ITO, CHENNAI V. M/s. Cargoplan International (India) Pvt. Ltd., CHENNAI

ITA 3140/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7420 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Double taxation relief; Services rendered outside India; Permanent establishment; Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !'. . # $ % , ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.3140/MDS/2016 * +* /ASSESSMENT YEAR: 2012-13 THE INCOME TAX OFFICER, CORPORATE WARD-1(3), CHENNAI-600 034. VS. M/S.CARGOPLAN INTERNATIONAL (INDIA) PVT. LTD., NO.113 & 114, MENA KAMPALA ARCADE, SIR THEAGARAYA ROAD, T.NAGAR, CHENNAI-600 017. [PAN: AACCC 5083 E ] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : MR.SHIVA SRINIVAS, JCIT ./,- 0 1 /RESPONDENT BY : MR.G.SEETHARAMAN, CA # 0 2' /DATE OF HEARING : 30.01.2017 34+ 0 2' /DATE OF PRONOUNCEMENT : 23.03.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 10.08.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 1, CHENNAI, IN ITA NO.79/CIT(A)-1/2015-16 FOR THE AY 2012-13 AND RAISE D THE FOLLOWING GROUNDS: ITA NO.3140/MDS/2016 :- 2 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U/S.40(A)(I) OF THE I.T. ACT TO THE TUNE OF RS .6,62,69,387/-. 2.1 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE F ACT THAT THE SERVICES DEFINED IN THE AGREEMENT INCLUDES IDENTIFYING POTENTIAL SHI PPERS AND CONSIGNEES ALSO TO ACTIVELY INVOLVED IN CANVASSING ON BEHALF OF EACH O THER WHICH AMOUNTS TO SERVICES IN THE NATURE OF MANAGERIAL, TECHNICAL OR CONSULTANCY. 2.2 IT IS SUBMITTED THAT FROM THE NATURE OF SERVICES R ENDERED BY THE FREIGHT FORWARDERS AS MENTIONED IN THE AGENCY AGREEMENT, TH E SERVICES ARE NOT JUST PERTAINING TO CARGO HANDLING, BUT ARE MANAGERIAL AN D TECHNICAL. IN ORDER TO IDENTIFY THE POTENTIAL SHIPPERS OR CONSIGNEES, THE NON-RESIDENT FREIGHT FORWARDERS HAVE TO NECESSARILY CARRY OUT EXTENSION MARKETING AND ADVERTISING ACTIVITIES SUCH AS RELATIONSHIP MARKETING, INTERNAL MARKETING, INTEGRATED MARKETING, CAPTURING MARKETING ETC., TO BUILD A STR ONG BRAND NAME OF THE ASSESSEE COMPANY IN THE OFFSHORE MARKETS. SINCE THE ASSESSEE COMPANY IS DEPENDENT ON THE TECHNICAL INPUT OF THE FREIGHT FOR WARDERS LOCATED IN THE OFFSHORE, IT AMOUNTS TO CONSULTANCY SERVICES. 2.3 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE FOLLOWING SERVICES ARE RENDERED BY THE FREIGHT FORWARDERS WHICH REQUIRE AN ORGANIZED MARKETING STRATEGY AND PLANS WHICH AMOUNTS TO MANAGERIAL AND TECHNICAL SERVICES: 2.4 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE E XPLANATION TO SEC.9(2) INSERTED IN FINANCE ACT W.R.E.F. 01-06-1976, BUSIN ESS CONNECTION (PLACE OF PERMANENT ESTABLISHMENT) IS NOT REQUIRED IN A CASE WHERE THE INCOME IS DEEMED TO ACCRUE AS PER SECTION 9(1)(VII) OF THE AC T. THEREFORE, AS PER SEC.5(2) R.W.S. 9(1)(VII) OF THE I.T ACT, THE PAYMENT MADE B Y THE ASSESSEE TO THE NON- RESIDENT IS AN INCOME ACCRUED IN INDIA. 3. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U/S.40(A)(IA) OF RS.68,69,549/-. 3.1 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE SERVICES RENDERED BY PUBLIC SECTOR UNDERTAKINGS IS IN THE NATURE OF PROV IDING WAREHOUSE SERVICES AND THE SAME REQUIRE COMPLIANCE U/S.40(A)(IA) OF THE AC T. 4. THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON MADE IN RESPECT OF EMPLOYEES CONTRIBUTION TOWARDS PF OF RS.8,16,531/- WHICH WAS REMITTED BEYOND THE PRESCRIBED DUE DATES. 4.1 THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE IN RESPECT OF DELAYED REMITTANCE OF ITS EMPLOYEES CONTRIBUTION OF PROVIDE NT FUND DESPITE THE FACT THAT CIRCULAR NO.22/2015 DATED 17.12.2015 CLEARLY APPLIE S TO CLAIM OF DEDUCTION RELATING EMPLOYERS CONTRIBUTION AND NOT FOR EMPLOY EES CONTRIBUTION TO WELFARE FUNDS. 4.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT ANY R ECEIVED SUM RECEIVED ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUN D NOT REMITTED WITHIN THE DUE DATE IS TO BE TREATED AS THE INCOME OF THE ASSE SSEE AND TAXED IN HIS HANDS AS PER PROVISIONS OF SEC.2(24)(X) OF THE I.T. ACT, 1961. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASI DE AND THAT OF THE AO RESTORED. ITA NO.3140/MDS/2016 :- 3 -: 2.0 GROUND NOS.1 & 5 ARE GENERAL IN NATURE WHICH DO NO T REQUIRE SPECIFIC ADJUDICATION. 3.0 GROUND NOS.2 TO 2.4 ARE RELATED TO THE DISALLOWANC E MADE U/S.40(A)(I) OF INCOME TAX ACT (IN SHORT THE ACT) FOR NON-DEDUCTION OF TAX AT SOURCE. BRIEF FACTS : THE ASSESSEE IS A PVT. LTD. COMPANY ENGAGED IN THE BUSINESS OF PROVIDING LOGISTIC SUPPORT IN AIR/OCEAN TRANSPORT W AREHOUSING AND DISTRIBUTION AND FILED ITS RETURN OF INCOME DECLARI NG TOTAL INCOME OF RS.31,25,617/- ON 30.11.2012. THE ASSESSMENT WAS C OMPLETED U/S.143(3) BY AN ORDER DATED 16.03.2015 ON TOTAL I NCOME OF RS.7,70,81,080/-. THE AO MADE VARIOUS ADDITIONS TO THE RETURN OF INCOME, ONE OF SUCH ADDITIONS WAS DISALLOWANCE U/S. 40(A)(I) OF THE ACT WHICH IS ONE OF THE ISSUES DISPUTED IN THIS APPEAL. THE ASSESSEE HAS INCURRED THE EXPENSES TOWARDS THE PAYMENT MADE TO O VERSEAS AGENTS COMPRISING OF: A. FREIGHT CHARGES AND OTHER ORIGIN CHARGES LIKE: I. INLAND TRANSPORTATION; II. STORAGE OF GOODS-IN-TRANSIT; III. EXPORT DOCUMENTATION AND SHIPPING CHARGES; IV. EXPORT DUTY (IN CASE OF IMPORT SHIPMENTS INTO I NDIA); B. DESTINATION CHARGES LIKE: I. CLEARANCE CHARGES; II. INLAND TRANSPORTATION; III. STORAGE CHARGES ETC. (IN CASE OF EXPORT SHIPME NTS FROM INDIA); AND C. THE SERVICE CHARGES OF THE OVERSEAS AGENT. ITA NO.3140/MDS/2016 :- 4 -: THE AO TREATED THE EXPENDITURE AS FEE FOR TECHNICA L SERVICES AND BROUGHT TO TAX U/S.40(A)(I) OF THE ACT. 4.