TRAVELS AND SHIPPING P.LTD, MUMBAI V. ITO 2(3)-3, MUMBAI

ITA 3854/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1682 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-03-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M A GOHEL
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 3854/MUM./2011 (ASSESSMENT YEAR : 200708 ) M/S TRAVELS AND SHIPPING PVT. LTD. DARABASHWA HOUSE, NARROTTAM MARARJI MARG BALLARD ESTATE MUMBAI 400 001. .. APPELLANT V/S THE INCOME TAX OFFICER 2 ( 3) 3 MUMBAI. .... RESPONDENT PERMANENT ACCOUNT NUMBER AAACT1396H ASSESSEE BY : MR. M. A. GOHEL REVENUE BY : MR. MANOJ KUMAR DATE OF HEARING 0 4 .0 3 .2013 DATE OF ORDER 08.03.2013 ORDER PER AMIT SHUKLA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST ORDER DATED 03.02.2011 PASSED BY THE CIT (APPEALS)6, MUMBAI, F OR THE QUANTUM OF ASSESSMENT UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 200708. 2. THE ASSESSEE IS MAINLY AGGRIEVED BY DISALLOWANCE OF ` 7,34,393/ MADE UNDER SECTION 40(A)(IA). 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PR IVATE LIMITED COMPANY, AND IS ENGAGED IN THE BUSINESS OF CUSTOM HOUSE CLEA RING, FORWARDING AND SHIPPING AGENTS. M/S TRAVELS & SHIPPING PVT. LTD. 2 4. THE ASSESSING OFFICER, DURING THE COURSE OF ASSE SSMENT PROCEEDING, NOTED THAT ASSESSEE HAS NOT DEDUCTED TDS ON THE TRA NSPORTATION OF SHIPPING CHARGES PAID ON BEHALF OF THE ASSESSEES CLIENTS AN D ASSESSEES CLIENTS HAVE ALSO NOT DEDUCTED TDS FOR MAKING SUCH PAYMENT TO TH E ASSESSEE ON ACCOUNT OF SUCH CHARGES. IN RESPONSE TO THE SHOWCAUSE NOTI CE, THE ASSESSEE SUBMITTED THAT ASSESSEE HAS MADE THE PAYMENT TO THE SHIPPING COMPANY AND OTHER PARTIES FOR SHIPPING CHARGES, PORT CHARGE S AND OTHER KINDS OF CHARGES ON BEHALF OF ITS CLIENTS. THE DETAILS OF PA YMENT MADE TO THE VARIOUS PARTIES WERE ALSO FURNISHED. IT WAS FURTHER SUBMITT ED THAT THE BILLS/INVOICES RAISED BY THE SHIPPING COMPANY ARE IN THE NAME OF A SSESSEES CLIENTS. SINCE, THE ASSESSEE WAS ONLY ACTING AS INTERMEDIARY ON BEH ALF OF ITS CLIENTS, THEREFORE, THE PAYMENTS MADE ON BEHALF OF ITS CLIEN TS WERE NOT DEBITED AS EXPENSES IN PROFIT AND LOSS ACCOUNT. SINCE, THE ASS ESSEE HAS NOT CLAIMED EXPENSES ON ACCOUNT OF THESE PAYMENTS, THEREFORE, I T WAS NOT RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE IN TERMS OF SECTION 194C OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). RELIANCE WAS ALSO PLACE D ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V/S CARGO LINKERS REP ORTED IN (2009) 179 TAXMAN 151. THE ASSESSING OFFICER REJECTED THE ASSE SSEES CONTENTIONS ON THE GROUND THAT THE EXPENSES NOT DEBITED IN PROFIT AND LOSS ACCOUNT CANNOT BE THE REASON FOR NONDEDUCTION OF TAX, WHEREAS ASS ESSEE HAS PAID SUCH EXPENSES IN THE TERMS OF SECTION 194C, THEREFORE, A SSESSEE WAS RESPONSIBLE TO DEDUCT TAX. HE ALSO DISTINGUISHED THE DECISION O F DELHI HIGH COURT IN THE CASE OF CIT V/S CARGO LINKERS (SUPRA) AND MADE THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF ` 7,34,393/ ON ACCOUNT OF PAYMENT OF TRANSPORTATION AND SHIPPING CHARGES TO THE VARIOUS PARTIES. 5. THE LEARNED CIT(A) CONFIRMED THE SAID DISALLOWAN CE OF 7,34,313/ MADE UNDER SECTION 40(A)(IA), AND REJECTED THE ASSE SSEES CONTENTIONS AFTER OBSERVING AND HOLDING AS UNDER : I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE SU BMISSIONS MADE BY THE AUTHORISED REPRESENTATIVE BUT DO NOT FIND MERIT IN THEM. THE APPELLANT M/S TRAVELS & SHIPPING PVT. LTD. 3 HAS ADMITTEDLY MADE PAYMENTS FOR WHICH A CONSOLIDAT ED BILL WAS RAISED. THUS, IN VIEW OF CIRCULAR NO. 715 DATED 08.08.1995 THE AP PELLANT WAS BOUND TO DEDUCT TDS FROM THE GROSS AMOUNT OF THE BILL INCLUD ING REIMBURSEMENT OF EXPENSES. HENCE, THE NON DEDUCTION OF TDS ON THE EN TIRE BILL AMOUNT WOULD ATTRACT DISALLOWANCE IN TERMS OF THE PROVISIONS OF SECTION 40(A)(IA) IN VIEW OF THE LEGAL POSITION BROUGHT OUT ABOVE. MERE NON ROUT ING OF THOSE EXPENSES (IN RESPECT OF WHICH REIMBURSEMENT HAS BEEN RECEIVED FR OM THE CLIENTS) THROUGH THE PROFIT AND LOSS ACCOUNT WOULD NOT ABSOLVE THE A PPELLANT FROM THE IMPLICATIONS OF THE MISCHIEF OF SECTION 40(A)(IA). HENCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED AND THIS GROUND IS DISMISSED. 6. THE LEARNED COUNSEL, ON BEHALF OF THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS MAINLY ACTING AS AN INTERMEDIARY ON BEH ALF OF ITS CLIENTS AND IS MAKING THE PAYMENT ON BEHALF OF THEIR CLIENTS, WHIC H IS NOT DEBITED AS EXPENSES IN PROFIT AND LOSS ACCOUNT. EVEN THE BILLS /INVOICES RAISED BY THE SHIPPING COMPANY ARE IN THE NAME OF ASSESSEES CLIE NTS. THEREFORE, THERE WAS NO QUESTION OF DEDUCTING TDS UNDER SECTION 194C OF THE ACT. HE ALSO DREW OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT TO SHOW THAT, ASSESSEE HAS NOT CLAIMED ANY SUCH EXPENSES. HE ALSO RELIED UPON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT V/S CARGO LINKERS (SU PRA) AND OTHER ITAT CASES. ON THE OTHER HAND, LEARNED SENIOR DEPARTMENT AL REPRESENTATIVE STRONGLY RELIED UPON THE FINDING OF THE CIT(A) AND SUBMITTED THAT ONE SINGLE BILL HAS BEEN RAISED AND TDS SHOULD HAVE BEEN DEDUC TED ON THE ENTIRE AMOUNT OF THE BILL. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, AND ALSO PE RUSED THE RELEVANT FINDING OF THE ASSESSING OFFICER AS WELL AS THE LEA RNED CIT(A) AND THE MATERIAL ON RECORD. THE ASSESSEE IS PROVIDING CLEAR ING AND FORWARDING SERVICES TO ITS CLIENT FOR CLEARING OF EXPORT/IMPOR T CONSIGNMENTS, FOR WHICH IT HAS BEEN MAKING PAYMENTS ON ACCOUNT OF VARIOUS CHAR GES ON BEHALF OF ITS CLIENT. THE SAME IS RECOVERED FROM ITS CLIENT ON AC TUAL BASIS. THE DOCUMENTS/CHALLANS FOR THE ABOVE PAYMENTS ARE ALSO ISSUED IN THE NAME OF THE ASSESSEES CLIENTS AND SUCH PAYMENTS MADE ON TH EIR BEHALF HAS NEITHER M/S TRAVELS & SHIPPING PVT. LTD. 4 BEEN DEBITED NOR CLAIMED AS EXPENSES IN THE PROFIT AND LOSS ACCOUNT. THUS, THE ASSESSEE IS ACTING MERE AS CONDUIT OR INTERMEDI ARY AND WHATEVER PAYMENTS ARE MADE TO THE CONCERNED SHIPPING COMPANY AND TO VARIOUS OTHER GOVERNMENT AGENCIES, THE SAME IS RECOVERED BY THE C LIENTS. IT IS NEITHER THE CASE OF THE ASSESSING OFFICER NOR OF THE CIT(A) THA T ASSESSEE HAS CLAIMED ANY SUCH EXPENSES IN THE PROFIT AND LOSS ACCOUNT. THESE ARE MAINLY REIMBURSEMENT OF THE EXPENSES. ONCE ANY EXPENSE HAS NOT BEEN CLAIMED AS DEDUCTION, THE PROVISION OF SECTION 40(A)(IA) CANNO T BE INVOKED. THE DISALLOWANCE CANNOT BE SUSTAINED IN THIS CASE FOR T HE REASON THAT, FIRSTLY, ASSESSEE CANNOT BE HELD TO A PERSON RESPONSIBLE FOR DEDUCTION OF TAX AT SOURCE IN TERMS OF SECTION 194C OF THE ACT AS THE A SSESSEE WAS ONLY ACTING AS A FACILITATOR OR INTERMEDIARY AND THERE IS NO PR IVITY OF CONTRACT BETWEEN THE ASSESSEE AND ITS CLIENTS AND SECONDLY, ONCE EXPENSE S HAS NOT BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT, THE PROVISIONS OF S ECTION 40(A)(IA) CANNOT BE INVOKED, BECAUSE SECTION 40 IS APPLICABLE ONLY IN R ELATION TO AMOUNTS CLAIMED AS DEDUCTION IN SECTIONS 30 TO 38, WHILE COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND P ROFESSION. THUS, SUCH A DISALLOWANCE CANNOT BE MADE IN THE HANDS OF THE ASS ESSEE UNDER SECTION 40(A)(IA). THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT V/S CARGO LINKERS (SUPRA) AND ALSO THE DECISION OF CIT V/S HA RVINDRA SINGH REPORTED IN (2013) 30 TAXMANN.COM 245 (DELHI) ALSO LAYS DOWN TH E SOME PREPOSITION. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE STANDS ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH MARCH, 2013 SD/ B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/ AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED: 08 TH MARCH, 2013 M/S TRAVELS & SHIPPING PVT. LTD. 5 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. TRUE COPY BY ORDER S.K. SHARMA (DY./ASSTT. REGISTRAR) ITAT, MUMBAI