DCIT, New Delhi V. M/s Jay Kay Freighters Pvt. Ltd., Delhi

ITA 3407/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65226 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 01-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Assessee Lawyers: RANO JAINV MOHAN
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `D : NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.3407/DEL./2011 (ASSESSMENT YEAR : 2008-09) DCIT, CIRCLE 4(1), VS. JAY KAY FREIGHTERS PVT. L TD., NEW DELHI. 68, VEER NAGAR, JAIN COLONY, DELHI. (PAN/GIR NO.AAACJ3309G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. RANO JAIN/V. MOHAN, ADV. REVENUE BY : SMT. SRUJANI MOHANTY, DR ORDER PER U.B.S. BEDI, J.M. THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT (A)- VII, NEW DELHI DATED 24.04.2011, RELEVANT TO ASSESS MENT YEAR 2008-09, WHEREBY BESIDES CHALALENGING THE ORDER OF CIT(A) AGAINST DELETION O F ADDITION OF RS.29,09,679/- MADE U/S 40(A)(IA) OF THE I.T. ACT, 1961, ON ACCOUNT OF FREI GHT CHARGES, DEPARTMENT HAS ALSO CHALALENGED THE ACTION OF CIT(A) IN ADMITTING ADDIT IONAL EVIDENCE WITHOUT FOLLOWING PROCEDURE LAID DOWN UNDER RULE 46A OF THE I.T. RULE S, 1962. 2. AT THE VERY OUTSET, LD.DR WAS ASKED TO CLARIFY W HICH FRESH EVIDENCE HAS BEEN ADMITTED BY CIT(A) AND, IF SO, HOW IT IS IN VIOLATI ON OF RULE 46A OF THE I.T. RULES, SHE COULD NOT BE ABLE TO SHOW ANY EVIDENCE FROM THE ORD ER OF CIT(A). AS SUCH, THIS GROUND OF APPEAL IS DISMISSED. 3. AS REGARDS THE DELETION OF ADDITION OF RS.29,09, 679/-, THE FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REND ERING SERVICES AS CUSTOM HOUSE AGENTS (CHA). THE RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 WAS FILED BY THE ASSESSEE ON 29.10.2008 DECLARING AN INCOME OF RS.1, 82,530/-. WHILE COMPLETING I.T.A. NO.3407/DEL./2011 (A.Y. : 2008-09) 2 ASSESSMENT UNDER SECTION 143(3) OF THE ACT, THE ASS ESSING OFFICER HAS MADE AN ADDITION OF RS.29,09,679/- ON ACCOUNT OF DISALLOWANCE OF EXP ENSES IN TERMS OF SECTION 40(A)(IA) OF THE ACT. 4. ASSESSEE TOOK UP THE MATTER IN APPEAL AND CIT(A) DELETED THE IMPUGNED ADDITON AGAINST WHICH DEPARTMENT HAS COME UP APPEAL. 5. LD.COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY ITAT, DELHI C BENCH DECISION IN THE CA SE OF HAH LOGISTICS VS. DCIT IN I.T.A. NO.1864/DEL./2011 FOR ASSESSMENT YEAR 2008-0 9 DATED 04.11.2011 AND BY PLACING COPY OF THE SAID ORDER IT WAS PLEADED FOR DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE AS IT IS A COVERED ISSUE. 6. LD.DR COULD NOT CONTROVERT THIS FACTUAL ASPECT, BUT RELIED UPON THE ORDER OF THE ASSESSING OFFICER TO PLEAD FOR RESTORATION OF ASSES SING OFFICERS ORDER. 7. AFTER HEARING BOTH THE SIDES, CONSIDERING THE MA TERIAL ON RECORD AS WELL AS PRECEDENT RELIED UPON BY LD.COUNSEL FOR THE ASSESSE E, WE FIND THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F ITAT, DELHI C BENCH IN THE CASE OF HAH LOGISTICS VS. DCIT (SUPRA), THIS ISSUE HAS BEEN DEALT WITH FROM PARAS.10-14 OF THE SAID ORDER TO DELETE THE DISALLOWANCE MADE BY THE A SSESSING OFFICER U/S 40(A)(IA) OF THE ACT, WHICH IS REPRODUCED HEREIN: 10. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LOGISTICS I.E. CLEARING AND FO RWARDING, AND IN THE COURSE OF CARRYING ON SUCH BUSINESS OF CLEARING AND FOR WARDING, THE ASSESSEE MADE PAYMENTS TO SHIPPING COMPANIES FOR AND ON BE HALF OF ITS CLIENTS, WHICH WERE REIMBURSED LATER BY ASSESSEES CLIENT ON ACTUA L BASIS. IT WAS THUS, CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS NO EXPENSES INCUR RED BY THE ASSESSEE ON ACCOUNT OF PAYMENT MADE TO VARIOU S SHIPPING COMPANIES/FREIGHT FORWARDS AND THUS, THERE WAS NO QUESTION OF DISALLO WANCE U/S 40(A)(IA) OF THE ACT. HE FURTHER SUBMITTED THAT THE PAYMENT M ADE TO SHIPPING COMPANIES ON BEHALF OF ASSESSEES CLIENT CONSISTED MAINLY OF FO LLOWING ITEMS: - (I) DOCUMENT CHARGES THESE CHARGES RELATE TO PREPARATION OF BILLS OF LADING WHICH IS A BASIC DOCUMENT FOR EXPORT/IMPORT IN IN DIA. I.T.A. NO.3407/DEL./2011 (A.Y. : 2008-09) 3 (II) THC (TERMINAL HANDLING CHARGES) THESE ARE T HE CHARGES LEVIED BY SHIPPING COMPANIES FOR HANDLING CARGO IN THE CUSTOM BO UNDED TERMINAL. THESE INCLUDE CFS (CONTAINER FILLING STATION) CHARGES FOR HANDLI NG THE CARGO IN YARD. THE MAXIMUM CHARGES AS PAYABLE TO SHIPPING LINES IN THIS REGARD ARE FIXED BY PORT AUTHORITIES. THE SHIPPING COMPANIES CANNOT CH ARGE MORE THAN THE RATES AS GIVEN BY PORT AUTHORITIES. 11. THE LD. COUNSEL FOR THE ASSESSEE FURTHER S UBMITTED THAT THERE WAS NO CONTRACT BETWEEN THE SHIPPING LINES AND THE A SSESSEE FIRM IN THE NATURE OF A WORK SPECIFIED IN SEC. 194C OF THE ACT. HE FURTHER CLARIFIED THAT THE BILLS FOR SPECIFIED SERVICES WERE RAISED BY SHIPPING LINE S IN THE NAME OF THE ULTIMATE CONSUMER AS PER THE TERMS AND CONDITIONS AGR EED UPON BETWEEN THEM, AND THE ASSESSEE FIRM AS A CLEARING AND FORWARDIN G AGENT HAS NOTHING TO DO WITH THE COMPONENTS OF THE BILLS RAISED BY THE SHIPPING LINES ON THE ULTIMATE CONSUMER. THE ASSESSEE HAS MERELY MADE THESE PAYME NTS ON BEHALF OF ULTIMATE CONSUMER I.E. ASSESSEES CLIENTS, AND GOT REIMBURSE D THE SAME WHILE RAISING INVOICE TO ITS CLIENTS, ON WHICH APPROPRIATE TDS HAS BEEN DEDUCTED BY THE CLIENT OF THE ASSESSEE. IN THIS CONNECTION, HE I NVITED OUR ATTENTION TO SOME COPIES OF THE BILLS RAISED BY SHIPPING LINES/FREIGHT FORWA RDS AND ALSO COPIES OF BILLS RAISED BY THE ASSESSEE FIRM TO ITS CLIENTS IN THIS REGARD, WHICH WERE ALSO FURNISHED TO THE ASSESSING OFFICER VIDE LETTER DATED 12.11.10. A CO PY OF ORDERS OF PORT AUTHORITIES HAS ALSO BEEN FURNISHED. IT WAS THUS, SUBMIT TED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS NO REQUIREMENT TO DEDU CT TAX AT SOURCE BY THE ASSESSEE INTERMEDIARY FROM THE PAYMENTS MADE T O SHIPPING LINES FOR AND ON BEHALF OF ASSESSEES CLIENT, AND AS SUCH NO DISALL OWANCE U/S 40(A)(IA) IS CALLED FOR. IN THIS CONNECTION, THE LD. COUNSEL FOR THE ASSESSE E HAS RELIED UPON THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF COMMIS SIONER OF INCOME TAX VS. CARGO LINKERS (2009) 179 TAXMAN 151 = (2008) 218 C TR (DEL.) 695, WHERE IT WAS HELD BY THE HONBLE HIGH COURT THAT THE ASSESS EE C&F AGENT IS ONLY AN INTERMEDIARY, WHO IS NOT A PERSON RESPONSIBLE FOR D EDUCTION OF TAX AT SOURCE IN TERMS OF SEC. 194C OF THE ACT. 12. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OT HER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT AS PER THE PROVISIONS OF SEC. 194C OF THE ACT, THE ASSESSEE WAS REQUI RED TO DEDUCT TAX AT SOURCE EVEN IF THE EXPENSES INCURRED BY THE ASSESSEE WERE REIMBURSED BY THE ASSESSEES CLIENT. 13. THE RIVAL CONTENTIONS OF BOTH THE PARTIE S HAVE BEEN CONSIDERED AND ORDERS OF THE AUTHORITIES BELOW HAVE BEEN PER USED. WE HAVE ALSO GONE THROUGH THE VARIOUS PAPERS AND DOCUMENTS CONTAINING 77 PAGES PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. 14. IT IS NOT IN DISPUTE THAT THE ASSESSEE FI RM IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGENT. THE GOODS OF ASSE SSEES CLIENT, WHO ARE EXPORTER OR IMPORTER, WERE EXPORTED OR IMPORTED BY THE S HIPPING COMPANIES. THE I.T.A. NO.3407/DEL./2011 (A.Y. : 2008-09) 4 SHIPPING COMPANIES RAISED BILL FOR VARIOUS CHARGES AGAINST THE ULTIMATE EXPORTER OR IMPORTER, WHO ARE THE CLIENT OF THE ASSESSEE. T HE AMOUNT MENTIONED IN THE BILL RAISED BY SHIPPING COMPANIES ON ULTIMATE CONSUMER WERE INITIALLY PAID BY THE ASSESSEE, AND THEREAFTER THE ASSESSEE GOT REIMBURS ED THE SAID AMOUNT FROM ITS CLIENT INCLUDING THE CHARGES OF THE ASSESSEE FOR SERVICES RENDERED. WE HAVE PERUSED THE VARIOUS BILLS RAISED BY VARIOUS S HIPPING COMPANIES AND FIND THAT THE SHIPPING COMPANIES RAISED THEIR BILLS ON TH E ULTIMATE CUSTOMER, WHO IS THE EXPORTER OR IMPORTER OF THE GOODS. THE ASSESSEE US ED TO RAISE BILLS UPON EXPORTER OR IMPORTER I.E. ASSESSEES CLIENT, I NCLUDING THE CHARGES PAYABLE TO SHIPPING LINES, AND AS WELL THE CHARGES OF TH E ASSESSEE ON ACCOUNT OF VARIOUS SERVICES RENDERED BY IT. IT HAS NOT B EEN DISPUTED BY THE AO THAT THE BILLS ISSUED BY SHIPPING COMPANIES WERE RAISED IN T HE NAME OF CLIENTS, WHOSE GOODS WERE EXPORTED OR IMPORTED, AND THE ASSE SSEE THEREAFTER RAISED THE BILL TO ITS CLIENT SEPARATELY INDICATING CHARGES OF THE ASSESSEE AS WELL AS THE CHARGES PAID BY THE ASSESSEE TO SHIPPING COMPANIE S ON BEHALF OF ITS CLIENTS. THEREFORE, FROM THE VARIOUS DETAILS FILED BY THE ASSESSEE AND NATURE OF THE ASSESSEES BUSINESS OF CLEARING AND FORWARDING AGENTS, WE FIND THAT THE ASSESSEE IS NOTHING BUT AN INTERMEDIARY BETWEE N THE EXPORTERS AND THE SHIPPING LINES. THE ASSESSEE FACILITATES THE CONTR ACT FOR CARRYING GOODS FOR AND ON BEHALF OF ITS CLIENT I.E. EXPORTERS OR IMPORTERS , AND THE PRINCIPLE CONTRACT FOR CARRYING GOODS IS BETWEEN THE EXPORTER/IMPORTER AND THE SHIPPING LINES. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF COMMISSIONER OF INCOME TAX VS. CARGO LINKERS (SUPRA), WHERE THE HONBLE HIGH COURT WAS IN AGREEMENT WITH THE ORDER PASSED BY THE TRIBUNAL, WHICH MAINLY DECIDED AN ISSUE OF FACT, NAMELY, THE NATURE OF THE CONTRACT BETWEEN THE PARTIES CONCERNED, AND IT WAS FOUN D AS A MATTER OF FACT THAT THE CONTRACT WAS ACTUALLY BETWEEN THE EXPORTER AND THE AIRLINE, AND THE ASSESSEE WAS ONLY AN INTERMEDIARY. IT WAS, THEREFORE, HELD THA T THE ASSESSEE IS NOT A PERSON RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE IN TERMS OF SEC. 194C OF THE ACT. RELYING ON THE AFORESAID DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CARGO LINKERS (SUPRA) WE HOLD THAT THE PRESE NT ASSESSEE, WHO IS CARRYING ON THE BUSINESS OF CLEARING AND FORWARDING AGENTS, IS NOT A PERSON RESPONSIBLE FOR DEDUCTING THE TAX AT SOURCE IN TERMS OF SEC. 19 4C OF THE ACT IN AS MUCH AS THE ASSESSEE IS ONLY AN INTERMEDIARY BETWEEN THE EXPORT ERS AND THE SHIPPING LINES AND IT MERELY FACILITATES THE CONTRACT FOR CARRY ING THE GOODS. SINCE THE ASSESSEE WAS NOT A PERSON RESPONSIBLE FOR DEDUCTION OF TAX A T SOURCE IN TERMS OF SEC. 194C OF THE ACT, THE QUESTION OF FAILURE ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE TO SHIPPING LINES FOR AND ON BEHALF OF ITS CLIENT WOULD NOT ARISE, AND, CONSEQUENTLY, PROVI SIONS OF SEC. 40(A)(IA) CANNOT BE INVOKED IN RESPECT OF THE PAYMENT MADE BY TH E ASSESSEE TO SHIPPING LINES FOR AND ON BEHALF OF ASSESSEES CLIENT I.E. ULTIMATE EXPORTER OR IMPORTER. WE, THEREFORE, REVERSE THE ORDER OF AUTHORITIES BELOW AND DELETE THE DISALLOWANCE OF RS. 2,04,72,855/- MADE U/S 40(A)(IA) OF THE ACT BY THE AO. I.T.A. NO.3407/DEL./2011 (A.Y. : 2008-09) 5 5. SINCE FACTS ARE SAME AND ISSUE IS IDENTICAL AND, MOREOVER NEITHER ANY CONTRARY MATERIAL HAS BEEN PLACED ON RECORD BY THE DEPARTMEN T NOR ANY HIGHER COURTS ORDER REVERSING ORDER OF ITAT HAS BEEN FILED, THEREFORE, WHILE FOLLOWING THE SAID PRECEDENT, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE APPEAL O F THE REVENUE. 6. AS A RESULT, THE APPEAL FILED BY THE DEPARTMENT GETS REJECTED. ORDER PRONOUNCED IN OPEN COURT ON 01.08.2012. SD/- SD/- (K.D. RANJAN) ACCOUNTANT MEMBER (U.B.S. BEDI ) JUDICIAL MEMBER DATED : AUG. 08 , 2012 SKB COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-VII, NEW DELHI. 5. CIT(ITAT) DEPUTY REGISTRAR, ITAT