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) ALLOWED THE ASSESSEES APPEAL FOLLOWING HIS OWN ORDER FOR THE AY 2011-12. THE RE LEVANT PART OF THE LD.CIT(A)S ORDER IS EXTRACTED AS UNDER FOR THE SAK E OF CONVENIENCE: 19. I HAVE CAREFULLY PERUSED THE FACTS IN ISSUE, AR GUMENTS ADVANCED BY THE APPELLANT AND MATERIAL ON RECORD. AN IDENTICAL ISSUE HAVING SIMIL AR SET OF FACTS CAME UP FOR CONSIDERATION BEFORE ME IN APPELLANTS OWN CASE FOR A.Y. 2011-12 WHEREIN THE SAID ISSUE WAS DECIDED IN FAVOUR OF THE APPELLANT VIDE MY ORDER IN ITA NO.180 /CIT(A)-1/2014-15 DATED 15.2.2016 HOLDING AS UNDER: THE APPELLANT ADMITTEDLY IS A THIRD PARTY LOGISTIC S ENTITY WHICH RENDERED SERVICES OF FACILITATING MOVEMENT OF GOODS FOR ITS CLIENTS ESTA BLISHED IN INDIA AND OUTSIDE INDIA. IN ORDER TO MAKE AVAILABLE THE SERVICES, IT NEGOTIA TED WITH HANDLING AGENTS BOTH DOMESTIC AS ALSO IN FOREIGN COUNTRY BY WAY OF NEGOT IATION FOR GOODS TRANSPORTED FROM FOREIGN DESTINATION TO INDIA. 19. THE DISPUTE IN THIS ASSESSMENT RELATES TO THE E XIGIBILITY OF TAX IN RELATION TO THE PAYMENT MADE BY THE APPELLANT TO THE FOREIGN ENTITI ES FOR THE SERVICES RENDERED IN VARIOUS FOREIGN DESTINATIONS. IT IS IN THIS CONTEXT THAT THE EXIGIBILITY OF TAX TO THE PAYMENT HAVE TO BE EXAMINED AS TO WHETHER THE TAX L IABILITY IS TRIGGERED IN TERMS OF SEC.9(1)(I) R.W.S.5 OF THE INCOME TAX ACT. 20. IT IS SETTLED LAW WHEN SERVICES ARE RENDERED BY A NON-RESIDENT WHO HAS NO BUSINESS CONNECTION OR PRESENCE BY WAY OF PERMANENT ESTABLISHMENT IN INDIA, THE INCOME WOULD BE TRIGGERED IN THE COUNTRY OF RESIDEN CE WHERE THE SERVICES WERE RENDERED. THE RATIO IN THE CONTEXT OF COMMISSION AG ENT LAID DOWN BY THE JURISDICTIONAL COURT IN THE CASE OF CIT V. FAIZAN S HOES P LTD 367 ITR 155 APPLIES MUTATIS MUTANDIS. 21. THE NON-RESIDENTS TO WHOM PAYMENTS WERE MADE WE RE FOR A BOUQUET OF SERVICES SUCH AS INLAND TRANSPORTATION, STORAGE OF GOODS IN TRANSIT, EXPORT DOCUMENTATION AND SHIPPING CHARGES, EXPORT DUTY IN THE PORT OF ORIGIN AND CLEARANCE CHARGES, INLAND TRANSPORTATION AND STORAG E CHARGES IN THE DESTINATION. THESE CANNOT BE CLASSIFIED AS CONSTITUTING EITHER M ANAGERIAL OR SERVICES WHICH ARE TECHNICAL IN NATURE WITHIN THE MEANING OF S.9(1)(VI I) OF THE ACT. THE BOARDS CIRCULAR NO.715 RELIED UPON ALSO CLARIFIED THAT PAYMENT TO C LEARING AND FORWARDING AGENTS FOR CARNAGE OF GOODS IS SUBJECT TO DEDUCTION OF TAX AT SOURCE U/S.194C WHILE S.194J STIPULATES DEDUCTION OF TAX AT SOURCE IN RESPECT OF PROFESSIONAL AND TECHNICAL SERVICES. IN S.194J THE EXPRESSION FEE FOR TECHNIC AL SERVICES HAS BEEN GIVEN THE SAME MEANING AS LAID DOWN IN EXPLANATION-2 TO S.9(1 )(VII). 22. IN LEAAP INTERNATIONAL P LTD THE ITAT CHENNAI I N ITA NO.356/MDS/2009 FOR AY 2005-06 IN ITS ORDER DATED 27.5.2011 HAVE HELD SIMIL ARLY THAT THE PAYMENTS TO FOREIGN COMPANY FOR SERVICES RENDERED OUTSIDE INDIA AND FOREIGN COMPANY HAVING NO BRANCHES OR PERMANENT ESTABLISHMENT IN INDIA, TH E PAYMENTS MADE TO IT WERE NOT LIABLE FOR DEDUCTION AT SOURCE U/S.195. IN THE CASE OF INDIAR CARRIERS P LTD THE ITAT DELHI BENCH ALSO HELD SIMILARLY IN RESPECT OF THE PAYMENTS MADE TO AN AGENT OUTSIDE INDIA FOR FREIGHT FORWARDING FUNCTIONS ON T HE SAME LOGIC. ITA NO.3140/MDS/2016 :- 5 -: 23. ON THE FACTS OF THE CASE, THESE ENTITIES WHO HAV E RENDERED SERVICES ADMITTEDLY HAVE NO PRESENCE IN INDIA BY WAY OF PERMANENT ESTAB LISHMENT AND NO BUSINESS CONNECTION IN AS MUCH AS THAT THE SERVICES WERE REN DERED OUTSIDE INDIA. IT WOULD SUFFICE TO HOLD THAT THE BASIC INGREDIENT TO TRIGGE R THE OPERATION OF SEC.9(1)(I) ARE CONSPICUOUS IN THEIR ABSENCE IN SUCH SERVICES. IT W OULD THEREFORE MAKE NO DIFFERENCE WHETHER OR NOT ANY OF THE ENTITIES ARE R ESIDENT IN THE JURISDICTION WHICH HAS DTAA WITH INDIA OR NOT. PAYMENT(S) MADE TO THEM WOULD NOT BE EXIGIBLE TO TAX UNLESS AND UNTIL A CASE HAS BEEN MADE OUT THAT THEY ARE IN THE NATURE OF THE SERVICES WITHIN THE MEANING OF SEC.9(1)(VI) OR 9(1) (VII) BEING ROYALTY OR TECHNICAL SERVICES AS SUCH THE SAME WOULD BE TAXABLE AS BUSI NESS PROFITS IN THE COUNTRY OF RESIDENCE. IT IS HELD THEREFORE THAT SINCE THE PAYM ENTS ARE NOT CHARGEABLE TO TAX IN INDIA U/S.9(1)(VII) R.W.S. 195, THE PROVISIONS OF S .40(A)(I) WILL NOT BE APPLICABLE. THE AO IS DIRECTED TO DELETE THE ADDITION MADE. THIS GRO UND OF APPEAL IS ALLOWED. 20. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE A RE IDENTICAL FOR THE PRESENT ASSESSMENT YEAR ALSO, I DO NOT FIND ANY REASONS TO DEVIATE FRO M THE STAND TAKEN BY ME IN THE SAID ASSESSMENT YEAR AND FOLLOW THE SAME. ACCORDINGLY, T HIS GROUND OF APPEAL GROUND IS ALLOWED. 5.0 AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVEN UE IS ON APPEAL BEFORE US. 6.0 THE LD.AR APPEARING FOR THE ASSESSEE ARGUED THAT O N IDENTICAL FACTS FOR THE AY 2011-12 IN THE ASSESSEES OWN CASE IN IT A NO.1542/MDS/16 DATED 10.11.2016 THE HONBLE ITAT B BENCH ALLOWED THE ASSESSEES APPEAL. ON THE OTHER HAND THE LD.DR SUPPORTED THE ORDERS OF THE AO. 7.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. THE LD.CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT (CITED SUPRA). THE CO- ORDINATE BENCH IN THE ORDER RELIED UPON BY THE ASSE SSEE CONFIRMED THE ORDER OF THE LD.CIT(A) IN THE ASSESSEES OWN CASE F OR THE AY 2011-12. WE EXTRACT THE RELEVANT PARAGRAPH OF THE DECISION OF I TAT IN THE CASE CITED SUPRA: 4.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FREIGHT FORWARDING THROUGH ITS OFFICES IN INDIA AS WELL AS ABROAD. WITH REGARD TO EXPORT SHIPMENT FROM INDIA, THE ASSESSEE COLLECTS THE GOOD S FROM THE EXPORTERS, CARRIES OUT INLAND ITA NO.3140/MDS/2016 :- 6 -: TRANSPORTATION, STORAGE OF GOODS IN TRANSIT, COMPLI ES WITH EXPORT DOCUMENTATION AND SHIPPING REQUIREMENTS, CLEARS THE GOODS WITH CUSTOM ERS, PAYS EXPORT DUTY, AND CO- ORDINANCE WITH AIRLINES/SHIPPING AGENCIES WITH RESP ECT TO TRANSPORTATION OF GOODS OUTSIDE INDIA ETC., AND THE OVERSEAS AGENTS OF THE ASSESSEE CLEARS THE GOODS AT DESTINATION, PAYS IMPORT TAX/DUTY, STORES THE GOODS IN TRANSIT, CARRI ES OUT INLAND TRANSPORTATION AND DELIVERS SHIPMENT TO THE IMPORTER OVERSEAS. IN THE CASE OF I MPORT SHIPMENTS IN INDIA, THE SAME ACTIVITIES ARE PERFORMED BY THE ASSESSEE AND THE FO REIGN FREIGHT FORWARDERS RESPECTIVELY IN THE REVERSE MANNER. THEREFORE IT IS APPARENT THAT, THE PAYMENT MADE BY THE ASSESSEE COMPANY TO THE FOREIGN FREIGHT FORWARDERS ARE CONCE RNED, IT IS FOR SERVICES RENDERED OUTSIDE INDIA. THE FOREIGN FREIGHT FORWARDERS WHO HAVE RECE IVED PAYMENTS FROM THE ASSESSEE ALSO DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. IN THIS SITUATION IN THE CASE OF THE ASSESSEE, THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) HAS RIGHTLY RELIED IN THE DECISION OF THE HONBLE JURISDICTIONAL MADRAS HIGH COURT IN THE CASE OF CIT VS. FAIZAN SHOES P.LTD., REPORTED IN 367 ITR 155, WHEREIN IT IS HELD AS FOLLOWS: HELD, DISMISSING THE APPEAL, THAT ON A READING OF SECTION 9(1)(VII), COMMISSION PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENTS WOU LD NOT COME UNDER THE TERM FEES FOR TECHNICAL SERVICES. FOR PROCURING ORDERS FOR LEATHER BUSINESS FROM OVERSEAS BUYERS, WHOLESALERS OR RETAILERS, AS THE C ASE MAY BE, THE NON-RESIDENT AGENT WAS PAID 2.5 PER CENT. COMMISSION ON FREE ON BOARD BASIS. THIS WAS A COMMISSION SIMPLICITER. WHAT WAS THE NATURE OF TECH NICAL SERVICE THAT THE NON- RESIDENT AGENTS HAD PROVIDED ABROAD TO THE ASSESSEE WAS NOT CLEAR FROM THE ORDER OF THE ASSESSING OFFICER. THE OPENING OF LETTERS OF CREDIT FOR THE PURPOSE OF COMPLETING THE EXPORT OBLIGATION WAS AN INCIDENT OF EXPORT AND, THEREFORE, THE NON- RESIDENT AGENT WAS UNDER AN OBLIGATION TO RENDER SU CH SERVICES TO THE ASSESSEE, FOR WHICH COMMISSION WAS PAID. THE NON-RESIDENT AGENT D ID NOT PROVIDE TECHNICAL SERVICES FOR THE PURPOSES OF RUNNING OF THE BUSINES S OF THE ASSESSEE IN INDIA. THEREFORE, THE COMMISSION PAID TO THE NON-RESIDENT AGENTS WOULD NOT FALL WITHIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES AND THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON PAYMENT OF COMMISSION. 4.7 FURTHER, THE RELIANCE PLACED BY THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) IN THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL I N LEAP INTERNATIONAL PVT.LTD. IN ITA NO.356/MDS/2009 VIDE ORDER DATED 27.05.2011 IS ALSO JUSTIFIABLE BECAUSE IN THAT CASE IT WAS HELD THAT PAYMENT MADE TO FOREIGN COMPANIES, FO R SERVICES RENDERED OUTSIDE INDIA, WHICH DID NOT HAVE PERMANENT ESTABLISHMENT IN INDIA , TAX NEED NOT BE DEDUCTED AT SOURCE UNDER SECTION 195 OF THE ACT. FOR THE ABOVE STATED REASONS, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) ON THIS ISSUE. 8.0 FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND WE UPHOLD THE ORDER OF LD.CIT(A) AND DISMISS THE RE VENUES APPEAL ON THIS ISSUE. 9.0 GROUND NOS.3 TO 3.1 ARE RELATED TO THE DISALLOWANC E U/S.40(A)(IA) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE COMPANY MADE PAYMENTS TO THE PUBLIC SECTOR COMPANIES SUCH AS SHIPPING CORPORATION OF INDIA, CENTRAL WAREHOUSING CORPORATION, CENTURY ITA NO.3140/MDS/2016 :- 7 -: PLAY HOMES INDIA LTD., AND CONTAINER CORPORATION IN DIA LTD., FOR A SUM OF RS.70,70,523/-. HOWEVER, THE COMPANY HAS NOT DEDUC TED THE TDS ON AMOUNT OF RS.68,69,549/-. THE AO WAS OF THE VIEW T HAT THE SERVICES RENDERED BY THE PUBLIC SECTOR UNDERTAKINGS WAS IN T HE NATURE OF PROVIDING WAREHOUSE SERVICES AND ATTRACTS THE PROVISIONS OF T DS. SINCE, THE ASSESSEE FAILED TO DEDUCT TDS, THE AO MADE ADDITION U/S.40(A)(I) OF THE ACT. 10.0 AGGRIEVED BY THE ORDER, THE ASSESSEE WENT ON APPEA L BEFORE THE LD.CIT(A). THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO HOLDING THAT THE TDS PROVISIONS DO NOT ATTRACT. THE LD.CIT (A) OBSERVED THAT THE ASSESSEE ACTED AS FACILITATOR IN IMPORT AND EXPORT AND ONLY AGENCY CHARGES WERE CREDITED AS INCOME BY THE ASSESSEE AND ALL THE EXPENSES INCURRED BY THE ASSESSEE ON BEHALF OF ITS CLIENTS HAVE BEEN REI MBURSED AND ON THE REIMBURSEMENT OF EXPENSES THE PROVISIONS OF TDS IS NOT APPLICABLE. THE LD.CIT(A) RELIED ON THE DECISION OF ITAT AHMEDABAD IN THE CASE OF ITO VS. PRITESH D.SHAH (HUF) IN ITA NO.175/AHD/2013 AND ALS O RELIED ON HIS OWN DECISION IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS. IN THE PRECEDING ASSESSMENT YEAR ON IDENTICAL FACTS, THE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE IN ITA NO.1542/MDS/2016 REMITTE D THE MATTER BACK TO THE FILE OF THE AO TO EXAMINE THE FACTS RELATING TO THE TAX DEDUCTION BY THE CLIENTS OF THE ASSESSEE. THE RELEVANT PARAGRAP H NO.5.4 IS EXTRACTED HEREUNDER: 5.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. PROVISIONS OF SECTION 1940 MAKES IT CLEAR THAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF ANY CONTRACT WILL BE LIABLE TO DEDUCT ITA NO.3140/MDS/2016 :- 8 -: TAX AT SOURCE. FROM THE FACTS OF THE CASE, IT IS NO T CLEAR ABOUT THE RELATIONSHIP OF THE ASSESSEE WITH THE PUBLIC SECTOR UNDERTAKINGS AND TH E NATURE OF CONTRACT BETWEEN THEM. IT IS ALSO NOT CLEAR WHETHER THE ASSESSEE IS MERELY AC TING AS AN AGENT OF ITS CLIENTS OR HAS UNDERTAKEN THE WAREHOUSING FACILITIES FOR ITS CLIEN TS. FURTHER IT IS NOT REVEALED WHETHER THE CLIENTS OF THE ASSESSEE HAVE DEDUCTED TAX AT SOURCE FOR THE PAYMENT MADE FOR PROVIDING THE WAREHOUSING FACILITY. THEREFORE, WE REMIT THE MATTE R BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER TO EXAMINE ALL THE RELEVANT FACTS AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW & MERIT. 11.0 SINCE THE FACTS INVOLVED FOR THE YEAR UNDER CONSID ERATION ARE SAME, WE REMIT THE MATTER BACK TO THE FILE OF AO TO EXAMI NE ALL THE RELEVANT FACTS REGARDING DEDUCTION OF TAX AT SOURCE BY THE CLIENTS AND DECIDE THE ISSUE AFRESH ON MERITS. 12.0 GROUND NOS.4 TO 4.4 ARE RELATED TO NON-PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND. THE AO FOUND THAT THE ASSESSEE HAS NOT MADE THE PAYMENT OF RS.8,16,531/- BEING EMPLOYEES C ONTRIBUTION TOWARDS PROVIDENT FUND BEFORE THE DUE DATE OF REMITTANCES A S REQUIRED U/S.2(24)(10) OF THE ACT. THEREFORE, THE AO MADE A DDITION AS PER CLAUSE (VA) OF SEC.36(1) OF THE INCOME TAX ACT. 13.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) DELETED THE AD DITION PLACING RELIANCE ON THE HONBLE JURISDICTIONAL HIGH COURT ORDER AND THE APEX COURTS ORDERS. FOR READY REFERENCE, WE EXTRACT THE RELEVA NT PART OF LD.CIT(A) ORDER FOR THE SAKE OF CONVENIENCE: 27. I HAVE CAREFULLY PERUSED THE FACTS IN ISSUE, SU BMISSIONS MADE BY THE APPELLANT AND MATERIAL ON RECORD. AS REGARDS THE DISALLOWANCE OF DELAYED PAYMENT ON EMPLOYEES CONTRIBUTION TO PF IS CONCERNED, IT WILL SERVE USEF UL PURPOSE TO REFER TO CIRCULAR NO.22/2015 DATED 17.12.2015 IN F.NO. 279/MISC./140/ 2015-ITJ. IT HAS BEEN CLARIFIED THEREIN, THAT THE APEX COURT DECISION IN THE CASE OF CIT V. ALOM EXTR USIONS LTD 185 TAXMAN 416 HAS BEEN ACCEPTED WITH REGARD TO THE EMPLOYERS CONTRIBUTION TO THE PF FUND OR SUPERANNUATION FUND OR GRATUITY FUND IF DEPOSITED ON OR BEFORE THE DUE DATE. NO DISALLOWANCE COULD BE MADE U/S.43B OF THE ACT. IT HAS ALSO BEEN CLARIFIED THAT THE CIRCULAR DOES NOT APPLY TO CLAIM OF DEDUCTION RELATING TO EMPLOYEES CONTRIBUTION TO WE LFARE FUNDS GOVERNED BY S.36(I)(VA). HOWEVER, IN VIEW OF THE JURISDICTIONAL HIGH COURTS DECISION DATED 24.7.2015 IN THE CASE OF ITA NO.3140/MDS/2016 :- 9 -: CIT VS. INDUSTRIAL SECURITY AND INTELLIGENCE INDIA (P) LTD IN TC (A) NO.585 & 586 OF 2015 AND MP NO.1 OF 2015, IT HAS BEEN HELD THEREIN PLACI NG RELIANCE ON THE DELHI HIGH COURTS DECISION IN THE CASE OF AIMIL LTD 321 ITR 508, THAT IF THE ASSESSEE HAD DEPOSITED EMPLOYEES CONTRIBUTION TOWARDS PF AND ESI AFTER THE DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT, BUT BEFORE THE DUE DATE OF FILING OF THE RETURN UND ER THE INCOME TAX ACT, NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS U/S.43B AS AMENDED BY FINANCE ACT 2003. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE HIGH COURT, THE PLEA OF THE APPELLANT IS ALLOWED. THIS GROUND OF APPEAL IS ALLO WED. 14.0 WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE LD.CIT(A) DELETED THE ADDITION PLACING RELIANC E ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT V. INDUSTRIAL SECURITY AND INTELLIGENCE INDIA PVT. LTD. THE ASSE SSEE REMITTED THE CONTRIBUTION BEFORE THE DUE DATE OF THE FILING OF R ETURN UNDER THE INCOME TAX ACT. THE REVENUE HAS NOT BROUGHT ANY OTHER DEC ISION CONTRAVERTING THE DECISION RELIED UPON THE BY THE LD.CIT(A). THE REFORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) AND THE SAM E IS UPHELD. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( !' . . # $ % ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 23 RD MARCH, 2017. TLN 0 .2$6 76+2 /COPY TO: 1. ,- /APPELLANT 4. # 82 /CIT 2. ./,- /RESPONDENT 5. 69 .2 /DR 3. # 82 ( ) /CIT(A) 6. 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