TIGERS WORLDWIDE LOGISTICS PVT LTD, MUMBAI V. DCIT (3)(3)(1) , MUMBAI

ITA 3286/MUM/2022

AI Insights

The case involves Tigers Worldwide Logistics Pvt. Ltd., which appealed against the orders of the Commissioner of Income-tax (Appeals) concerning disallowances made under section 40(a)(i) of the Income-tax Act, 1961, for the assessment years 2001-02 and 2008-09. The primary issues revolved around the disallowance of management fees and a 7% addition on total freight payments, which the assessee argued were already included in the remittances and subjected to TDS in previous years. The Tribunal examined the applicability of the double tax avoidance agreement and the provisions of the Act, leading to a decision to restore certain issues for fresh examination and to allow some deductions claimed by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123408 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 05-03-2023
• Assessment Year: 2001-2002
• Appeal Filed On: 28-12-2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Non-deduction of tax; TDS; Set aside
• Section: 143(3); 194C; 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 3286/MUM/2022 Assessment Year: 2001-02 & ITA No. 3287/MUM/2022 Assessment Year: 2008-09 Tigers Worldwide Logistics Pvt. Ltd., 301, Sangeet Plaza, Marol Naka, Marol, Andheri East, Mumbai-400059. Vs. DCIT (3)(3)(1), Aayakar Bhavan, M.K. Road, New Marine Lines, Mumbai-400020 PAN No. AAACK 4578 L Appellant Respondent Assessee by : Mr. Haridas Bhat, AR Revenue by : Mr. S.K. Jain, DR Date of Hearing : 06/03/2023 Date of pronouncement : 30/03/2023 ORDER PER OM PRAKASH KANT, AM These two appeals by the assessee are directed against two separate orders, both dated 31.10.2022 passed by the Ld. Commissioner of Income-tax – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2001-02 and 2008-09. The facts and circumstances being identical appeals were heard together consolidated order for convenience. 2. Firstly, we take the appeal of the assessee for assessment year 2001-02. The relevant grounds raised by the assessee are reproduced as under: “1. On the facts and circumstances of the the CIT (Appeals) erred in confirming the addition of Rs. 23,25,585/-, being disallowance made u/s 40(a)(i) of the Act 2. On the facts and circumstances of the case and in law the CIT(A) failed to appreciate that a) The amount of Rs. 23,2 fees paid to Kamino LTD, UK without deduction of TDS b) With regards to the income element from the parent company Kamino Ltd, UK, the income element is already added to the income of the assessed by way of disallowed of 7% of the gross debits. c) Thus, 23,25,585/ Rs.3,43,48,443/ disallowing the same again would result in double taxation. 3. The appellant, therefore, prays that the disallowance of Rs. 23,25,585 3. Briefly stated, facts of the case are that the assessee is private limited company incorporated in India. The 51 percent of the equity share capital of the assessee is held by London”. The group companies Enterprises, used to sen Tigers Worldwide Logistics Pvt. Ltd. 09. The facts and circumstances being identical appeals were heard together and disposed off by way of this consolidated order for convenience. Firstly, we take the appeal of the assessee for assessment year 02. The relevant grounds raised by the assessee are reproduced as under: 1. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming the addition of Rs. , being disallowance made u/s 40(a)(i) of the Act 2. On the facts and circumstances of the case and in law the CIT(A) failed to appreciate that a) The amount of Rs. 23,25,585/- is towards management fees paid to Kamino LTD, UK without deduction of TDS b) With regards to the income element from the parent company Kamino Ltd, UK, the income element is already added to the income of the assessed by way of disallowed of the gross debits. c) Thus, 23,25,585/- already forming part of Rs.3,43,48,443/- on which 7% is already added once further disallowing the same again would result in double taxation. 3. The appellant, therefore, prays that the disallowance of Rs. 23,25,585/-may please be deleted.” Briefly stated, facts of the case are that the assessee is private limited company incorporated in India. The 51 percent of the equity share capital of the assessee is held by he group companies of the assessee i.e. Associated used to send shipments by air/sea to India by making Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 2 09. The facts and circumstances being identical, these and disposed off by way of this Firstly, we take the appeal of the assessee for assessment year 02. The relevant grounds raised by the assessee are case, and in Law, the CIT (Appeals) erred in confirming the addition of Rs. , being disallowance made u/s 40(a)(i) of the Act 2. On the facts and circumstances of the case and in law the is towards management fees paid to Kamino LTD, UK without deduction of TDS b) With regards to the income element from the parent company Kamino Ltd, UK, the income element is already added to the income of the assessed by way of disallowed of already forming part of on which 7% is already added once further disallowing the same again would result in double taxation. 3. The appellant, therefore, prays that the disallowance of Briefly stated, facts of the case are that the assessee is a private limited company incorporated in India. The 51 percent of the equity share capital of the assessee is held by “Kamino Ltd. of the assessee i.e. Associated shipments by air/sea to India by making payment of freight and other charges in the country of the origin and the cost for door to air shipment. The assessee company to receive those shipments and collecting the freight and other charges from those customers/parties. This freight has in foreign currency Associated concern from time to time. 3.1 For the year under consideration, the assessee filed return of income on 22.10.2001 declaring loss of Rs.19,921/ assessment u/s 143(3) of the Income Act’) was passed on 29.03.2004 by the Assessing Officer assessing total income at Rs.3,90,10,956/ Ld. CIT(A) allowed part relief. On further appeal, the Income Appellate Tribunal (ITAT) vide order dated 30.11.2009 restored some of the issues to the file of the Assessing Officer. The i restored included disallowance u/s 40a(i) of the Act for non deduction of tax at source u/s 195 of the Act on the remittances made to the related parties and others. The Tribunal restored the issue to the file of the Assessing Officer for examining t of the remittance in view of double tax avoidance agreement between India and United Kingdom and other countries. 