RECORD, REVEALS THAT THE RE IS A PRIVI TY OF CONTRACT BETWEEN THE ASSESSEE AND THE CARGO COMPANY / CLEARING AGENTS. THAT BEING SO AND IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE CLAIM THAT SUCH PAY MENTS FOR FREIGHT OR CLE ARING CHARGES HAVE BEEN MADE BY THE ASSESSEE ON BEHALF OF THE FOREIGN BUYERS, THE AUTHORITIES BELOW CANNOT BE SAID TO HAVE ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 1 9 4C OF THE I.T. ACT ARE ATTRACTED IN THIS CASE . THE APPELLATE TRIBUNAL IN THE CASE O F UTILITY POWERTECH LTD. (SUPRA) , WHICH FOLLOWS THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SIEMENS AKTIONGESELLSCHAFT (SUPRA) , ALSO DO NOT APPLY TO TH E PECULIAR FACTS OF THE CASE IN THE ABSENCE OF ANY MATERIAL BROUGHT ON R ECORD TO SHOW THAT THERE WAS NO ELEMENT OF PROFIT IN MAKING PAYMENTS FOR FREIGHT BY THE ASSESSEE . NO COGENT MATERIAL OR RELIABLE EVIDENCE TO SUBSTANTIATE THAT IT HAS MADE SUCH PAYMENT S ON BEHALF OF HIS BUYERS OR TO A THIRD PARTY HAS BEEN LAID ON RECORD . W E, THEREFORE, DO NOT FIND ANY MERIT IN THE GROUND SO RAISED IN THE APPEAL BY THE ASSESSEE AND THE SAME STAND REJECTED . 7. THE SPECIAL BENCH OF THE APPELLATE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS. ACIT, [2012] 136 ITD 23 (VIZAG)(SB) , HOW EVER, HAS HELD THAT THE ASSESSEE HAVING COLLECTED AND ITA NO. 3139 /20 1 0 6 PAID THE AMOUNT DURING THE YEAR ITSELF, IT IS ONLY THE AMOUNT THAT IS PAYABLE AT THE END OF THE YEAR, CAN ALONE BE SUBJECT ED TO DISALLOWANCE UNDER SECTION 40A (IA) OF THE ACT. WE, THEREFORE, REMIT THE MA TTER BACK TO THE ASSESSING AUTHORITY TO FIND OUT TH IS FACT AND TAKE DECISION IN ACCORDANCE WITH LAW HAVING REGARD TO THE JUDGMENT OF THE SPECIAL BENCH OF THE TRIBUNAL. 8 . IN THE RESULT, APPEAL BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSE S ONLY . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF OCT . , 2012. 19 TH OCT . , 2012 SD/ - SD/ - ( ) ( VIVEK V ARMA ) ( . ) ( B.R.JAIN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 19 TH OCT ./ 2012. /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI