ITO, New Delhi V. M/s. Opera Global Pvt. Ltd., New Delhi

ITA 3980/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58510 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY SENIOR
• Assessee Lawyers: MRS RANO JAIN CAS
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3980/DEL./2010 (ASSESSMENT YEAR : 2006-07) ITO, WARD 13 (4), VS. M/S. OPERA GLOBAL PVT. LTD ., NEW DELHI. 1099, VIKAS KUNJ, VIKAS PURI, NEW DELHI 110 018. (PAN : AAACO7607G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN & MRS. RANO JAIN, CAS REVENUE BY : SMT. SRUJANI MOHANTY, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE ORDER OF CIT (APPEALS)-XVIII, NEW DELHI DATED 03.05.2010. THE G ROUNDS OF APPEAL READ AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF RS.14,57,703/- MADE U/S 40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE ON PAYMENTS OF CLEARING & FORWARDING CHARGES . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF RS.77,69,537/- MADE U/S 40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE ON PAYMENTS OF FREIGHT & CARTAGE OUTWARD. ITA NO.3980/DEL./2010 2 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE BUSINESS OF MANUFACTURING AND EXPORT OF GARMENTS. THE RETURN O F INCOME WAS FILED ON 30 TH NOVEMBER, 2006 DECLARING A LOSS OF RS.2,311/-. WH ILE PASSING THE ORDER UNDER SECTION 143(3), THE ASSESSING OFFICER MADE AD DITION UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE ON PAY MENTS OF CLEARING AND FORWARDING CHARGES OF RS.14,57,703/- AND ON THE PAY MENT OF FREIGHT AND CARTAGE OUTWARD. THE CIT (A) HAS GRANTED THE RELIE F BY HOLDING AS UNDER :- 5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AS WELL AS THE SUBMISSIONS MADE BY THE LD. AR ALONG WITH TH E JUDICIAL DECISIONS CITED BY HIM. THE AO HAS DISALLOWED THE A PPELLANT'S CLAIM OF DEDUCTION OF RS.14,57,703/- ON ACCOUNT OF CLEARING AND FORWARDING CHARGES AND RS.77,69,537/- ON ACCOUN T OF FREIGHT OUTWARD CHARGES U/S 40A(IA) DUE TO NON-DEDU CTION OF TDS ON THE ABOVE PAYMENTS MADE BY THE APPELLANT. IT IS ARGUED BY THE ID. AR THAT THE ABOVE PAYMENT OF RS.7 7,69,537/- HAS BEEN MADE BY THE APPELLANT ON THE BASIS OF SEPA RATE BILLS RAISED BY THE FORWARDING AGENT TOWARDS REIMBURSEMEN T OF ACTUAL AND EXACT AMOUNT OF FREIGHT CHARGES PERTAINI NG TO THE AIRLINES FOR EXPORT OF THE GOODS. IT IS ARGUED THAT THERE IS NO LIABILITY FOR DEDUCTION OF TDS ON THE ABOVE PAYMENT S U/S 194C. IT IS ALSO ARGUED THAT PROVISION OF SECTION 4 0A(IA) DOES NOT APPLY TO SUCH PAYMENTS MADE TOWARDS REIMBURSEME NT OF ACTUAL FREIGHT CHARGES PAID TO THE AIRLINES. THE ID . AR HAS ALSO RELIED UPON A LARGE NUMBER OF CASE LAWS IN SUPPORT OF HIS CLAIM. AS REGARDS THE PAYMENT OF RS.14,57,703/- REP RESENTING CLEARING AND FORWARDING CHARGES, IT IS ARGUED THAT THE ABOVE AMOUNT WAS PAID TO VARIOUS PARTIES AS PER BILLS AND NONE OF THE PAYMENTS WERE ABOVE RS.50,000/- AND HENCE THE SAID PAYMENTS ARE NOT LIABLE TO TDS U/S 194C OF THE ACT. ITA NO.3980/DEL./2010 3 5.1. ON CAREFUL EXAMINATION OF THE MATTER, I FIND T HAT PAYMENTS MADE ON THE BASIS OF SEPARATE BILLS RAISED FOR REIMBURSEMENT OF ACTUAL FREIGHT CHARGES PAID TO AIR LINES ARE NOT COVERED BY THE PROVISIONS OF SECTION 194C READ WITH SECTION 40A(IA) OF THE ACT. I ALSO FIND THAT IN THE RELATE D CASE OF ITO VS DR. WILLIAM SCHWABE INDIA (P) LTD. (2005) 3 SOT 71 RELIED UPON BY THE LD AR, THE JURISDICTIONAL HIGH COURT HA S HELD THAT THE REIMBURSEMENT OF ACTUAL VEHICLE EXPENSES IS NOT COVERED WITHIN THE AMBIT OF SECTION 194J, WHICH IS AKIN TO THE PROVISIONS OF SECTION 194C. IN THE SAID ORDER, THE HON'BLE DELHI HIGH COURT HAS ALSO TAKEN THE SUPPORT OF THE CBDT C IRCULAR NO. 715 DATED 08.08.1995 AS PER WHICH TDS IS REQUIR ED TO BE MADE ONLY IN THE CASES WHERE BILLS ARE RAISED FOR G ROSS AMOUNT INCLUSIVE OF PROFESSIONAL FEES AS WELL AS REIMBURSE MENT OF ACTUAL EXPENSES AND ACCORDINGLY NO TDS IS REQUIRED TO BE MADE WHEN BILLS ARE RAISED SEPARATELY BY THE AGENT FOR REIMBURSEMENT OF ACTUAL EXPENSES INCURRED BY IT. TH E HON'BLE HIGH COURT HAS ALSO OBSERVED THAT THERE IS NO ELEME NT OF PROFIT INVOLVED IN SUCH BILLS RELATING TO REIMBURSEMENT OF ACTUAL EXPENSES. THE RATIO OF THE ABOVE JUDGEMENT IS DIREC TLY APPLICABLE TO THE INSTANT CASE. SIMILAR DECISION HA S ALSO BEEN TAKEN BY THE HON'BLE ITAT IN A NUMBER OF CASES CITE D BY THE LD. AR. THUS, AS PER THE STATUTORY PROVISIONS CONTA INED IN SECTION 194C READ WITH SECTION 40A(IA) OF THE ACT A ND THE CBDT'S CIRCULAR NO. 715 DATED 08.08.1995 AS WELL AS THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT, THE IMPUGNE D DISALLOWANCE OF RS.77,69,537/- CANNOT BE SUSTAINED. FURTHER, THE DISALLOWANCE OF RS.14,57,703/- ALSO CANNOT BE S USTAINED AS NO PAYMENT HAS BEEN MADE TO ANY PARTY / AGENT IN EX CESS OF RS.50,000/- AND HENCE THE SAID PAYMENTS ARE NOT SUB JECT TO TDS AS PER THE EXPRESS PROVISIONS OF SECTION 194C(5 ). THE IMPUGNED ADDITION OF RS.92,27,240/- IS THEREFORE DE LETED. 3. LEARNED DR RELIED ON THE ORDER OF ASSESSING OFFI CER. LEARNED AR RELIED ON THE ORDER OF CIT (A) AND ALSO PLEADED THA T THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE I N ITA NO.3645/DEL/2011 FOR ASSESSMENT YEAR 2008-09 IN DELHI BENCH E, NEW DELHI ORDER DATED 30.09.2011 AND THE ORDER OF ITAT IN THE CASE OF ITO VS. M/S. ONS CREATIONS ITA NO.3980/DEL./2010 4 PVT. LTD. IN ITA NO.3981/DEL/2010 FOR ASSESSMENT YE AR 2006-07 VIDE ORDER DATED 13.05.2011. 4. WE HAVE HEARD BOTH THE SIDES. WE FIND THAT THE CLEARING AND FORWARDING CHARGES OF RS.14,57,703/- WERE PAID TO V ARIOUS PARTIES AND NONE OF THE PARTIES WAS PAID MORE THAN RS.50,000/- DURING T HE YEAR WHICH IS EVIDENT FROM PAGE 30 & 31 OF THE PAPER BOOK WHEREIN THE PAR TY-WISE DETAILS OF PAYMENT HAVE BEEN PROVIDED. KEEPING THESE FACTS IN VIEW, WE SUSTAIN THE ORDER OF THE CIT (A) ON THE ISSUE. AS FAR AS THE P AYMENT OF FREIGHT AND CARTAGE OUTWARD IS CONCERNED, THIS ISSUE IS DIRECTL Y COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE IN ITA NO.3645/DEL/2011, CITED SUPRA, WHEREIN THE ITAT HAS HELD AS UNDER :- 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPE ALS), IT WAS ARGUED THAT THE PAYMENT HAS BEEN MADE BY THE AS SESSEE ON THE BASIS OF SEPARATE BILLS RAISED BY THE FORWARDIN G AGENT TOWARDS REIMBURSEMENT OF ACTUAL AND EXACT AMOUNT OF FREIGHT CHARGES PERTAINING TO THE AIRLINES FOR EXPORT OF THE GOODS. IT WAS FURTHER ARGUED THAT THERE IS NO LIABILITY FOR DEDUCTION OF TDS ON THE ABOVE PAYMENTS U/S 194C. IT WAS FURTHER ARGUED THAT THAT PROVISION OF SECTION 40(A)(IA) DOES NOT APPLY TO SU CH PAYMENTS MADE TOWARDS REIMBURSEMENT OF ACTUAL FREIGHT CHARGE S PAID TO THE AIRLINES. ASSESSEE FURTHER RELIED UPON THE CERT AIN CASE LAWS IN THIS REGARD. ON CONSIDERING THE ISSUE, THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- ON CAREFUL EXAMINATION OF THE MATTER, I FIND THAT THE PAYMENTS MADE ON THE BASIS OF SEPARATE BILLS RAISED FOR REIMBURSEMENT OF ACTUAL FREIGHT CHARGES PAID TO AIR LINES ARE NOT COVERED BY THE PROVISIONS OF SECTION 194C R EAD WITH SECTION 40(A)(IA) OF THE ACT. I ALSO FIND THAT IN THE RELATED CASE OF ITO VS. DR. WILLIAN SCHWABLE INDIA (P) LTD. (2005) 3 SOT 71, RELIED UPON BY THE A.R., THE ITA NO.3980/DEL./2010 5 JURISDICTIONAL HIGH COURT HAS HELD THAT THE REIMBUR SEMENT OF ACTUAL VEHICLE EXPENSES IS NOT COVERED WITHIN TH E AMBIT OF SECTION 194J, WHICH IS AKIN TO THE PROVISIONS OF SECTION 194C. IN THE SAID ORDER, THE HONBLE DELHI HIGH COU RT HAS ALSO TAKEN THE SUPPORT OF CBDT CIRCULAR NO. 715 DAT ED 08.8.1995 AS PER WHICH TDS IS REQUIRED ONLY IN CASE S WHERE BILLS ARE RAISED FOR GROSS AMOUNT INCLUSIVE O F PROFESSIONAL FEES AS WELL AS REIMBURSEMENT OF ACTUA L EXPENSES AND ACCORDINGLY NO TDS IS REQUIRED TO BE M ADE WHEN BILLS ARE RAISED SEPARATELY BY AGENTS FOR REIMBURSEMENT OF ACTUAL EXPENSE INCURRED BY THEM. T HE HONBLE HIGH COURT HAS ALSO OBSERVED THAT THERE IS NO ELEMENT OF PROFIT INVOLVED IN SUCH BILLS RELATING T O REIMBURSEMENT OF ACTUAL EXPENSES. THE RATIO OF THE ABOVE JUDGEMENT IS APPLICABLE TO THE INSTANT CASE. SIMILA R DECISION HAS ALSO BEEN TAKEN BY THE HONBLE ITAT IN A NUMBER OF CASES CITED BY THE LD. AUTHORISED REPRESENTATIVE. THUS, AS PER THE STATUTORY PROVISIO NS CONTAINED IN SECTION 194C READ WITH SECTION 40(A)(I A) OF THE ACT AND THE CBDTS CIRCULAR NO. 715 DATED 08.8.1995 AS WELL AS THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT, THE IMPUGNED DISALLOWANCE OF RS.48,61,509/ - CANNOT BE SUSTAINED. ALSO SIMILAR DISALLOWANCE HAS BEEN DELETED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVIII IN THE CASE OF APPELLANT, VIDE HIS ORDER DATED 03.5.2010 FOR THE A.Y. 2006-07. THUS LOOKING INTO THE FACTS OF THE CASE AND FOLLOWING THE DECISION OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVIII, AS WELL AS THE LAW LAID DOWN IN THE MATTER, THE SAME IS DELETE D. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. CO UNSEL OF THE ASSESSEE HAS CONTENDED THAT THIS TRIBUNAL IN ITA NO . 3981/DEL/2010 FOR ASSESSMENT YEAR 2006-07 IN THE CA SE ITO VS. M/S ONS CREATIONS PVT. LTD. VIDE ORDER DATED 13/5/2 011 HAS CONSIDERED THE IDENTICAL ISSUE AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 6.1 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME ITA NO.3980/DEL./2010 6 TAX (APPEALS) IS CORRECT IN HOLDING THAT PROVISION OF SECTION 40(A)(IA) DOES NOT APPLY TO SUCH PAYMENTS MADE TOWA RDS REIMBURSEMENT OF ACTUAL FREIGHT CHARGES PAID TO THE AIRLINES. IN THIS REGARD, RELIANCE OF CASE ITO VS. DR. WILLIAN S CHWABE INDIA (P) LTD. (2005) 3 SOT 71 ALSO RELEVANT AND SUPPORTS THE CASE OF THE ASSESSEE. FURTHER, CBDT CIRCULAR NO. 715 DATED 08.8.1995 PROVIDE THAT THE TDS IS REQUIRED TO BE MADE, ONLY I N CASES WHERE THE BILLS ARE RAISED FOR GROSS AMOUNT INCLUSIVE OF PROFESSIONAL FEES AS WELL AS REIMBURSEMENT OF ACTUAL EXPENSES AN D ACCORDINGLY NO TDS IS REQUIRED TO BE MADE WHEN BILL S ARE RAISED SEPARATELY BY AGENTS FOR REIMBURSEMENT OF ACTUAL EX PENSES INCURRED BY THEM. ACCORDINGLY, NO TDS IS REQUIRED T O BE RAISED. THUS, WE FIND OURSELVES IN AGREEMENT WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT DISALLOWA NCE OF RS.48,61,509/- CANNOT BE SUSTAINED. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THIS GR OUND OF REVENUES APPEAL ALSO. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF JANUARY, 2012. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 13 TH DAY OF JANUARY, 2012/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.