3.2 In the assessment order passed by the Assessing Officer in compliance to the direction of the ITAT Tigers Worldwide Logistics Pvt. Ltd. payment of freight and other charges in the country of the origin and the cost for door to air shipment. The assessee company those shipments and deliver the same to custom and collecting the freight and other charges from those customers/parties. This freight has been remitted by the assessee in foreign currency to M/s Kamino Ltd. London and other from time to time. For the year under consideration, the assessee filed return of income on 22.10.2001 declaring loss of Rs.19,921/ assessment u/s 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was passed on 29.03.2004 by the Assessing Officer assessing total income at Rs.3,90,10,956/-. On appeal by the assessee Ld. CIT(A) allowed part relief. On further appeal, the Income Appellate Tribunal (ITAT) vide order dated 30.11.2009 restored some of the issues to the file of the Assessing Officer. The i restored included disallowance u/s 40a(i) of the Act for non deduction of tax at source u/s 195 of the Act on the remittances made to the related parties and others. The Tribunal restored the issue to the file of the Assessing Officer for examining t of the remittance in view of double tax avoidance agreement between India and United Kingdom and other countries. In the assessment order passed by the Assessing Officer in compliance to the direction of the ITAT, he disallowed 7% Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 3 payment of freight and other charges in the country of the origin and the cost for door to air shipment. The assessee company used customerin India and collecting the freight and other charges from those been remitted by the assessee Kamino Ltd. London and other For the year under consideration, the assessee filed return of income on 22.10.2001 declaring loss of Rs.19,921/-. The tax Act, 1961 (in short ‘the Act’) was passed on 29.03.2004 by the Assessing Officer assessing by the assessee, the Ld. CIT(A) allowed part relief. On further appeal, the Income-tax Appellate Tribunal (ITAT) vide order dated 30.11.2009 restored some of the issues to the file of the Assessing Officer. The issues restored included disallowance u/s 40a(i) of the Act for non- deduction of tax at source u/s 195 of the Act on the remittances made to the related parties and others. The Tribunal restored the issue to the file of the Assessing Officer for examining the taxability of the remittance in view of double tax avoidance agreement (DTAA) between India and United Kingdom and other countries. In the assessment order passed by the Assessing Officer in he disallowed 7% of the gross remittance made by the assessee income component element embedded in remittances liable for deduction of tax at source u/s 195 of the Act and due to non-deduction of tax that extent was held as disallo the management fee paid of Rs.23,35,585/ United Kingdom, it was submitted by the assessee amount was included in the remittances, for which Officer already disallowed income element involved therein and therefore, separate disallowance of Rs.23,25,585/ fee would amount to double disallowance. Secondly, it was submitted that the TDS was duly deducted and paid in su assessment year i.e. AY 2002 allowed in that year. However, no documentary evidence in support of submissions were filed by the assessee before the Assessing Officer and therefore, he sustained the disallowance of fee of Rs.23,25,585/- the tax at source u/s 195 of the Act. 4. On further appeal, the Ld. CIT(A) upheld the disallowance of 7% of the remittance for non disallowance of Rs.23,25,585/ 5. Before us, the assessee is in second round of litigation. T assessee is aggrieved only with the disallowance of Rs.23,25,585/ Tigers Worldwide Logistics Pvt. Ltd. gross remittance made by the assessee, considering the 7% as element embedded in remittances liable for deduction of tax at source u/s 195 of the Act and due to deduction of tax at source on the said component was held as disallowable u/s 40a(i) of the Act. Rega the management fee paid of Rs.23,35,585/- to M/s Kamino Ltd. it was submitted by the assessee that included in the remittances, for which Officer already disallowed income element involved therein and therefore, separate disallowance of Rs.23,25,585/- as management fee would amount to double disallowance. Secondly, it was submitted that the TDS was duly deducted and paid in su assessment year i.e. AY 2002-03 and therefore, same should be allowed in that year. However, no documentary evidence in support of submissions were filed by the assessee before the Assessing Officer and therefore, he sustained the disallowance of - u/s 40a(i) of the Act due to non the tax at source u/s 195 of the Act. On further appeal, the Ld. CIT(A) upheld the disallowance of 7% of the remittance for non-deduction of tax at source as well as wance of Rs.23,25,585/- towards management fee. the assessee is in second round of litigation. T assessee is aggrieved only with the disallowance of Rs.23,25,585/ Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 4 considering the 7% as element embedded in remittances, which was liable for deduction of tax at source u/s 195 of the Act and due to at source on the said component remittance to wable u/s 40a(i) of the Act. Regarding to M/s Kamino Ltd. that firstly, said included in the remittances, for which the Assessing Officer already disallowed income element involved therein and as management fee would amount to double disallowance. Secondly, it was submitted that the TDS was duly deducted and paid in subsequent 03 and therefore, same should be allowed in that year. However, no documentary evidence in support of submissions were filed by the assessee before the Assessing Officer and therefore, he sustained the disallowance of management u/s 40a(i) of the Act due to non-deduction of On further appeal, the Ld. CIT(A) upheld the disallowance of deduction of tax at source as well as towards management fee. the assessee is in second round of litigation. The assessee is aggrieved only with the disallowance of Rs.23,25,585/- for management fee challenged the disallowance mainly on the two reasons. Firstly, the amount disallowed already included Secondly, tax was also deducted in subsequent assessment year. 6. We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. Before us, the assessee has only challenged disallowance of Rs.23,25,585/ was paid to “M/s Ka The Ld. CIT(A) upheld the disallowance observing as under: “6.3 Disallowance of Rs.23,25,585/ Management The appellant, though not in the grounds of appeal, in its submissions, has submitted that the disallowance towards management fees u/s.40(a)(i) for non sec. 195 am since the income element on the remittances made to the parent company is already added to the income and disallowed the same u/s.40(a)(ia). The submission of the appellant is carefully considered. Based on the s made by the appellant, the AO in Para 2.1 and 2.2 of the assessment order has averred that the appellant has made the management fees in terms of duly executed agreements and it was mandatorily paid to the parent company. The appellant further su such Management fees was deducted during the F.Y.2001 02 relevant to the A.Y 2002 made in F.Y 2001 dated 06.09.2004 (as seen in para 2.2 of the assessm order) also pleaded before the AO that the such deduction should be allowed for the A.Y 2002 made, in F.Y 1999 tax us. 195 and the sum of Rs.23.25,585/ total Income. From Tigers Worldwide Logistics Pvt. Ltd. for management fee. In the ground raised, the assessee has sallowance mainly on the two reasons. Firstly, the already included in the total remittances made. Secondly, tax was also deducted in subsequent assessment year. We have heard rival submission of the parties on the issue d perused the relevant material on record. Before us, the assessee has only challenged disallowance of Rs.23,25,585/ M/s Kamino Ltd. London” towards management fees. The Ld. CIT(A) upheld the disallowance observing as under: Disallowance of Rs.23,25,585/-, u/s.40(a)(i) towards Management Fees The appellant, though not in the grounds of appeal, in its submissions, has submitted that the disallowance towards management fees u/s.40(a)(i) for non-deduction of tax under sec. 195 amounts to double taxation of the same amount since the income element on the remittances made to the parent company is already added to the income and disallowed the same u/s.40(a)(ia). The submission of the appellant is carefully considered. Based on the s made by the appellant, the AO in Para 2.1 and 2.2 of the assessment order has averred that the appellant has made the management fees in terms of duly executed agreements and it was mandatorily paid to the parent company. The appellant further submitted before the AO that the TDS on such Management fees was deducted during the F.Y.2001 02 relevant to the A.Y 2002-03 and remittances were also made in F.Y 2001-02. The appellant vide its submission dated 06.09.2004 (as seen in para 2.2 of the assessm order) also pleaded before the AO that the such deduction should be allowed for the A.Y 2002-03. Since no TDS was made, in F.Y 1999-00, the appellant was liable to deduct the tax us. 195 and the sum of Rs.23.25,585/-was added to the total Income. From the above facts, it emanates that the Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 5 the assessee has sallowance mainly on the two reasons. Firstly, the in the total remittances made. Secondly, tax was also deducted in subsequent assessment year. We have heard rival submission of the parties on the issue-in- d perused the relevant material on record. Before us, the assessee has only challenged disallowance of Rs.23,25,585/- which towards management fees. The Ld. CIT(A) upheld the disallowance observing as under: , u/s.40(a)(i) towards The appellant, though not in the grounds of appeal, in its submissions, has submitted that the disallowance towards deduction of tax under ounts to double taxation of the same amount since the income element on the remittances made to the parent company is already added to the income and disallowed the same u/s.40(a)(ia). The submission of the appellant is carefully considered. Based on the submission made by the appellant, the AO in Para 2.1 and 2.2 of the assessment order has averred that the appellant has made the management fees in terms of duly executed agreements and it was mandatorily paid to the parent company. The bmitted before the AO that the TDS on such Management fees was deducted during the F.Y.2001- 03 and remittances were also 02. The appellant vide its submission dated 06.09.2004 (as seen in para 2.2 of the assessment order) also pleaded before the AO that the such deduction 03. Since no TDS was 00, the appellant was liable to deduct the was added to the the above facts, it emanates that the management fees are totally different from the issue of remittances made towards freight charges made to parent company and other group companies/associates. The appellant company itself has deducted the TDS on management fee in the subsequent financial years and hence there no question of non 2000-01 relevant to the AY 2001 justified in adding the management fees of Rs.23,25.585/ on account of the facts admitted assessment proceedings. The appellant submitted that TDS is not liable to be deducted on those remittances towards sea freight charges as per Circular No.723 dated19/9/95. The copy of the Circulars reproduced as under: SECTION 172 SHIPPINGBUSINESS OF NON 913. Tax deduction at source from payment made to foreign shipping companies 1. Representations have been received regarding the scope ofsections 172, 194C and 195 of the Income connection with tax ded made to the foreign shipping companies or their agents. 2. Section 172 deals with shipping business of non residentsSection 172(1) provides the mode of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non livestock, mail or goods shipped at a port in India. An analysis of the provisions of section 172 would show that these provisions have to be applied to every journey a ship, belonging to or chartered by any port in India. Section 172 is a self levy and recovery of the tax, ship and requires the filing of the return within a maximum time of thirty days from the date of departure 3. The provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not Tigers Worldwide Logistics Pvt. Ltd. management fees are totally different from the issue of remittances made towards freight charges made to parent company and other group companies/associates. The appellant company itself has deducted the TDS on ent fee in the subsequent financial years and hence there no question of non-deduction of TDS for the FY 01 relevant to the AY 2001-02. Hence, the AO was fully justified in adding the management fees of Rs.23,25.585/ on account of the facts admitted by the appellant during the assessment proceedings. The appellant submitted that TDS is not liable to be deducted on those remittances towards sea freight charges as per Circular No.723 dated19/9/95. The copy of the Circulars reproduced as under: 72 SHIPPINGBUSINESS OF NON-RESIDENTS 913. Tax deduction at source from payment made to foreign shipping companies 1. Representations have been received regarding the scope ofsections 172, 194C and 195 of the Income-tax Act, 1961, in connection with tax deduction at source from payments made to the foreign shipping companies or their agents. 2. Section 172 deals with shipping business of non residentsSection 172(1) provides the mode of the levy and recovery of tax in the case of any ship, belonging to or rtered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India. An analysis of the provisions of section 172 would show that these provisions have to be applied to every journey a ship, belonging to or chartered by a non-resident, undertakes from any port in India. Section 172 is a self-contained code for the levy and recovery of the tax, ship-wise, and journeywise, and requires the filing of the return within a maximum time of thirty days from the date of departure of the ship 3. The provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 6 management fees are totally different from the issue of remittances made towards freight charges made to parent company and other group companies/associates. The appellant company itself has deducted the TDS on ent fee in the subsequent financial years and deduction of TDS for the FY 02. Hence, the AO was fully justified in adding the management fees of Rs.23,25.585/- by the appellant during the The appellant submitted that TDS is not liable to be deducted on those remittances towards sea freight charges as per Circular No.723 dated19/9/95. The copy of the Circulars RESIDENTS 913. Tax deduction at source from payment made to foreign 1. Representations have been received regarding the scope tax Act, 1961, in uction at source from payments made to the foreign shipping companies or their agents. 2. Section 172 deals with shipping business of non- residentsSection 172(1) provides the mode of the levy and recovery of tax in the case of any ship, belonging to or resident, which carries passengers, livestock, mail or goods shipped at a port in India. An analysis of the provisions of section 172 would show that these provisions have to be applied to every journey a ship, resident, undertakes from contained code for the wise, and journeywise, and requires the filing of the return within a maximum time of the ship 3. The provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not applicable. The reco voyage undertaken from any port in India by a ship under the provisions of section 172. 4. Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other than railways. person referred to in clauses (a) to () of sub any"resident" (termed as contractor). It is clear from the section that the area of operation of TDS is confined to payments made to any "resident. On 172 operates in the area of computation of profits from shipping business of non overlapping in the areas of operation of these sections. 5. There would, however, be cases where payments are made to shi charterers for carriage of passengers etc., shipped at a port in India. Since, the agent acts on behalf of the non ship-owner or charterer, he steps into the shoes of the principal. Accordingly, provisio and those of sections 194C and 195 will not apply. Circular: No. 723, dated 19 As it can be seen from the above, this circular is applicable to foreign shipping companies which is governed by Sec.172 of the IT Act, 196 appellant's case. Hence this ground is dismissed. 6.1 Before us, the addition has not been challenged either as income not taxable under the double tax avoidance agreement or under the provisions of the Incom which this addition is challenge amount already included in the remittances made by the assessee and for which 7% of the remittance amount income element, which has been disall deduction of tax at source u/s 195 of the Act and therefore, no Tigers Worldwide Logistics Pvt. Ltd. applicable. The recovery of tax is to be regulated, for a voyage undertaken from any port in India by a ship under the provisions of section 172. 4. Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other than railways. This section applies to payments made by a person referred to in clauses (a) to () of sub-section (1) to any"resident" (termed as contractor). It is clear from the section that the area of operation of TDS is confined to payments made to any "resident. On the other hand, section 172 operates in the area of computation of profits from shipping business of non-residents. Thus, there is no overlapping in the areas of operation of these sections. 5. There would, however, be cases where payments are made to shipping agents of non-resident ship charterers for carriage of passengers etc., shipped at a port Since, the agent acts on behalf of the non owner or charterer, he steps into the shoes of the Accordingly, provisions of section 172 shall apply and those of sections 194C and 195 will not apply. Circular: No. 723, dated 19-9-1995. As it can be seen from the above, this circular is applicable to foreign shipping companies which is governed by Sec.172 of the IT Act, 1961. Hence the circular is not applicable to the appellant's case. Hence this ground is dismissed.” Before us, the addition has not been challenged either as taxable under the double tax avoidance agreement or under the provisions of the Income-tax Act. The only ground on which this addition is challenged by the assessee is that this amount already included in the remittances made by the assessee of the remittance amount has been treated as which has been disallowed u/s 40a(i) for non deduction of tax at source u/s 195 of the Act and therefore, no Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 7 very of tax is to be regulated, for a voyage undertaken from any port in India by a ship under 4. Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other This section applies to payments made by a section (1) to any"resident" (termed as contractor). It is clear from the section that the area of operation of TDS is confined to the other hand, section 172 operates in the area of computation of profits from residents. Thus, there is no overlapping in the areas of operation of these sections. 5. There would, however, be cases where payments are resident ship-owners or charterers for carriage of passengers etc., shipped at a port Since, the agent acts on behalf of the non-resident owner or charterer, he steps into the shoes of the ns of section 172 shall apply and those of sections 194C and 195 will not apply. As it can be seen from the above, this circular is applicable to foreign shipping companies which is governed by Sec.172 of 1. Hence the circular is not applicable to the ” Before us, the addition has not been challenged either as taxable under the double tax avoidance agreement or tax Act. The only ground on by the assessee is that this amount already included in the remittances made by the assessee has been treated as owed u/s 40a(i) for non- deduction of tax at source u/s 195 of the Act and therefore, no separate disallowance is called for. In our opinion, the management fee paid is different in character from the remittances made for air/freight sea payments/reimbursem treated at par with the remittances in which only 7% amount has been accepted by the Income The assessee has not challenged that whole of the management fee was not liable for tax in the hands we do not find any error in the order of the Ld. CIT(A) in upholding the disallowance. However, if the amount is also included in the remittance and 7% of the said has been tax tax at source, then th corresponding amount may have been held as disallowable. source on the management fee and paid in subsequent year then assessee may claim the deduction in subsequent year as per provisions of the law. accordingly allowed partly for 7. Now, we take up appeal of the assessee for assessment year 2008-09. The relevant grounds raised by the assessee are reproduced as under: “GROUND NO I 1. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming the addition of 7% on total freight payment of R$. Put 29,58,49,113/ Tigers Worldwide Logistics Pvt. Ltd. separate disallowance is called for. In our opinion, the management fee paid is different in character from the remittances made for air/freight sea payments/reimbursement. Therefore, it treated at par with the remittances in which only 7% amount has been accepted by the Income-tax Authorities as income element. The assessee has not challenged that whole of the management fee liable for tax in the hands of the recipients and therefore, we do not find any error in the order of the Ld. CIT(A) in upholding the disallowance. However, if the amount is also included in the remittance and 7% of the said has been taxed for non then the Assessing Officer may corresponding amount may be reduced from the remittances which have been held as disallowable. Further, if tax has been deducted at source on the management fee and paid in subsequent year then assessee may claim the deduction in subsequent year as per provisions of the law. The ground of the appeal of the assessee is accordingly allowed partly for statistical purposes. Now, we take up appeal of the assessee for assessment year 09. The relevant grounds raised by the assessee are reproduced as under: GROUND NO I 1. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming the addition of 7% on total freight payment of R$. Put 29,58,49,113/- instead of Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 8 separate disallowance is called for. In our opinion, the management fee paid is different in character from the remittances made for ent. Therefore, it cannot be treated at par with the remittances in which only 7% amount has tax Authorities as income element. The assessee has not challenged that whole of the management fee of the recipients and therefore, we do not find any error in the order of the Ld. CIT(A) in upholding the disallowance. However, if the amount is also included in the for non-deduction of may verify and from the remittances which Further, if tax has been deducted at source on the management fee and paid in subsequent year then assessee may claim the deduction in subsequent year as per The ground of the appeal of the assessee is Now, we take up appeal of the assessee for assessment year 09. The relevant grounds raised by the assessee are 1. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming the addition of 7% on instead of 7% of Rs. 1,30,77,020/ party. 2. On the facts and the CIT(A) failed to appreciate that the tax Audit report of the Assessed where the payment to the related parties is listed U/s40A(2)(b). This aspect confirms the business connection of the Assessed. Therefore, the exp Rs. 82,00,048/ to Holding company Kamino Ltd towards freight and Rs. 48,76,972/ does qualify for the business connections. 3. The appellant, therefore, prays that the disallowance of 7% of Rs. 1.30.77.020/ amounting to Rs. 9,15,391/ balance be deleted. GROUND NO I 1. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming the disallowance of provision for sales commission U/s43B of 2. On the facts and circumstances of the case and in law the CIT(A) failed to appreciate that a Sales incentive is a regular feature and provisions are made at the end ofthe year as a usual practice. b) Sales incentive cannot be covered U/s43B of 3. The appellant, therefore, prays that the disallowance of Provision for sales commission may please be allowed. 8. The First ground relates to addition of 7% confirmed by the Ld. CIT(A) on freight payment of Rs.29,58,49,113/-. Bu should have been restricted to 7% remittances made to the related parties Tribunal in assessment year 2001 Tigers Worldwide Logistics Pvt. Ltd. 7% of Rs. 1,30,77,020/- payment made to theRelated 2. On the facts and circumstances of the case and in law the CIT(A) failed to appreciate that the tax Audit report of the Assessed where the payment to the related parties is listed U/s40A(2)(b). This aspect confirms the business connection of the Assessed. Therefore, the expenses of Rs. Rs. 82,00,048/ to Holding company Kamino Ltd towards freight and Rs. 48,76,972/- towards management fees does qualify for the business connections. 3. The appellant, therefore, prays that the disallowance of 7% of Rs. 1.30.77.020/- shown in Tax Audit Report amounting to Rs. 9,15,391/-may please be made and balance be deleted. GROUND NO II 1. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming the disallowance of provision for sales commission U/s43B of the Act. 2. On the facts and circumstances of the case and in law the CIT(A) failed to appreciate that a Sales incentive is a regular feature and provisions are made at the end ofthe year as a usual practice. b) Sales incentive cannot be covered U/s43B of the Act. 3. The appellant, therefore, prays that the disallowance of Provision for sales commission may please be allowed. The First ground relates to addition of 7% confirmed by the Ld. CIT(A) on freight payment of . But according to the assessee disallowance should have been restricted to 7% of Rs.1,30,77,020/ made to the related parties only. We find that the Tribunal in assessment year 2001-02 had set aside the issue of Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 9 payment made to theRelated circumstances of the case and in law the CIT(A) failed to appreciate that the tax Audit report of the Assessed where the payment to the related parties is listed U/s40A(2)(b). This aspect confirms the business enses of Rs. Rs. 82,00,048/ to Holding company Kamino Ltd towards towards management fees 3. The appellant, therefore, prays that the disallowance of x Audit Report may please be made and 1. On the facts and circumstances of the case, and in Law, the CIT (Appeals) erred in confirming the disallowance of 2. On the facts and circumstances of the case and in law a Sales incentive is a regular feature and provisions are the Act. 3. The appellant, therefore, prays that the disallowance of Provision for sales commission may please be allowed.” The First ground relates to addition of 7% of remittances confirmed by the Ld. CIT(A) on freight payment of according to the assessee disallowance 77,020/-, which was . We find that the set aside the issue of examining the taxability therein under the double tax avoidance agreement and provisions of the Act.We find that in assessment year 2001 assessee has not challenged the addition of 7% on the freight payment u/s 40a(i) o u/s 195 of the Act. The only dispute in the year under consideration is that addition @ 7% should have been restricted the payments to related parties only and it should not have been extended to the total fr assessee. In our opinion, i. Whether remittances to other parties are pure reimbursement or any profit element is involved. If profit element is there, of the tax at source. ii. Whether the remittances to other parties include sea freight remittances, which already stand excluded from TDS under provision of section 195 of the Act iii. Whether any tax was already deducted by th on the remittances made to other parties. 8.1 We find that the Tribunal in assessment year 2007 recorded the fact of the remittances made to the group concern as well as other and the issue was restored back for verification. The Tigers Worldwide Logistics Pvt. Ltd. examining the taxability of remittances and profit element involved therein under the double tax avoidance agreement and provisions of e find that in assessment year 2001-02 assessee has not challenged the addition of 7% on the freight payment u/s 40a(i) of the Act for non-deduction of tax at source u/s 195 of the Act. The only dispute in the year under consideration is that addition @ 7% should have been restricted related parties only and it should not have been extended to the total freight payment of Rs.29,58,49, assessee. In our opinion, following issues need to be Whether remittances to other parties are pure reimbursement or any profit element is involved. If profit element is there, then same would be liable for deduction of the tax at source. Whether the remittances to other parties include sea freight remittances, which already stand excluded from TDS under provision of section 195 of the Act Whether any tax was already deducted by th on the remittances made to other parties. We find that the Tribunal in assessment year 2007 recorded the fact of the remittances made to the group concern as well as other and the issue was restored back for verification. The Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 10 of remittances and profit element involved therein under the double tax avoidance agreement and provisions of 02,before us, the assessee has not challenged the addition of 7% on the freight deduction of tax at source u/s 195 of the Act. The only dispute in the year under consideration is that addition @ 7% should have been restricted to related parties only and it should not have been 49,113/- by the following issues need to be examined: Whether remittances to other parties are pure reimbursement or any profit element is involved. If profit same would be liable for deduction Whether the remittances to other parties include sea freight remittances, which already stand excluded from TDS under provision of section 195 of the Act . Whether any tax was already deducted by the assessee We find that the Tribunal in assessment year 2007-08 recorded the fact of the remittances made to the group concern as well as other and the issue was restored back for verification. The relevant finding of the Tribunal in assessment year 2007 No. 4961/Del/2010 is reproduced as under: “2.3 Having heard both the sides and perused the material on record it is relevant to mention that the Tribunal in the assessee's own case for the Assessment Years 2001 restored the matter back to the file of the AO for a fresh adjudication. It is noted that the Ld.CIT(A) has confirmed the impugned disallowances following the orders of the predecessors for the Assessment Years 2 05.This is evidenced in para 5.3 of the order of the id.CIT(A). It is pertinent to mention that against the orders of the La.CIT(A) for re AYs 1031 Tribunal has set aside the matter to the AO, for a fresh adjudication. Ther this issue is also restored back to fresh adjudication in the similar line of direction given by the Tribunal in the said cases. While deciding the issue afresh, the A is directed to decide the of the facts emerging from the records for the year under consideration as it is brought to our notice by the Ld.AR that major portion of remittances during the previous year relevant to the assessment year under consideration are made to non group payees out of the total remittances to 49 payees and the orders of the Ld.CIT(A) & the Tribunal have considered the facts emerging from records of the AY 2001-92 where remittances have been made to group companies only and al payees are covered by Article 7 of the remittance is directed to d deduct any tax us 195 of the Act in the light of the provisions contained i order and direct accordingly.” 