Shri Kishore Vadilal Pvt.Ltd., Ahmedabad V. The AddlCIT.,Range-4, Ahmedabad

ITA 3199/AHD/2011

• Counselvise Citation: 319920514 RSA 2011
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-02-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: R C SHAH
• Keywords: Non-deduction of tax; Corroborative evidences
• Section: 194C

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , . ! !,'# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A. NO.3199/AHD/2011 ( ! & ! & ! & ! & / / / / ASSESSMENT YEAR : 2008-09) KISHORE VADILAL PVT.LTD. PLOT NO.3, PHASE-I GIDC ESTATE VATVA AHMEDABAD-382 445 ! ! ! ! / VS. THE ADDL. CIT RANGE-4 AHMEDABAD ' '# ./() ./ PAN/GIR NO. : AAACK5882F ( '* / // / APPELLANT ) .. ( +,'*/ RESPONDENT ) '* - '/ APPELLANT BY : SHRI R.C.SHAH +,'* . - ' / RESPONDENT BY : SHRI S.P.TALATI, SR. D.R. !/ . 0#/ // / DATE OF HEARING : 22/02/2012 1 & . 0# / DATE OF PRONOUNCEMENT : 16/04/2012 '2/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-VIII, AHMEDA BAD DATED 18/11/2011 AND THE FOLLOWING GROUND RAISED IS AS U NDER:- 1. THAT THE C.I.T. (APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE OF A SUM OF RS.15,97,755 MADE BY THE A.O. BY INVOKING TH E PROVISIONS OF SEC.40A(IA) OF THE I.T. ACT IN RESPECT OF THE RE-IM BURSEMENT OF VARIOUS EXPENSES PAID TO RISHABH LOGISTICS THOUGH NO TAX WA S DEDUCTIBLE AT SOURCE FROM THE SAME IN VIEW OF THE DECISIONS OF TH E HONOURABLE ITA NO. 3199/AHD/2011 KISHORE VADILAL PVT.LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 2 - TRIBUNAL IN THE CASE OF ITO V/S. DR.VILLMAR SCHWABE INDIA PVT.LTD. REPORTED IN 3 SOT 71 (DEL) WHEREIN THE BOARD CIRCUL AR NO.715 DT.8-8- 1995 WAS ALSO CONSIDERED. IT IS SUBMITTED THAT THE APPELLANT HAD DEDUCTED T.D.S. FROM THE SERVICE CHARGES OF RISHABH LOGISTICS U/S.194C OF THE ACT. IT IS FURTHER SUBMITTED THAT THE I.T. DEPARTMENT HA D ALSO ACTUALLY ISSUED CERTIFICATE FOR NO TAX DEDUCTION TO THE CARGO CARRI ER AND, THEREFORE, ALSO NO TAX WAS LIABLE TO BE DEDUCTED AT SOURCE SIN CE THE REIMBURSEMENT OF THE CHARGES PAYABLE TO THE SAME WAS ALSO CLAIMED . IT IS, THEREFORE, SUBMITTED THAT IN VIEW OF THE FACTS OF THE CASE AND THE DECISION CITED ABOVE, IT BE HELD THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT T.D.S. FROM THE REIMBURSEMENTS AND, THEREFORE, THE ADDITION OF RS.15,97,755 MADE U/S.40A(IA) BE DELETED. 2. FACTS IN BRIEF AND THE ISSUE INVOLVED IN THIS C ASE AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3 ) OF THE I.T. ACT, 1961 DATED 14/12/2010 WERE THAT ON EXAMINATION O F THE DETAILS OF EXPORT EXPENSES IT WAS NOTED BY THE ASSESSING OFFIC ER THAT A PAYMENT OF RS.18,91,750/- WAS MADE TO RISHAB LOGISTICS, AHMEDA BAD. OUT OF THE SAID AMOUNT, THE ASSESSEE HAS DEDUCTED TDS ONLY ON AN AMOUNT OF RS.2,93,995/-. THE ASSESSING OFFICER HAS THEREFORE NOTED THAT NO TDS WAS DEDUCTED ON THE REMAINING AMOUNT OF RS.15,97,75 5/-. THE ASSESSEE HAS SUBMITTED A BREAK-UP OF EXPORT EXPENSES AND ON THAT BASIS IT WAS FOUND THAT SOME OF THE AMOUNT WAS CATEGORIZED AS C LEARING CHARGES AND OTHERS WERE CATEGORIZED AS RE-IMBURSEMENT OF EXPEN SES. ACCORDING TO ASSESSING OFFICER, THERE WAS NO DIFFERENCE BETWEEN THE SAID TWO EXPENSES AND THE ASSESSEE WAS REQUIRED TO DEDUCT THE TAX ON THE ENTIRE AMOUNT. IN THIS CONNECTION, THE ASSESSEES EXPLANATION WAS AS UNDER:- ITA NO. 3199/AHD/2011 KISHORE VADILAL PVT.LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 3 - AS REGARDS THE PAYMENTS MADE TO RUSHABH LOGISTICS AND THE TDS THEREFROM, WE HAVE FURTHER TO CLARIFY THAT THE PAYE E HAD FURNISHED THE COPY OF THE NO TAX DEDUCTION CERTIFICATE FROM T HE COMPETENT A.O., AND THEREFORE, NO TAX WAS REQUIRED TO BE DEDU CTED AT SOURCE BY THE ASSESSEE IN RESPECT OF VARIOUS PAYMENTS. A COPY OF THE SAID CERTIFICATES HAVE BEEN SUBMITTED TO YOU EARLIER AND THE SAME ARE AGAIN SUBMITTED HEREWITH FOR YOUR READY REFERENCE. THE ASSESSEE HAD DEDUCTED TAX AT SOURCE FROM THE CHARGES FOR THE SERVICES RENDERED BY RUSHABH LOGISTICS. IN VIEW OF THIS, TH ERE IS NO TDS FROM ALL THE PAYMENTS MADE TO THE SAID PARTY BUT TH E SAME IS SUPPORTED BY THE CERTIFICATE ISSUED BY THE I.T. DEP ARTMENT. KINDLY, THEREFORE, NOTE THAT THERE IS NO DEFAULT IN MAKING ANY TDS. AS REGARDS THE LIABILITY TO DEDUCT THE TDS ON THE WHOLE AMOUNT PAID TO RISHABH LOGISTICS, WE HAVE TO CLARIFY THAT RISHABH LOGISTICS IS A CLEARING & FORWARDING AGENT AND THER EFORE, IT CLAIMS THE REIMBURSEMENT OF THE AMOUNT PAID BY IT A S AIR FREIGHT CHARGES, CARRIER CHARGES, CMC CHARGES, CONCOR CHARG ES, GSEC CHARGES TO THE OTHER PARTIES WHO HAD ACTUALLY RENDE RED THE SERVICES IN ADDITION TO ITS CHARGES FOR THE SERVICE S RENDERED BY IT. RISHABH LOGISTICS DOES NOT EARN ANY INCOME OUT OF S UCH REIMBURSEMENTS AS THE ACTUAL EXPENSES ARE CLAIMED B Y IT. THE ASSESSEE HAS DEDUCTED THE DUE TDS FROM THE SERVICE CHARGES LEVIED BY RISHABH LOGISTICS FOR ITS SERVICES BUT NOT FROM THE REIMBURSEMENT OF EXPENSES SINCE THE SAME DO NOT REP RESENT THE AMOUNT PAID FOR CARRYING OUT ANY WORK BY RISHABH LO GISTICS. IN THIS REGARD, WE HAVE TO REQUEST YOU TO REFER TO THE DECISION OF THE HON'BLE DELHI TRIBINAL IN THE CASE OF ITO V DR.WILL MAR SCHWABE INDIA P LTD REPORTED IN 3 SOT 71 (DEL), A COPY OF W HICH IS SUBMITTED HEREWITH FOR YOUR READY REFERENCE. IN TH E SAID DECISION, THE TRIBUNAL HAS ALSO CONSIDERED THE BOARD CIRCULAR NO 715 DATED 8/8/1995 AND HAS MADE IT CLEAR THAT NO TDS IS REQUI RED TO BE DEDUCTED IN THE CASE OF REIMBURSEMENT CLAIMED WHERE THE SAME HAVE BEEN SHOWN SEPARATELY IN THE BILLS RAISED BY T HE PARTY BUT TDS WILL HAVE TO BE DEDUCTED EVEN FROM THE REIMBURS EMENTS IF THE SAME ARE NOT SEPARATELY SHOWN AND A COMPOSITE AMOUN T HAS BEEN CHARGED IN THE BILL. IN THE CASE OF THE ASSESSEE, AMOUNTS OF REIMBURSEMENTS HAVE BEEN SHOWN SEPARATELY AND THERE FORE, NO TAX ITA NO. 3199/AHD/2011 KISHORE VADILAL PVT.LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 4 - IS REQUIRED TO BE DEDUCTED THEREFROM. KINDLY, THER EFORE, NOTE THAT THERE IS NO DEFAULT OF TDS IN THIS REGARD. 2.1. THE ASSESSING OFFICER WAS NOT CONVINCED AND HE LD THAT IN VIEW OF THE BOARDS CIRCULAR NO.715 DATED 8/8/1995 THE ASS ESSEE WAS REQUIRED TO DEDUCT THE TAX AT SOURCE ON ANY SUM PAID, HENCE REIMBURSEMENT WAS OUT OF THE BILL AMOUNT, THEREFORE LIABLE FOR DEDUCT ION OF TAX AT SOURCE. ACCORDING TO ASSESSING OFFICER, SINCE THE ASSESSEE HAS FAILED TO DEDUCT THE TAX AT SOURCE, HENCE THE PROVISIONS OF SECTION 40(A)(IA) WERE APPLICABLE. RESULTANTLY, DISALLOWANCE OF THE ENTI RE AMOUNT OF RS.15,97,755/- WAS MADE. THE MATTER WAS CARRIED BE FORE THE FIRST APPELLATE AUTHORITY. 3. IN ADDITION TO WHAT WAS STATED TO ASSESSING OFFI CER, THE ASSESSEE HAS FURTHER SUBMITTED BEFORE THE LEARNED CIT(APPEAL S) AS UNDER:- 6. THE SUBMISSION OF THE APPELLANT HAD CREDITED R S.1935480 TO THE ACCOUNT OF RISHABH LOGISTICS COMPRISING OF VARI OUS REIMBURSEMENTS LIKE DOCUMENTATION CHARGES, EXPORT C ARGO HANDLING CHARGES, CONTAINER CONCOUR CHARGES, GCCI C HARGES AIR FREIGHT/OCEAN CHARGES, ETC. AGGREGATING TO RS.16539 73 SPECIFICALLY MENTIONED SEPARATELY IN ITS BILLS AND ITS AGENCY CHARGES AGGREGATING RS.254805+SERVICE TAX OF RS.26702=RS.281507 ON WHICH T.D.S. OF RS.6404 WAS D EDUCTED AT SOURCE AND DULY DEPOSITED. IN FORM NO.16A ISSUED T O THE PARTY, THE TOTAL AMOUNT OF RS.293995 WAS MENTIONED THROUGH ERROR. THE REIMBURSEMENT OF EXPENSES GIVEN TO RISHABH LOGISTIC S IS NOT IN THE NATURE OF ITS INCOME BECAUSE SUCH AMOUNTS WERE PAID BY IT AS PER THE DETAILS SEPARATELY GIVEN IN THE BILLS ALONG WIT H THE SUPPORTING EVIDENCES IT TO OTHER PARTIES AND, HENCE, THE APPEL LANT WAS NOT LIABLE TO DEDUCT ANY TDS FROM RS.1653973 IN VIEW OF THE SPECIFIC PROVISIONS OF SEC.194C THE RELEVANT EXTRACT OF WHIC H IS GIVEN HEREINBELOW: ITA NO. 3199/AHD/2011 KISHORE VADILAL PVT.LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 5 - .. . 6.1. THE PERUSAL OF THE ABOVE CLEARLY SHOWS THAT TDS IS NOT APPLICABLE IN RESPECT OF THE ENTIRE SUM PAYABLE TO THE CONTRACTOR BUT ON INCOME COMPRISED THEREIN ONLY. THE INTENTIO N BEHIND THIS IS THAT THE LAW WANTS TO TAX ONLY INCOME AND NOT THE E NTIRE RECEIPTS AND THE TDS PROVISIONS ARE ONE OF THE MODES OF RECO VERY OF SUCH TAX ONLY. THEREFORE, THE TDS IS MADE APPLICABLE ON LY IN RESPECT OF THE INCOME COMPRISED IN ANY SUM PAYABLE TO THE CONT RACTOR. IN THIS REGARD, WE RELY UPON THE DECISION OF THE HONOU RABLE TRIBUNAL IN THE CASE OF ITO V/S DR.WILLMAR SCHWABE INDIA PVT .LTD. REPORTED IN 3 SOT 71 (DEL) WHEREIN THE BOARD CIRCUL AR NO.715 DT. 8-8-1995 WAS ALSO CONSIDERED. THE A.O. HAS HEAVILY RELIED UPON THE SAID CIRCULAR WITHOUT APPRECIATING THE SUBSTANT IVE PROVISIONS OF SEC. 194C(1) REPRODUCED ABOVE. MOREOVER, THE I.T D EPARTMENT HAD ISSUED CERTIFICATE FOR NON-DEDUCTION OF TAX AT SOURCE IN RESPECT OF FREIGHT AND OTHER CHARGES TO THE CARGO CARRIER. ACCORDINGLY, THE PROVISIONS OF SECTION 40A(IA) CANNOT BE APPLIED TO THE SAME. 3.1. HOWEVER, THE LEARNED CIT(APPEALS) WAS NOT CONV INCED AND HELD THAT THE ASSESSEE WAS DUTY BOUND TO DEDUCT THE TAX ON THE ENTIRE AMOUNT PAID TO RISHABH LOGISTICS AS PER THE PROVISIONS OF SECTION 194C OF THE I.T.ACT. THE ACTION OF THE ASSESSING OFFICER WAS A FFIRMED. 4. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. FR OM THE SIDE OF THE ASSESSEE, LD.AR MR.R.C.SHAH APPEARED AND PLACED REL IANCE ON ITO VS. DR.WILLMAR SCHWABE INDIA (P.) LTD. 3 SOT 71 (DELHI) AND KARNAVATI CO- OP.BANK LTD. VS. DY.CIT 134 ITD 486 (AHD). ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE, LD.SR.DR MR.S.P.TALAT I APPEARED AND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BE LOW. ITA NO. 3199/AHD/2011 KISHORE VADILAL PVT.LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 6 - 4.1. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES , WE HAVE NOTED THAT THE ASSESSEE HAS MADE PAYMENTS TO M/S.RISHABH LOGIS TICS IN RESPECT OF EXPORT EXPENSES. IT IS PERTINENT TO NOTE THAT RIS HABH LOGISTICS IS A CLEARING AND FORWARDING AGENT. IT IS ALSO WORTH TO NOTE AS PER THE COMPILATION FILED BEFORE US SHOWING THE DETAILS OF PAYMENT; THAT THE BILLS RAISED BY RISHABH LOGISTICS HAVE BIFURCATED THE AMO UNT WHICH WAS TO BE REIMBURSED UNDER THE HEAD REIMBURSEMENT AMOUNTS (A ) AND IN THE OTHER COLUMN OTHER AMOUNTS (B). ON THE BASIS OF THOSE DETAILS, THE ASSESSEE HAS ALSO PLACED THE BILL-WISE DETAILS THRO UGH WHICH IT WAS DEMONSTRATED THAT THE REIMBURSEMENT WAS IN RESPECT OF DOCUMENTATION CHARGES, EXPORT CARGO HANDLING CHARGES, CONTAINER C ONCOUR CHARGES, GCCI CHARGES AIR FREIGHT/OCEAN CHARGES, ETC. ON THE OTH ER HAND, THE ASSESSEE HAS ALSO FURNISHED THE DETAILS OF AGENCY CHARGES ON WHICH THE TDS WAS STATED TO BE DEDUCTED. IN THIS REGARD, THE ASSESSE E HAS EXPLAINED THE NATURE OF SERVICES RENDERED BY M/S.RISHABH LOGISTIC S AND VEHEMENTLY ARGUED THAT THE REIMBURSEMENT OF AMOUNT WAS NOT THE PAYMENT MADE PERTAINING TO THE SERVICES RENDERED. IT HAS ALSO BEEN ARGUED THAT AS PER THE PROVISIONS OF SECTION 194C, ANY PERSON RESPONSI BLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IS RE QUIRED TO DEDUCT TDS. MEANING THEREBY THE TERM ANY SUM IS TO BE READ AL ONG WITH THE PHRASE CARRYING OUT ANY WORK. FURTHER TO ELABORATE FOR CARRYING OUT ANY WORK IF ANY SUM IS PAID, THEN THE PERSON RESPONSIBLE FO R MAKING SUCH PAYMENT IS REQUIRED TO DEDUCT THE TAX AT SOURCE. AS FAR AS THE QUESTION OF RE-IMBURSEMENT OF EXPENSE IS CONCERNED, A VIEW HAS ALREADY BEEN EXPRESSED IN THE CASE OF KARNAVATI CO-OP.BANK LTD.( SUPRA)[AHMEDABAD ITA NO. 3199/AHD/2011 KISHORE VADILAL PVT.LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 7 - BOTH OF US ARE THE SIGNATORY] AND HELD THAT WHERE T HE PAYMENT WAS TOWARDS RE-IMBURSEMENT OF EXPENSES, THEN THE PAYEE IS NOT REQUIRED TO DEDUCT THE TAX AT SOURCE ON PAYMENT OF REIMBURSEMEN T. WE HAVE ALSO PERUSED THE ORDER OF DR.WILLMAR SCHWABE INDIA (P.) LTD.(SUPRA), WHEREIN THE CBDT CIRCULAR NO.715 DATED 08/08/1995 HAS BEEN DISCUSSED AND IT WAS HELD THAT THE SAID CIRCULAR WOULD BE APPLICABLE ONLY IN THE CASES WHERE BILLS ARE RAISED FOR THE GROSS AMOUNT INCLUSI VE OF PROFESSIONAL FEES AS WELL AS REIMBURSEMENT OF ACTUAL EXPENSES AND THA T NO SEPARATE BILLS WERE RAISED FOR REIMBURSEMENT OF ACTUAL EXPENSES AN D THAT THE SEGREGATION OF THE TWO DISTINCT AMOUNT WAS NOT VISI BLE FROM THE BILLS. THESE TWO DECISIONS THUS SQUARELY COVERED THE ISSUE IN HAND IN FAVOUR OF THE ASSESSEE. SINCE THE ASSESSEE HAS SEGREGATED TH E AMOUNTS FOR WHICH REIMBURSEMENT WAS CLAIMED AND THE AMOUNTS FOR WHICH THE SERVICE CHARGES WERE CLAIMED, THEN WE CAN HOLD THAT THE ASS ESSEE HAS RIGHTLY DEDUCTED THE TAX ONLY ON THAT AMOUNT WHICH WAS COV ERED UNDER THE PROVISIONS OF SECTION 194C OF THE I.T.ACT. THE ADM ITTED FACTUAL POSITION IS THAT THE ASSESSEE WAS AWARE ABOUT ITS LEGAL RES PONSIBILITY TO DEDUCT THE TDS ON THE SERVICE CHARGES, HENCE ADMITTEDLY DEDUCT ED THE TAX ON THE SAID AMOUNT OF RS.2,93,995/-, AS NOTED BY THE ASSES SING OFFICER. WE THEREFORE HOLD THAT FOR REST OF THE AMOUNT WHICH WA S NOTHING BUT PAYMENT OF REIMBURSEMENT, THE ASSESSEE WAS NOT UNDER LEGAL OBLIGATION TO DEDUCT THE TAX AT SOURCE. WE THEREFORE HOLD THAT THE PROV ISIONS OF SECTION 40(A)(IA) OF THE I.T.ACT WERE WRONGLY INVOKED IN TH E PRESENT SET OF FACTS AND CIRCUMSTANCES OF THE CASE, HENCE WE HEREBY DIRE CT THE ASSESSING OFFICER NOT TO MAKE THE DISALLOWANCE OF THE SAID EX PENSES. RESULTANTLY, GROUND IS ALLOWED. ITA NO. 3199/AHD/2011 KISHORE VADILAL PVT.LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 8 - 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. SD/- SD/- ( . ! ! ) ( ) '# ( A. MOHAN ALANKAMONY ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIA L MEMBER AHMEDABAD; DATED 16/ 04 /2012 30..!, .!../ T.C. NAIR, SR. PS '2 . +4 5'4& '2 . +4 5'4& '2 . +4 5'4& '2 . +4 5'4&/ COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-VIII, AHMEDABAD 5. 49: +! , , / DR, ITAT, AHMEDABAD 6. :;