MEDREL PHARMACEUTICALS (I) P. LTD, MUMBAI V. ITO 5(2)(3), MUMBAI

ITA 3550/MUM/2010

• Counselvise Citation: 355019914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: BEHARILAL
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D : MUMBAI BEFORE SHRI D.K. AGARWAL, (JUDICIAL MEMBER) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.3550/MUM/2010 ASSESSMENT YEAR : 2006-07 MEDREL PHARMACEUTICALS (INDIA) PVT. LTD. 901-A, RAHEJA PLAZA, L.B.S. MARG GHATKOPAR (W) MUMBAI-400 086. ..( APPELLANT ) P.A. NO. (AACCM 5972 A) VS. INCOME TAX OFFICER WARD 5(2)(3) MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI BEHARILAL RESPONDENT BY : SHRI P. C. MAURYA DATE OF HEARING : 4.8.2011 DATE OF PRONOUNCEMENT : 12 TH AUGUST, 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26.2.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07 . THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING DISALLOWANCE OF FREIGHT AND CLEARING AND FORWARDING CHARGES OF RS.70,56,418/- UNDER PROVISIO NS OF SECTION 40(A)(IA). ITA NO.3550/M/10 A.Y:06-07 2 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE A SSESSEE WHO IS AN EXPORTER OF PHARMACEUTICALS, HAD PAID A SUM OF RS.7 0,56,418/- TO EIGHT DIFFERENT PARTIES AS PER DETAILS GIVEN BELOW:- SR. NO. NAME AMOUNT 1 ASHTIVINAYAK SHIPPING AGENCY 1,54,010.00 2 RONAK CONTAINER LINE 1,91,253.00 3 SAFMARINE INDIA PVT. LTD. 49,36,424.64 4 MAERSK INDIA PVT. LTD. 4,20,536.60 5 P & O NEDLLOYED (I) PVT. LTD. 9,04,021.76 6 MITSUI O.S.K. LINES INDIA PVT. LTD. 3,08,635.00 7 SADGURU FOWRWARDERS PVT. LTD. 1,20,537.00 8 AIR TRANSPORT CO. 21,000.00 TOTAL 70,56,418.00 2.1 THE AO OBSERVED THAT THE ASSESSEE HAD PAID FREI GHT, CLEARING AND FORWARDING CHARGES IN RESPECT OF WHICH TAX WAS REQU IRED TO BE DEDUCTED UNDER SECTION 194C WHICH HAD NOT BEEN DONE. HE, THE REFORE, DISALLOWED THE CLAIM OF EXPENSES UNDER THE PROVISIONS OF SECTION 4 0(A)(IA) OF THE ACT. IN APPEAL CIT(A) NOTED THAT THE PAYMENTS TO THE PARTY AT SL.NO.1 WAS NOT FREIGHT BUT FOR VARIOUS SERVICES RENDERED AS CLEARI NG AND FORWARDING AGENT ON WHICH TAX WAS REQUIRED TO BE DEDUCTED WHICH HAD NOT BEEN DONE. THE CIT(A) ALSO OBSERVED THAT THERE WAS ALSO NO EVIDENCE IN SU PPORT OF SUCH EXPENSES. HE, THEREFORE, CONFIRMED THE DISALLOWANCE OF RS.1,54 ,010/- IN RESPECT OF OTHER CHARGES, CIT(A) OBSERVED THAT PAYMENTS HAD BE EN MADE FOR TRANSPORTATION OF GOODS AS PER CONTRACT AND SINCE A MOUNT PAID AS PER EARLIER GR EXCEEDED RS.20,000/-, TAX WAS REQUIRED TO BE DED UCTED IN VIEW OF CIRCULAR NO.715 DATED 7.8.1995 OF CBDT. CIT FURTHE R OBSERVED THAT THE ITA NO.3550/M/10 A.Y:06-07 3 ASSESSEE HAD MADE PAYMENT ON ACCOUNT OF SHIPPING FR EIGHT AND, THEREFORE, PROVISIONS OF SEC. 195 WERE APPLICABLE AS PAYMENT H AD BEEN MADE TO FOREIGN COMPANY. HE, THEREFORE, HELD THAT THE TAX WAS REQU IRED TO BE DEDUCTED AND ACCORDINGLY DISALLOWANCE BY AO UNDER SECTION 40A(IA ) WAS UPHELD. AGGRIEVED BY THE SAID DECISION, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT SAFMARINE INDIA PVT. LTD. (S.NO.3), MAERSK INDIA PVT. LTD.(S.NO.4) AND MITSUI O.S.K. LINES INDIA PVT. LTD.(S.NO.6) WERE AGENTS OF NON-RESIDENT SHIPPING COMPANIES. THE PAYMENTS MADE TO SHIPPING COMPANIES OR THEIR AGENTS ARE TAXABLE UNDER SECTION172 OF THE ACT AND THEREFORE, PROVISIONS OF SECTION 194C AND 195 ARE NOT APPLICABLE IN SUCH CASES AS EXPLAINED BY CBDT I N CIRCULAR NO.723 A COPY OF WHICH WAS PLACED AT PAGE-1 OF PAPER BOOK. IT WA S ALSO SUBMITTED THAT P&O NEDLLOYED (I) PVT. LTD. WAS NON RESIDENT COMPAN Y AND ITS OFFICE HAD CLOSED AND THEREFORE, ASSESSEE WAS NOT IN A POSITIO N TO FILE EXEMPTION CERTIFICATE. IT WAS POINTED OUT THAT THE ASSESSEE HAD FILED EXEMPTION CERTIFICATE IN RESPECT OF PARTIES AT S.NO.3,4 AND 6 AVAILABLE AT PAGE 5, 4 AND 2 OF THE PAPER BOOK WHICH HAD NOT BEEN CONSIDERED BY LOWER AUTHORITIES. AS REGARDS ASHTAVINAYAK SHIPPING AT S.NO.1, IT WAS SUB MITTED THAT THE DETAILS IN RESPECT OF SAID PARTY HAD BEEN PLACED AT PAGE-8 ONW ARDS OF THE PAPER BOOK WHICH CLEARLY SHOWS THAT THE PARTY HAD SUPPLIED GOO DS TO THE ASSESSEE AND HAD NOT RENDERED ANY SERVICES, AND THEREFORE, NO TA X WAS REQUIRED TO BE DEDUCTED. IT WAS ACCORDINGLY URGED THAT THE ORDER OF CIT(A) SHOULD BE SET ASIDE AND CLAIM OF THE ASSESSEE BE ALLOWED. ITA NO.3550/M/10 A.Y:06-07 4 3.1 THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVA L CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY O F EXPENSES INCURRED ON ACCOUNT OF VARIOUS PARTIES MENTIONED IN PARA-2 EARL IER. THE AO HAD DISALLOWED THE CLAIM ON THE GROUND THAT TAX HAD NOT BEEN DEDUCTED AT SOURCE. THE ORDER HAS BEEN CONFIRMED BY THE CIT(A) WHO HAS ALSO MENTIONED THAT IN RESPECT OF PARTY AT SL.NO.1 THERE WAS ALSO NO SUPPO RTING EVIDENCE IN RESPECT OF EXPENSES. THE ASSESSEE HAS SUBMITTED THAT PARTI ES AT SL.NO.3,4, AND 6 WERE AGENTS OF NON RESIDENT SHIPPING COMPANIES AND THEIR INCOME WAS EXEMPT FROM TAX IN INDIA. EXEMPTION CERTIFICATES H AD BEEN FILED ( PLACED AT PAGE 5,4 AND 2 OF THE PAPER BOOK) WHICH WERE ALSO A VAILABLE BEFORE LOWER AUTHORITIES WHO HAD NOT CONSIDERED THE SAME. FURTH ER IN VIEW OF CIRCULAR NO.723 OF CBDT, INCOME IN RESPECT OF FOREIGN SHIPPI NG COMPANIES ARE REQUIRED TO BE ASSESSED UNDER SECTION 172 AND THE P ROVISIONS OF SECTION 194C AND 195 ARE NOT APPLICABLE IN THESE CASES, AND THER EFORE, NO TAX WAS REQUIRED TO BE DEDUCTED. IT HAS ALSO BEEN SUBMITTED THAT TH E PARTY AT SL.NO.5 IS ALSO A NON-RESIDENT COMPANY AND ITS INCOME WAS NOT TAXABLE IN INDIA. THUS, MAJOR PAYMENTS WERE MADE TO NON RESIDENT COMPANIES, INCOM E OF WHICH IS CLAIMED TO BE EXEMPT IN INDIA. IN RESPECT OF THREE SUCH CO MPANIES EXEMPTION CERTIFICATE HAD BEEN FILED BEFORE AUTHORITIES BELOW . THE PARTY AT SL.NO.1 HAD NOT PROVIDED ANY SERVICES. IT HAD SUPPLIED GOODS W HICH IS CLEAR FROM THE BILLS PLACED ON RECORD AND THEREFORE, TAX MAY NOT BE REQU IRED TO BE DEDUCTED. THEREFORE, IN OUR VIEW, THE ISSUE REQUIRES FRESH EX AMINATION IN THE LIGHT OF ITA NO.3550/M/10 A.Y:06-07 5 RELEVANT PROVISIONS OF LAW AND THE MATERIAL PLACED ON RECORD BY THE ASSESSEE WHICH HAD NOT BEEN CONSIDERED. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR PA SSING A FRESH ORDER AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNIT Y OF HEARING TO THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12.8.2011. SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12.8.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.