8.2 Respectfully, following the finding of the Tribunal in assessment year 2007 made to parties other than related parties is restored to the file Tigers Worldwide Logistics Pvt. Ltd. ding of the Tribunal in assessment year 2007 No. 4961/Del/2010 is reproduced as under: Having heard both the sides and perused the material on record it is relevant to mention that the Tribunal in the assessee's own case for the Assessment ears 2001-02,2004-05, 2005-06 & 2006-07 has restored the matter back to the file of the AO for a fresh adjudication. It is noted that the Ld.CIT(A) has confirmed the impugned disallowances following the orders of the predecessors for the Assessment Years 2001-02 & 2004 05.This is evidenced in para 5.3 of the order of the id.CIT(A). It is pertinent to mention that against the orders of the La.CIT(A) for re AYs 1031-92 3. 2004- Tribunal has set aside the matter to the AO, for a fresh adjudication. Therefore, it would be just and proper that this issue is also restored back to the file of the Ad for judication in the similar line of direction given by the Tribunal in the said cases. While deciding the issue afresh, the A is directed to decide the issue on the basis of the facts emerging from the records for the year under consideration as it is brought to our notice by the Ld.AR that major portion of remittances during the previous year relevant to the assessment year under consideration are to non group payees out of the total remittances to 49 payees and the orders of the Ld.CIT(A) & the Tribunal have considered the facts emerging from records of the 92 where remittances have been made to group companies only and also that remittances to these es are covered by Article 7 of the various DTAAs as tance are of business profit accordingly, the AO is directed to decide whether the assessee is li deduct any tax us 195 of the Act in the light of the provisions contained in Article 7 of applicable DTAA order and direct accordingly.” following the finding of the Tribunal in assessment year 2007-08 the issue of disallowance of remittances made to parties other than related parties is restored to the file Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 11 ding of the Tribunal in assessment year 2007-08 in ITA Having heard both the sides and perused the material on record it is relevant to mention that the Tribunal in the assessee's own case for the Assessment 07 has restored the matter back to the file of the AO for a fresh adjudication. It is noted that the Ld.CIT(A) has confirmed the impugned disallowances following the orders of the 02 & 2004- 05.This is evidenced in para 5.3 of the order of the id.CIT(A). It is pertinent to mention that against the orders -05, the Tribunal has set aside the matter to the AO, for a fresh efore, it would be just and proper that the file of the Ad for judication in the similar line of direction given by the Tribunal in the said cases. While deciding the issue issue on the basis of the facts emerging from the records for the year under consideration as it is brought to our notice by the Ld.AR that major portion of remittances during the previous year relevant to the assessment year under consideration are to non group payees out of the total remittances to 49 payees and the orders of the Ld.CIT(A) & the Tribunal have considered the facts emerging from records of the 92 where remittances have been made to group s to these the various DTAAs as iness profit accordingly, the AO ecide whether the assessee is liable to deduct any tax us 195 of the Act in the light of the DTAA. We following the finding of the Tribunal in 08 the issue of disallowance of remittances made to parties other than related parties is restored to the file of the Assessing Officer for verification as directed above. The ground No. 1 of the appeal of the assessee is accordingly allowed for statistical purposes. 9. In ground No. 2, the assessee has challenged disallowance of provisions for sales commission ex relevant finding of the Ld. CIT(A) on the issue in dispute is reproduced as under: “6.3Ground No. 8 Provision for commission on sales incentives Rs.5,00,000: Assessing officer: 2. During the relevant year the assessee has made adhoc provision of 5,00,000/ incentives.Assessee failed to file details and justification of this provision and as how it is an ascertained liability. The claim remains unverifiable and therefore same is disallowed and Rs.5,00,000/ income of the assessee. Appellant's submission: The Assessee gives sales incentives after calculation of business. As at the end of the year the calculations were not complete and accordingly an ad hoc provision of Rs.5 lacs were made towards the submit that the provision for expenses is made based on estimates as available on the balance sheet date by following the mercantile method of accounting. Any small shortfall or excess of the said provision gets adjusted in the ensuing years the exchequer. The provisions are based on the estimates which are confirmed by the Auditors of the Company. We therefore submit that the same may kindly be allowed as expenses. Tigers Worldwide Logistics Pvt. Ltd. the Assessing Officer for verification as directed above. The ground No. 1 of the appeal of the assessee is accordingly allowed for In ground No. 2, the assessee has challenged disallowance of provisions for sales commission expenses of Rs.5,00,000/ relevant finding of the Ld. CIT(A) on the issue in dispute is reproduced as under: 6.3Ground No. 8 Provision for commission on sales incentives Rs.5,00,000: Assessing officer: 2. During the relevant year the assessee has made adhoc provision of 5,00,000/- towards sales incentives.Assessee failed to file details and justification of this provision and as how it is an ascertained liability. The claim remains unverifiable and therefore same is disallowed and Rs.5,00,000/-is added to the income of the assessee. Appellant's submission: The Assessee gives sales incentives after calculation of business. As at the end of the year the calculations were not complete and accordingly an ad hoc provision of Rs.5 lacs were made towards the Incentive. We submit that the provision for expenses is made based on estimates as available on the balance sheet date by following the mercantile method of accounting. Any small shortfall or excess of the said provision gets adjusted in the ensuing years. Thus, there is no loss to the exchequer. The provisions are based on the estimates which are confirmed by the Auditors of the Company. We therefore submit that the same may kindly be allowed as expenses. Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 12 the Assessing Officer for verification as directed above. The ground No. 1 of the appeal of the assessee is accordingly allowed for In ground No. 2, the assessee has challenged disallowance of penses of Rs.5,00,000/-. The relevant finding of the Ld. CIT(A) on the issue in dispute is 6.3Ground No. 8 Provision for commission on sales 2. During the relevant year the assessee has made an towards sales incentives.Assessee failed to file details and justification of this provision and as how it is an ascertained liability. The claim remains unverifiable and therefore ed to the The Assessee gives sales incentives after calculation of business. As at the end of the year the calculations were not complete and accordingly an ad hoc provision Incentive. We submit that the provision for expenses is made based on estimates as available on the balance sheet date by following the mercantile method of accounting. Any small shortfall or excess of the said provision gets . Thus, there is no loss to the exchequer. The provisions are based on the estimates which are confirmed by the Auditors of the Company. We therefore submit that the same may Decision: The commission is admittedly payable on sales. The books having been closed and subjected to audit need not haveany provision for commission on sales and any provision made may always be brought to actuals which is sales which is ascertainable and there cannot be any change thereof. Unlike warra expenses, commission on sales being an event associated with sales which has already been ascertained and crystalized, the need for provision cannot be appreciated. The disallowance is upheld. This ground is dismissed. 10. We have heard rival submissi dispute and perused the relevant material on record. of liability which has not ascertained provisions of the Act expenses was based on following mercantile allowable. We find that the Ld. provision as ascertained. According to him the commission on sales have been associated crystallized and therefore, once it that provision of sales commission cannot be disallowed under the provisions of the Act. Accordingly, we set aside the finding of the Ld. CIT upheld by him. The ground No. 2 of the appeal of the assessee is accordingly allowed. Tigers Worldwide Logistics Pvt. Ltd. Decision: The commission is admittedly payable on sales. The books having been closed and subjected to audit need not haveany provision for commission on sales and any provision made may always be brought to actuals which is sales which is ascertainable and there cannot be any change thereof. Unlike warra expenses, commission on sales being an event associated with sales which has already been ascertained and crystalized, the need for provision cannot be appreciated. The disallowance is upheld. This ground is dismissed.” We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. of liability which has not ascertained is not allowable under the provisions of the Act. According to the assessee this provision for ses was based on the estimate on the balance sheet following mercantile method of accounting and therefore it was allowable. We find that the Ld. CIT(A) himself h provision as ascertained. According to him the commission on sales have been associated with sales, which has already ascertained and crystallized and therefore, once it is held by the Ld provision of sales commission is a ascertained liability, cannot be disallowed under the provisions of the Act. Accordingly, et aside the finding of the Ld. CIT(A) and delete the addition ld by him. The ground No. 2 of the appeal of the assessee is Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 13 Decision: The commission is admittedly payable on sales. The books having been closed and subjected to audit need not haveany provision for commission on sales and any provision made may always be brought to actuals which is sales which is ascertainable and there cannot be any change thereof. Unlike warranty expenses, commission on sales being an event associated with sales which has already been ascertained and crystalized, the need for provision cannot be appreciated. The disallowance is upheld. on of the parties on the issue-in- dispute and perused the relevant material on record. Any provision is not allowable under the ccording to the assessee this provision for the balance sheet date by of accounting and therefore it was has treated the provision as ascertained. According to him the commission on sales has already ascertained and by the Ld. CIT(A) himself is a ascertained liability, same cannot be disallowed under the provisions of the Act. Accordingly, (A) and delete the addition ld by him. The ground No. 2 of the appeal of the assessee is 11. In the result, the appeal of the assessee for AY 2001 allowed for statistical purposes whereas a 2008-09 allowed partly for statistical purposes. Order pronounced Sd/- (ABY T VARKEY JUDICIAL MEMBER Mumbai; Dated: 30/03/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Tigers Worldwide Logistics Pvt. Ltd. In the result, the appeal of the assessee for AY 2001 allowed for statistical purposes whereas appeal for assessment year 09 allowed partly for statistical purposes. Order pronounced in the open Court on 30/0 Sd/ ABY T VARKEY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Tigers Worldwide Logistics Pvt. Ltd. ITA No. 3286 & 3287/M/2022 14 In the result, the appeal of the assessee for AY 2001-02 is ppeal for assessment year 03/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai