ACIT, New Delhi V. M/s Jet Air Pvt. Ltd., New Delhi

ITA 3623/DEL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2695 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 21-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Assessee Lawyers: ARVIND SONDE
• Keywords: Rectification of order; Assessment record
• Section: 143(3); 194C; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SMT. DIVA SINGH, JUDICIAL MEMBER I.T.A.NO.3623/DEL/2011 ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME-TAX, M/S. JET AIR PV T. LTD., CIRCLE 4(1), NEW DELHI. VS. JETAIR HOUSE, 13, COMMUNITY CENTRE, YUSUF SARAI, NEW DELHI. PAN: AAACJ0121C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K. MISHRA , DR. RESPONDENT BY : SHRI ARVIND SONDE, ADVOCATE. O R D E R PER DIVA SINGH, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 18.05.2011 OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VII, NEW D ELHI, PERTAINING TO THE ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS:- 01. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS & CONTRARY TO FACTS AND LAW. 02. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DIRECTING THE AO TO ALLOW CREDIT OF TDS AMOUNTING TO RS.2,75,78,008/-. 03. THE LD. CIT(A) IGNORED THE FACT THAT THE ASSESS EE DID NOT INCLUDE THE MATCHING INCOME FOR TAXATION FOR THE YEAR, ON W HICH TAX WAS DEDUCTED AT SOURCE (TDS), AND CREDIT FOR TDS WAS CO RRECTLY ITA NO.3623/DEL/2011 2 DISALLOWED BY AO IN ACCORDANCE WITH THE PROVISIONS OF SECTION 199 OF THE INCOME TAX ACT. 2. THE RELEVANT FACTS AS FOUND DISCUSSED IN THE ASS ESSMENT ORDER ARE THAT THE ASSESSEE COMPANY DECLARED AN INCOME OF RS.7,37,04,0 50/- BY WAY OF FILING RETURN OF INCOME ON 31.10.2005. AFTER BEING PROCESSED UNDE R SEC. 143(1), THE SAME WAS SELECTED FOR SCRUTINY BY WAY OF ISSUANCE OF NOTICE UNDER SEC. 143(2) AND 143(1) ALONG WITH QUESTIONNAIRE. 2.1. THE ASSESSING OFFICER TOOK NOTE OF THE FACT TH AT THE ASSESSEE COMPANY WAS CARRYING ON THE BUSINESS OF GENERAL SALES AGENTS (G SA) FOR INTERNATIONAL AIRLINES AND DOMESTIC AIRLINES IN INDIA FOR PASSENGER AND CA RGO WAREHOUSE MANAGEMENT. APART FROM THAT THE ASSESSEE ALSO HAD SEPARATE DIVI SION OPERATING GROUND HANDLING AT VARIOUS AIRPORTS IN INDIA FOR PASSENGER FLIGHTS AND CARGO WAREHOUSE MANAGEMENT. 2.2. IN THE YEAR THE ASSESSEE HAD DECLARED A TOTAL TURNOVER OF RS.137.07 CRORES INCLUDING OTHER INCOME IN THE FORM OF INTEREST, REN TAL INCOME, ROYALTY, CONSULTANCY ETC., APART FROM LONG TERM CAPITAL GAIN ON PURCHASE AND SALE OF SHARES OF RS.2,58,088/- . THE SAME WAS ACCEPTED IN 143(3) PR OCEEDINGS. 2.3. THEREAFTER NOTICE UNDER SEC. 154/155 OF THE AC T DATED 27.07.2010 WAS ISSUED TO THE ASSESSEE AS ON SCRUTINY OF ASSESSMENT RECORD S, IT WAS SEEN THAT THE ASSESSEE COMPANY WAS ALLOWED CREDIT FOR TDS AMOUNTING TO RS. 8,05,45,370/- AT THE TIME OF ASSESSMENT. THE ANALYSIS OF STATEMENT OF TDS RECON CILIATION AND INCOME RELATING TO THESE CERTIFICATES SHOWED THAT CREDIT WAS ALLOWE D ON TDS AMOUNTING TO RS.2,75,78,008/- WHICH WAS DEDUCTED ON INCOME WHICH DID NOT FORM PART OF TOTAL ITA NO.3623/DEL/2011 3 INCOME OF THE ASSESSMENT YEAR. THIS ACCORDING TO T HE AO WAS NOT ALLOWABLE AS PER THE PROVISIONS OF THE INCOME TAX ACT, 1961. ACCORD INGLY BY WAY OF ISSUANCE OF NOTICES, IT WAS PROPOSED THAT THE CREDIT FOR TDS OF RS.2,75,78,008/- BE WITHDRAWN. ASSESSEES OBJECTION, IF ANY ON THE PROPOSED ACTION WERE SOUGHT. 2.4. IN RESPONSE THERETO THE ASSESSEE FILED ITS SUB MISSIONS DATED 04.08.2010 INTER ALIA RELYING ON VARIOUS CASE LAWS. THE AO CO NSIDERING THE SUBMISSIONS PASSED THE RECTIFICATION ORDER UNDER SEC. 154 DATED 31.01.2011 WITHDRAWING THE CREDIT OF TDS OF THE STATED AMOUNT. 3. THIS ORDER WAS CHALLENGED BEFORE THE LEARNED CI T(A). IN THE RECTIFICATION ORDER THE AO OBSERVED THAT THE ASSESSEE COMPANY HAD BEEN ALLOWED CREDIT FOR TDS AMOUNTING TO RS.8,05,45,370/- AT THE TIME OF ASSESS MENT. THE ANALYSIS OF THE STATEMENT OF TDS RECONCILIATION AND INCOME RELATING TO THESE CERTIFICATES SHOWED THAT THE CREDIT WAS ALLOWED ON TDS AMOUNTING TO RS. 2,75,78,008/- WHICH WAS DEDUCTED ON INCOME WHICH DID NOT FORM PART OF TOTA L INCOME OF THE CURRENT YEAR AS SUCH IT WAS NOT ALLOWABLE AS PER THE PROVISIONS OF INCOME-TAX ACT, 1961. REFERRING TO THE FACT THAT THE NOTICE UNDER SEC. 154/155 HAD BEEN ISSUED REQUIRING THE ASSESSEE TO EXPLAIN AS TO WHY TDS AMOUNTING TO RS.2,75,78,00 8/- SHOULD NOT BE WITHDRAWN. IN RESPONSE TO THE SAME THE ASSESSEE COMPANY RELIED UPON VARIOUS CASE LAWS AND SUBMITTED THAT THE CREDIT FOR TDS WAS ALLOWABLE. T HE EXPLANATION WAS CONSIDERED NOT ACCEPTABLE AND WITHDRAWAL OF CREDIT OF TDS AMOU NTING TO RS.2,75,78,008/- WAS MADE. AGGRIEVED BY THIS THE ASSESSEE CAME IN APPEA L BEFORE THE CIT(A). ITA NO.3623/DEL/2011 4 4. IN SUPPORT OF ITS GROUNDS, VARIOUS SUBMISSIONS W ERE ADVANCED BEFORE THE CIT(A). THE SAME ARE FOUND REPRODUCED IN PARA 5.2 AND 5.3 OF THE IMPUGNED ORDER AND ARE BEING REPRODUCED:- 5.2 DURING THE APPELLATE PROCEEDINGS, IT WAS SUBM ITTED ON BEHALF OF THE APPELLANT INTER ALIA THAT 'IN THIS REGARD IT IS SUBMITTED THAT THE APPELLANT IS THE GSA OF MANY AIRLINES (BOTH DOMESTIC & INTERNATIONAL AIRLINES) F OR THE SALE OF THEIR CARGO & PASSENGER TICKETS AND IS ENTITLED TO GSA CO MMISSION FROM SUCH AIRLINES ON THE SALE OF CARGO & PASSENGER TICK ETS. THE APPELLANT, BEING THE GSA OF THE VARIOUS AIRLINES, FURTHER APPO INTS VARIOUS AGENTS ALL OVER THE COUNTRY AND THESE AGENTS DEAL WITH THE APPELLANT AND NOT WITH THE AIRLINES. FURTHER, IN RESPECT TO CARGO SAL E, THE ACCOUNTING TREATMENT FOLLOWED BY THE APPELLANT AND ITS AGENT V IS-A-VIS THE CLAIM OF THE TDS IS EXPLAINED WITH THE HELP OF A FLOW CHART ATTACHED AS ANNEXURE A AND THE SAME IS FURTHER EXPLAINED AS UND ER: THE AGENT, APPOINTED BY THE APPELLANT, MAKE THE BOO KING FOR THE CARGO SALE OF SAY RS 100/- AND AFTER DEDUCTING ITS COMMIS SION OF RS 5/- AND TDS@ 2.24% U/S 194C OF THE IT. ACT ON THE BALANCE R S. 95/-, REMITS RS 92.87 TO THE APPELLANT. BUT THE APPELLANT HAS TO PAY TO THE AIRLINE, THE EN TIRE SALE AMOUNT OF RS.95/- (I.E. BY ADDING THE AMOUNT OF TDS DEDUCTED BY THE AGENT) SINCE THE AIRLINE HAS NOTHING TO DO WITH THE TDS AM OUNT DEDUCTED BY THE AGENT. IN EFFECT, THE APPELLANT HAS TO FUND THE TDS DEDUCTED BY THE AGENT. THEREAFTER, THE APPELLANT GETS ENTITLED TO THE COMM ISSION OF RS. 2.50 (2.5% OF RS. 100/-) FROM THE AIRLINE ON WHICH THE A IRLINE DEDUCTS TDS @ 5.6% U/S 194H OF THE IT. ACT AND REMITS THE BALAN CE AMOUNT OF RS. 2.36 TO THE APPELLANT. THE APPELLANT GETS ENTITLED TO TDS OF RS.2.13 U/S 1 94C DEDUCTED BY THE AGENT, AND OF RE 0.14 U/S 194H DEDUCTED BY THE AIRLINES. ITA NO.3623/DEL/2011 5 THE AGENT ISSUES THE TDS CERTIFICATES IN THE NAME O F THE APPELLANT WHICH THE APPELLANT CLAIMS IN ITS RETURN OF INCOME. HENCE, THE TDS MONEY GETS LOCKED UP TILL SUCH TIME THE APPELLANT G ETS ITS REFUND. FROM THE ABOVE, IT IS CLEAR THAT THE SALES ARE MADE BY THE AGENT ON BEHALF OF THE AIRLINE BUT SINCE THE AGENT IS DEALIN G WITH THE APPELLANT AND NOT WITH THE AIRLINE, THE AGENT DEDUCTS TDS U/S 194C OF THE I T. ACT ON THE REMITTANCE MADE TO THE APPELLANT AND ISS UE TDS CERTIFICATES IN THE NAME OF THE APPELLANT. HENCE, THE APPELLANT' S TDS GETS DEDUCTED IN ORDER TO COMPLY WITH THE PROVISIONS OF SECTION 194C OF THE I T. ACT. IT IS EMPHASIZED THAT THE ENTIRE CARGO SALES OF THE AIRLINES ARE ROUTED THROUGH THE APPELLANT'S BANK ACCOUNTS (I.E. THE FUN DS COLLECTED FROM CARGO SALE IS RECEIVED BY THE APPELLANT FROM VARIOU S AGENTS AND THEN THE APPELLANT REMITS THIS AMOUNT COLLECTED TO THE A IRLINES). SINCE THE ENTIRE AMOUNT 'IS REMITTED TO THE AIRLINES, THE SAM E DOES NOT GET REFLECTED IN THE APPELLANT'S PROFIT & LOSS ALE. ONL Y THE GSA COMMISSION EARNED AND RECEIVED FROM THE AIRLINE ON THE CARGO SALES IS REFLECTED IN THE PROFIT & LOSS ALE. THE ABOVE-MENTI ONED ACCOUNTING TREATMENT IS BEING FOLLOWED BY ALL THE GSAS AND THE IR AGENTS IN INDIA WITHOUT ANY EXCEPTION AND THE APPELLANT BEING ONE O F THEM. THUS, AS EXPLAINED ABOVE, THE CRUX OF THE MATTER IS : A. THE ABOVE-MENTIONED ACCOUNTING TREATMENT IS BEI NG FOLLOWED BY ALL THE GSAS AND THEIR AGENTS IN INDIA WITHOUT ANY EXCEPTION AND THE APPELLANT BEING ONE OF THEM. B. THE ENTIRE CARGO SALES OF AIRLINE ARE ROUTED TH ROUGH THE APPELLANT'S BANK ACCOUNTS. C. THE AGENTS DEAL WITH GSA AND NOT THE AIRLINE AN D THEREFORE AGENTS DEDUCTS THE TDS U/S 194C ON THE REMITTANCE M ADE TO GSA AND ISSUE TDS CERTIFICATES IN THE NAME OF GSA AS DEDUCT EE. D. THE GSA CLAIMS THE TDS IN ITS RETURN OF INCOME. IT IS FURTHER SUBMITTED THAT SIMILAR ISSUE WAS RAIS ED IN THE CASE OF THE APPELLANT'S SISTER CONCERN NAMELY M/S NATIONAL TRAV EL SERVICES (FIRM) IN THE A. Y. 2004-05, WHEREIN THE DEPUTY COMMISSION ER OF INCOME ITA NO.3623/DEL/2011 6 TAX, CIR 24(1), NEW DELHI (THE ASSESSING OFFICER OF THE FIRM) AFTER BEING EXPLAINED THE ABOVE-MENTIONED ACCOUNTING TREA TMENT, HAD ALLOWED THE CREDIT OF TDS TO THE FIRM BY PASSING AN ORDER U/S 154 OF THE 1 T. ACT. IN THE SAID ORDER, IT WAS ALSO HELD T HAT THE PROVISIONS OF SECTION 199 OF THE 1 T. ACT IS NOT APPLICABLE ON TH E FIRM (COPY OF THE ORDER U/S 154 OF THE 1 T. ACT IS ENCLOSED AS ANNEXU RE B). FURTHER, THE SAME PROCESS OF CLAIMING THE TDS CREDI T HAS BEEN FOLLOWED BY THE APPELLANT IN THE PREVIOUS YEARS ALS O WHICH WAS DULLY ACCEPTED BY THE A. O. IN THE PREVIOUS YEARS ALSO. IN VIEW OF THE ABOVE FACTS & EXPLANATION, IT IS ABS OLUTELY CLEAR THAT TDS CREDIT OF RS.2,75, 78,008/- IS FULLY ALLOWABLE TO THE APPELLANT UNDER THE 1 T. ACT AND THE A.O. IS TOTALLY UNJUSTIF IED & UNREASONABLE IN DISALLOWING THE TDS CREDIT OF RS.2.75 CRORES. TH US, WE REQUEST YOUR HONOUR TO DIRECT THE A.O. TO ALLOW THE TDS CREDIT O F RS.2,75,78,008/- TO THE APPELLANT AND OBLIGE. ' 5.3 IT WAS FURTHER SUBMITTED ON BEHALF OF THE APPE LLANT INTER ALIA THAT 'IN CONTINUATION TO OUR SUBMISSIONS DATED 04.05.201 1, KINDLY FIND ATTACHED THE RECONCILIATION OF INCOME AS PER BOOKS OF ACCOUNT WITH THE TDS CERTIFICATES FOR THE A. Y. 2004-05, A. Y. 2005- 06 AND A. Y. 2006- 07 AS ANNEXURE A. IN ALL THESE THREE ASSESSMENT YEA RS, THE APPELLANT'S CASE WAS SELECTED FOR SCRUTINY AND AN ASSESSMENT OR DER U/S 143(3) OF THE 1 T. ACT WAS PASSED IN ALL THE THREE ASSESSMENT YEARS WHEREIN THE RETURNED INCOME OF THE APPELLANT WAS ACCEPTED AS AS SESSED INCOME AND TDS CREDITS CLAIMED BY THE APPELLANT WERE ALSO ALLOWED THE COPY OF THE ASSESSMENT ORDER U/S 143(3) OF THE IT. ACT F OR THE A. Y. 2004-05, A. Y. 2005-06 & A. Y. 2006-07 ARE ATTACHED AS ANNEX URE B. FURTHER, COPY OF THE FINANCIAL STATEMENTS OF THE APPELLANT F OR THE RELEVANT ASSESSMENT YEAR IS ATTACHED AS ANNEXURE C. FROM THE PERUSAL OF THE RECONCILIATIONS ATTACHED AB OVE AND THE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICERS U/S 143(3) OF THE IT. ACT, YOUR HONOUR WILL APPRECIATE THAT NOT ONLY THE APPELLANT HAS CORRECTLY OFFERED ITS INCOME TO TAX & CLAIMED THE C REDIT OF TDS IN A CONSISTENT MANNER OVER THE YEARS (I.E. BOTH IN THE PREVIOUS, RELEVANT & SUBSEQUENT ASSESSMENT YEAR), THE SAME HAS ALSO BEEN DULY ACCEPTED BY ITA NO.3623/DEL/2011 7 THE ASSESSING OFFICER OF THE RANK OF ADDITIONAL COM MISSIONER OF INCOME TAX. THIS ACCOUNTING TREATMENT FOLLOWED BY THE APPELLANT , IS ALSO FOLLOWED BY ALL THE GSAS & THEIR AGENTS IN INDIA WITHOUT ANY EXCEPTION. IT MAY PLEASE BE APPRECIATED THAT THE AGENTS HAVE NO CHOIC E BUT TO DEDUCT TDS AS PER THE PROVISIONS OF SECTION 194C, OTHERWIS E HE WOULD BE VIOLATING THE LAW AND WOULD FACE SERIOUS CONSEQUENC ES EVEN THOUGH THERE IS A MIS MATCH BETWEEN THE INCOME AND GROSS R ECEIPT. IT IS A PECULIAR CIRCUMSTANCE IN THIS LINE OF BUSINESS. IF A HOLISTIC VIEW IS TAKEN OF THE ENTIRE FACTS, IT CAN BE SEEN THAT THER E IS NO LOSS OF REVENUE. IT IS NOT A CASE WHEREIN ANY INCOME HAS ESCAPED ASS ESSMENT. THE ENTIRE TRANSACTION IS GETTING ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND THE CORRESPONDING INCOME BEING FULLY REFLECTED AND DECLARED IN THE RETURN OF INCOME. MOREOVER, EVEN IF THE PROFIT & LOSS ACCOUNT OF THE APPELLANT IS RECASTED IN ORDER TO SHOW THE GROSS RECEIPT FROM TH E CUSTOMER AS INCOME, THERE WOULD BE A CORRESPONDING EXPENSE ENTR Y WHEN THE AMOUNT IS REMITTED TO THE AIRLINE) OF EQUAL AMOUNT. THUS, THE ENTIRE EXERCISE WOULD BE TAX NEUTRAL. IN VIEW OF THE ABOVE FACTS & EXPLANATION, IT IS ABS OLUTELY CLEAR THAT TDS CREDIT OF RS.2,75,78,008/- IS FULLY ALLOWABLE T O THE APPELLANT UNDER THE 1 T. ACT AND THE A.O. IS TOTALLY UNJUSTIF IED & UNREASONABLE IN DISALLOWING THE SAID TDS CREDIT. THUS, WE REQUES T YOUR HONOUR TO DIRECT THE A. 0. TO ALLOW THE TDS CREDIT OF RS.2, 7 5, 78,008/- TO THE APPELLANT AND OBLIGE. 5. CONSIDERING THE SAME THE CIT(A) DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE VIDE PARA 5.4 TO 5.8 OF THE IMPUGNED ORDER HOLDING AS UNDER FOR READY-REFERENCE:- 5.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MA DE ON BEHALF OF THE APPELLANT, THE FINDINGS OF THE ASSESSING OFFICE R IN THE RECTIFICATION ORDER AND MATERIAL PLACED ON RECORD. IT IS AN UNDI SPUTED FACT THAT THE APPELLANT IS THE GSA OF MANY AIRLINES (BOTH DOMESTI C & INTERNATIONAL AIRLINES) FOR THE SALE OF THEIR CARGO & PASSENGER T ICKETS AND IS ENTITLED TO GSA COMMISSION FROM SUCH AIRLINES ON THE SALE OF CARGO & PASSENGER TICKETS. THE APPELLANT, BEING THE GSA OF VARIOUS AIRLINES, FURTHER APPOINTS VARIOUS AGENTS ALLOVER THE COUNTRY AND THESE AGENTS ITA NO.3623/DEL/2011 8 DEAL WITH THE APPELLANT AND NOT WITH THE AIRLINES. FURTHER, IN RESPECT OF CARGO SALE, THE ACCOUNTING TREATMENT FOLLOWED BY THE APPELLANT ARID ITS AGENT VIS-A-VIS THE CLAIM OF THE TDS IS EXPLAIN ED AS UNDER :- A) THE AGENT, APPOINTED BY THE APPELLANT, MAKE THE BOOKING FOR THE CARGO SALE OF SAY RS 100/- AND AFTER DEDUCTING ITS COMMISSION OF RS.5/- AND TDS @ 2.24% U/S 194C OF THE LT. ACT ON T HE BALANCE RS.95/-, REMITS RS.92.87 TO THE APPELLANT; B) BUT THE APPELLANT HAS TO PAY TO THE AIRLINE, TH E ENTIRE SALE AMOUNT OF RS. 95/- (I.E.) BY ADDING THE AMOUNT OF T DS DEDUCTED BY THE AGENT) SINCE THE AIRLINE HAS NOTHING TO DO WITH THE IDS AMOUNT DEDUCTED BY THE AGENT. IN EFFECT, THE APPELLANT HAS TO FUND THE IDS DEDUCTED BY THE AGENT; C) THEREAFTER, THE APPELLANT GETS ENTITLED TO THE COMMISSION OF RS.2.50 (2.5% OF RS.100/-) FROM THE AIRLINE ON WHIC H THE AIRLINE DEDUCTS IDS @ 5.6% U/S 194H OF THE I.T. ACT AND REM ITS THE BALANCE AMOUNT OF RS.2.36 TO THE APPELLANT; D) THE APPELLANT CLAIMS TDS OF RS.2.13 U/S 194C DE DUCTED BY THE AGENT, AND OF RE 0.14 U/S 194H DEDUCTED BY THE AIRL INES; E) THE AGENT ISSUES THE TDS CERTIFICATES IN THE NA ME OF THE APPELLANT WHICH THE APPELLANT CLAIMS IN ITS RETURN OF INCOME. HENCE, THE TDS MONEY GETS LOCKED UP TILL SUCH TIME THE APP ELLANT GETS ITS REFUND. FROM THE ABOVE, IT IS CLEAR THAT THE SALES ARE MADE BY THE AGENT ON BEHALF OF THE AIRLINE BUT SINCE THE AGENT IS DEALIN G WITH THE APPELLANT AND NOT WITH THE AIRLINE, THE AGENT DEDUCTS TDS U/S 194C OF THE ACT ON THE REMITTANCE MADE TO THE APPELLANT AND ISSUES TDS CERTIFICATES IN THE NAME OF THE APPELLANT. HENCE, THE APPELLANT'S T AX GETS DEDUCTED AT SOURCE IN ORDER TO COMPLY WITH THE PROVISIONS OF SE CTION 194C OF THE ACT. 5.5 IT IS ALSO OBSERVED THAT THE ENTIRE CARGO SALE S OF THE AIRLINES ARE ROUTED THROUGH THE APPELLANT'S BANK ACCOUNTS (LE TH E FUNDS COLLECTED FROM CARGO SALE IS RECEIVED BY THE APPELLANT FROM V ARIOUS AGENTS AND THEN THE APPELLANT REMITS THIS AMOUNT COLLECTED TO THE AIRLINES). SINCE THE ENTIRE AMOUNT IS REMITTED TO THE AIRLINES, THE SAME DOES NOT GET REFLECTED IN THE APPELLANT'S PROFIT & LOSS ACCOUNT. ONLY THE GSA ITA NO.3623/DEL/2011 9 COMMISSION EARNED AND RECEIVED FROM THE AIRLINE ON THE CARGO SALES IS REFLECTED IN THE PROFIT & LOSS ACCOUNT. IT HAS BEEN STATED THAT THE ABOVE- MENTIONED ACCOUNTING TREATMENT IS BEING FOLLOWED BY ALL THE GSAS AND THEIR AGENTS IN INDIA WITHOUT ANY EXCEPTION AND THE APPELLANT BEING ONE OF THEM. 5.6 IT HAS ALSO BEEN POINTED OUT BY THE LEARNED AI R OF THE APPELLANT THAT IDENTICAL ISSUE WAS RAISED IN THE CASE OF THE APPELLANT'S SISTER CONCERN, NAMELY M/S NATIONAL TRAVEL SERVICES (FIRM) IN THE A.Y. 2004- 05, WHEREIN THE ASSESSING OFFICER I.E. DEPUTY COMMI SSIONER OF INCOME TAX, CIR 24(1), NEW DELHI AFTER BEING SATISFIED WIT H THE ABOVE- MENTIONED ACCOUNTING TREATMENT, HAD ALLOWED THE CRE DIT FOR TDS TO THE FIRM BY PASSING AN ORDER U/S 154 OF THE ACT. IN THE SAID ORDER, IT WAS ALSO HELD THAT THE PROVISIONS OF SECTION 199 OF THE ACT ARE NOT APPLICABLE TO THE FIRM. THE SAME SYSTEM OF CLAIMING CREDIT FOR TDS HAS BEEN FOLLOWED BY THE APPELLANT IN THE BOTH IN THE PRECED ING AS WELL AS IN THE SUCCEEDING ASSESSMENT YEARS AND THIS HAS BEEN ALL A LONG ACCEPTED BY THE A.O. 5.7 IT HAS BEEN STATED THAT THE AGENTS HAVE NO CHOI CE BUT TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194C, OT HERWISE THEY WOULD BE VIOLATING THE LAW AND WOULD FACE SERIOUS CONSEQU ENCES EVEN THOUGH THERE IS A MISMATCH BETWEEN THE INCOME AND GROSS RE CEIPT. IT IS A PECULIAR CIRCUMSTANCE IN THIS LINE OF BUSINESS. CON SIDERING THE FACTS OF THE CASE IN ITS ENTIRETY, IT CAN BE SEEN THAT THERE IS NO LOSS OF REVENUE. IT IS NOT A CASE WHEREIN ANY INCOME HAS ESCAPED ASS ESSMENT. THE ENTIRE TRANSACTION IS GETTING ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND THE CORRESPONDING INCOME BEING FULLY REFLECTED AND DECLARED IN THE RETURN OF INCOME. MOREOVER, EVEN IF THE PROFIT & LOSS ACCOUNT OF THE APPELLANT IS RECAST IN ORDER TO SHOW THE GROSS RECEIPT FROM THE CUSTOMER AS INCOME, THERE WOULD BE A CORRESPONDING EXPENSE ENTRY (WHEN THE AMOUNT IS REMITTED TO THE AIRLINE) OF EQU AL AMOUNT. THUS, THE ENTIRE EXERCISE WOULD BE TAX NEUTRAL. 5.8 THEREFORE, CONSIDERING THE TOTALITY OF THE FAC TS AND CIRCUMSTANCES OF THE CASE, I AM INCLINED TO HOLD TH AT TDS CREDIT OF RS.2,75,78,008/- IS FULLY ALLOWABLE TO THE APPELLAN T UNDER THE ACT AND THE A.D. IS DIRECTED TO ALLOW THE CREDIT FOR TDS OF THE SAID AMOUNT. SUBJECT TO THE OBSERVATIONS MADE ABOVE, GROUNDS OF APPEAL NO.2 AND 3 ARE TREATED AS ALLOWED. ITA NO.3623/DEL/2011 10 6. THE LEARNED CIT-DR HEAVILY RELIED UPON THE RECTI FICATION ORDER PASSED UNDER SEC. 154 BY THE ASSESSING OFFICER ASSAILED THE IMPU GNED ORDER CONTENDING THAT THE LEARNED CIT(A) HAS MADE NO EFFORT TO SHOW AS TO HOW THE EXERCISE WAS TAX NEUTRAL AND MERELY CONCLUDING THAT THE EXERCISE WOULD BE TA X NEUTRAL DOES NOT ADDRESS THE ISSUE. IT WAS ALSO SUBMITTED THAT IT WAS NOT SUFFI CIENT COMPLIANCE OF THE DUTY IMPOSED BY THE STATUTE ON THE AUTHORITY WHILE ADJUD ICATING ON THE ISSUE. THE ISSUE, IT WAS HIS SUBMISSION, SHOULD BE SET ASIDE TO THE A O SO AS TO EXAMINE SPECIFICALLY THAT IF AT ALL IT IS TAX NEUTRAL THEN TO WHAT EXTEN T IT IS TAX NEUTRAL. IT WAS HIS SUBMISSION THAT COMPLETE FACTS AND THE ACTUAL POSIT ION OF THE AIRLINE, AGENTS OF THE ASSESSEE AND THE ASSESSEE HAS NOT BEEN LOOKED INTO AND GOING ON GENERAL ARGUMENTS AND HYPOTHESIS RELIEF HAS BEEN GRANTED. ACCORDINGL Y, LOOKING AT THE CLEAR MANDATE OF LAW AS PER THE RELEVANT PROVISION OF THE LAW THE ISSUE NEEDS TO BE RESTORED BACK. 6.1. LD. AR ON THE OTHER HAND HEAVILY RELIED UPON T HE IMPUGNED ORDER. IT WAS HIS SUBMISSION THAT NO EFFORT HAS BEEN MADE BY THE DEPA RTMENT TO SHOW WHAT IS THE ERROR IN THE IMPUGNED ORDER WHETHER ON FACT OR LAW. THE MODUS OPERANDI IN THE CASE OF THE GSA BUSINESS IS IDENTICAL. ALL SUCH G ENERAL SALES AGENT WHERE THEIR AGENTS DEAL WITH THE GSA WHO MAKES THE PAYMENT TO T HE AIRLINES FOLLOW THIS PRACTICE AND THE RECONCILIATION SHOWN BY THE ASSESS EE HAS NOT BEEN FAULTED WITH. NO CONTRARY VIEW OR FACT HAS BEEN BROUGHT ON RECORD . AS SUCH IT WAS URGED THAT THE IMPUGNED ORDER DESERVES TO BE UPHELD. ITA NO.3623/DEL/2011 11 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSEE HAS ADDRESSED THE CIT(A) IN REGARD TO ITS BUSINESS AS A GENERAL SALES AGENT OF MANY AIRLINES. THE MODE OF FUNCTIONING AS EXPLAINED IS THAT THE ASSESSEE HAS APPOINTED VARIOU S AGENTS ALL OVER THE COUNTRY AND THE AGENTS DEAL WITH THE ASSESSEE AND NOT WITH THE AIRLINES. THE ACCOUNTING TREATMENT FOLLOWED BY THE ASSESSEE AND THE AGENT VI S--VIS THE CLAIM OF TDS IS THAT ON A BOOKING HYPOTHETICALLY OF RS.100/- BY THE AGEN T DEDUCTION OF ITS COMMISSION OF RS.5/- IS MADE AND TDS AT 2.24% U/S 194C ON THE BALANCE AMOUNT OF RS.95/- IS MADE AND THE AGENT REMITS RS.92.87 TO THE ASSESSEE. IN VIEW OF THE FACT THAT THE ASSESSEE HAS TO PAY THE AIRLINES, THE ENTIRE SALE A MOUNT OF RS.95/- WHEREIN THE AMOUNT DEDUCTED BY THE AGENT IS ALSO INCLUDED IS PA ID BY THE ASSESSEE TO THE AIRLINE. AS THE AIRLINE IS NOT INTERESTED IN THE TDS AMOUNT DEDUCTED BY THE AGENT THUS IN EFFECT THE ASSESSEE FUNDS THE TDS PAID BY THE AGEN T. THEREAFTER, THE ASSESSEE IS ENTITLED TO THE COMMISSION OF RS.2.50 (2.5 % OF RS. 100/-) FROM THE AIRLINE ON WHICH THE AIRLINE DEDUCTS TDS AT 5.6 % U/S 194H OF THE IN COME TAX ACT AND REMITS THE BALANCE AMOUNT OF RS.2.36 TO THE ASSESSEE. THUS TH E ASSESSEE IS ENTITLED TO TDS AT 2.30 U/S 194C WHICH IS DEDUCTED BY THE AGENT AND RS .0.14 U/S 194H DEDUCTED BY THE AIRLINE. THE TDS CERTIFICATES ARE ISSUED IN TH E NAME OF THE ASSESSEE BY THE AGENT WHICH ARE CLAIMED BY THE ASSESSEE IN ITS RETU RN AND THUS THIS MONEY GETS LOCKED UP TILL SUCH TIME THE ASSESSEE GETS ITS REFU ND. THE CARGO SALES OF THE AIRLINES ARE ROUTED FROM THE ASSESSEES GOODS AND THE FUNDS COLLECTED FROM THE CARGO SALES IS ITA NO.3623/DEL/2011 12 RECEIVED BY THE ASSESSEE FROM VARIOUS AGENTS AND TH E ASSESSEE REMITS THE AMOUNT COLLECTED TO THE AIRLINES. IN VIEW OF THE FACT THA T THE ENTIRE AMOUNT IS REMITTED TO THE AIRLINES, IT IS NOT REFLECTED IN ASSESSEES P&L ACC OUNT AND ONLY THE GSA COMMISSION EARNED AND RECEIVED FROM THE AIRLINES ON THE CARGO SALES IS REFLECTED IN P&L ACCOUNT. IT HAS ALSO BEEN STATED ON BEHALF OF THE ASSESSEE THAT THIS METHOD OF ACCOUNTING IS BEING FOLLOWED BY THE GSA AND THEIR A GENTS IN INDIA WITHOUT ANY EXCEPTION. RELIANCE WAS PLACED UPON A SIMILAR CASE IN THE ASSESSEES SISTER CONCERN NAMELY M/S NATIONAL TRAVEL SERVICES (FIRM) IN 2004- 05 ASSESSMENT YEAR. THE ASSESSEE HAS ALSO STATED TO HAVE FILED RECONCILIAT ION OF TDS CERTIFICATES FOR 2004- 05 TO 2006-07 ASSESSMENT YEARS WHEREIN THE ASSESSME NT ORDERS PASSED U/S 143(3) OF THE ACT WERE RELIED UPON IN SUPPORT OF THE ASSERTIO N THAT THE AMOUNTS STAND RECONCILED. IT IS SEEN THAT THESE SUBMISSIONS HAVE BEEN ACCEPTED BY THE CIT(A). WE HAVE ALREADY REPRODUCED THE RELEVANT FINDINGS IN THE EARLIER PART OF THIS ORDER. ON A CONSIDERATION OF THE SAME, WE ARE OF THE VIEW THAT SINCE THE FINDINGS ARRIVED AT HAS NEITHER BEEN REBUTTED ON FACTS AND NO EVIDENCE HAS BEEN LED TO SHOW THAT EITHER THE MODUS OPERANDI FOLLOWED BY THE ASSESSEE WAS NOT FOLLOWED BY GSA AND THEIR AGENTS IN INDIA OR THAT ON ACCOUNT OF FOLLOWING THI S SYSTEM SOME AMOUNTS NOT INCLUDED IN THE TOTAL INCOME STOOD ADJUSTED WITH TH E TDS CONSIDERED. IN THE ABSENCE OF ANY REBUTTAL ON FACTS OR LAW, WE FIND NO GOOD REASON TO INTERFERE WITH THE FINDING ARRIVED AT IN THE IMPUGNED ORDER. BEIN G SATISFIED WITH THE REASONING AND FINDING, THE DEPARTMENTAL GROUND IS DISMISSED. ITA NO.3623/DEL/2011 13 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH OF APRIL 2013. SD/- SD/- (G.D. AGRAWAL) (DIVA SINGH) VICE PRESIDENT JUDICIAL MEMBER DATED: 30/04/2013 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REG ISTRAR ITAT NEW DELHI