VOLKART FLEMING SHIPPING & SERVICES LTD, MUMBAI V. DCIT 2(3), MUMBAI

ITA 417/MUM/2012

• Counselvise Citation: 41719914 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 02-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 19-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADIP SHAURYA ARYA
• Assessee Lawyers: MILIN THAKUR
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 37; 154; 194C

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - F BENCH. . , !'# !$%&' , %! () BEFORE S/SH.D.MANMOHAN, VICE-PRESIDEN T & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.417/MUM/2012, ! ! ! ! * * * * / ASSESSMENT YEAR-2008-09 VOLKART FLEMING SHIPPING & SERVICES LTD.CASSINATH BUILDING, A K NAYAK MARG, FORT,MUMBAI-1 VS. D C I T-2(3) AAYAKAR BHAVAN, M. K ROAD,MUMBAI-20 PAN:AAACV1843P ( !+, / APPELLANT) ( -.+, / RESPONDENT) !$) / 0 % / REVENUE BY : SHRI PRADIP SHAURYA ARYA !12 !12 !12 !12 0 0 0 0 % %% % / ASSESSEE BY : SHRI MILIN THAKUR ! ! ! ! / // / 2! 2! 2! 2! / DATE OF HEARING : 25-06-2014 3* ! / 2! / DATE OF PRONOUNCEMENT : 02-07-2014 , 1961 / // / !! !! !! !! 254 )1( % %% % &24 &24 &24 &242 22 2 (%5 (%5 (%5 (%5 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM %! %! %! %! () () () () !$%&' !$%&' !$%&' !$%&' % %% % ! ! ! ! : CHALLENGING THE ORDER DATED 16.11.2011 OF CIT(A)-16 MUMBAI,ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: GROUND L:DISALLOWANCE UNDER SECTION 40(A)(IA) TOWAR DS CONTAINER (LOADED) TRANSPORTATION CHARGES 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -6, MUMBAI {'THE CIT(A)'] ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER('AO'} IN DISALLOWING THE CONTAINER LOADED TRANSPORTATION CHARGES OF RS. 6, 49, 485 PAID TO CO NTAINER CORPORATION OF INDIA LIMITED (CONCOR) UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961 {'THE ACT'}. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE AND OUGH T TO HAVE HELD THAT THE CONTAINER LOADED TRANSPORTATION CHARGES ARE IN THE NATURE OF FREIGHT PAID TO RAILWAYS AND THEREFORE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE FACTS A ND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT(A) ERRED IN NOT SPECIFICALLY ALL OWING THE DEDUCTION OF RS.7,62,096 (RS.3,58, 898 PLUS RS.4,03,198) AND OUGHT NOT TO HAVE DIRECTE D THE DETAILS TO THE AO FOR VERIFICATION. 4. YOUR APPELLANT PRAYS THAT THE SAID DISALLOWANCE OUGHT TO BE DELETED. GROUND 2: DISALLOWANCE UNDER SECTION 40(A)(UJ) TOWA RDS SHIP HANDLING CHARGES 5. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF AO IN DISALLOWING THE SHIP HANDLING CHARGES OF RS. 2. 09. 644 UNDER THE PROVISIONS OF S ECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961 ('THE ACT'). 6. THE LEARNED CIT(A) FAILED TO APPRECIATE AND OUGH T TO HAVE HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE SHIP HANDLING C HARGES. 7. YOUR APPELLANT PRAYS THAT THE SAID DISALLOWANCE OUGHT TO BE DELETED. GROUND 3: SET-OFF OF LOSSES 8. THE LEARNED CIT(A) ERRED IN NOT SPECIFICALLY DIR ECTING THE AO TO ALLOW THE GROUND IN RESPECT OF SETTING OFF OF THE BROUGHT FORWARD BUSINESS LOSSES OF RS. 5,87,723 AND UNABSORBED DEPRECIATION OF 2 RS. 5,12,041 FOR AY 2007-08 AGAINST THE BUSINESS IN COME. GROUND 4: COMPUTATION OF TAX 9. THE LEARNED CIT(A) ERRED IN NOT SPECIFICALLY DIR ECTING THE AU TO ALLOW THE GROUND IN RESPECT OF RE-COMPUTING THE TOTAL TAX LIABILITY WITHOUT CONSID ERING SURCHARGE FOR THE YEAR & CONSEQUENTIAL EDUCATION CESS @ 2% THEREON ON THE AMOUNT OF SURCHA RGE. GROUND 5: TDS CREDIT 10. THE LEARNED CIT(A) ERRED IN NOT SPECIFICALLY DI RECTING THE AO TO GRANT THE CREDIT FOR TDS AT RS. 23,01,303 AS CLAIMED IN THE RETURN OF INCOME. GROUND 6: INTEREST UNDER SECTION 234C 1L.THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE AO TO COMPUTE INTEREST UNDER SECTION 234C BASED ON THE RETURNED INCOME. GENERAL 12.EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHO UT PREJUDICE TO THE OTHER. 13. THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER OF AMEND TO THE GROUNDS OF APPEAL. DURING THE COURSE OF HEARING BEFORE US,AR DID NOT P RESS GROUND NO. 9 TO 13, HENCE, SAME STAND DISMISSED AS NOT PRESSED. 2 .ASSESSEE-COMPANY, FILED ITS RETURN OF INCOME ON 30 .09.2008 DECLARING TOTAL INCOME OF RS.66,55,0301-.ASSESSING OFFICER(AO)PASSED AN ORDER U/S.143(3) OF THE ACT ON 21.10.2010 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 93,76 ,0201-. 3 .FIRST GROUND(GAO ITO-L) OF APPEAL IS ABOUT DISALLO WANCE MADE U/S. 40(A)(IA) OF THE ACT TOWARDS CONTAINER (LOADED)TRANSPORTATION CHARGES. DURING TH E ASSESSMENT PROCEEDINGS,AO FOUND THAT ASSESSEE HAD DEBITED A SUM OF RS. 34 CRORES UNDER T HE HEAD YARD RELATED EXPENSES.HE DIRECTED THE ASSESSEE TO FURNISH DETAILS THEREOF ALONG WITH THE PROOF OF TAX DEDUCTED AT SOURCE (TDS).IN RESPONSE THERETO THE ASSESSEE FILED DETAILS AS DESI RED BY THE AO.HE FOUND THAT THE IT HAD NOT DEDUCTED TAX FOR CONTAINER TRANSPORTATION CHARGES ( CTC) OF RS. 14,11,581/-.HE DIRECTED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE EXPENSES INCUR RED BY IT UNDER THE HEAD CTC SHOULD NOT BE DISALLOWED. THE ASSESSEE ARGUED THAT PROVISIONS OF CHAPTER XVII B WERE NOT APPLICABLE IN RESPECT OF THE ABOVE EXPENSES. AFTER CONSIDERING TH E REPLY OF THE ASSESSEE AND COPIES OF BILLS- CUM-REPLIES ISSUED BY THE CONTAINER CORPORATION OF INDIA LTD.(CONCOR),HE HELD THAT ASSESSEE HAD BEEN PAYING FREIGHT CHARGES AND TERMINAL HANDLI NG CHARGES, THAT THE TERMINAL HANDLING CHARGES WERE PROFESSIONAL IN NATURE,THAT TAX WAS TO BE DEDUCTED AT SOURCE,THAT TDS WAS ALSO TO BE MADE FOR CTC,THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE FOR RS.16.21IAKHS.FINALLY,HE MADE A DISALLOWANCE OF RS.2.09 LAKHS AND RS.14.11LA KHS UNDER THE HEAD SHIP HANDLING CHARGES(SHC) AND CTC RESPECTIVELY U/S. 40(A)(IA) OF THE ACT. 4 .ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY (F AA).BEFORE HIM IT WAS ARGUED THAT THE EXPLANATION (IV) TO SECTION 194C OF THE ACT EXCLUDED CARRIES OF GOODS BY RAILWAY FROM THE DEFINITION OF WORK, THAT PAYMENTS TO SHC E XCLUDED AMOUNTS PAID TO SEVERAL INDEPENDENT PARTIES THAT WERE BELOW THE SPECIFIED MONETARY LIMI TS OF THE SAID SECTION. FAA ASKED THE ASSESSEE TO PRODUCE THE EVIDENCES OF PAYMENT MADE TO RAILWAY VIDE HIS NOTE SHEETS ENTRIES DATED 17.08. 2011, 15.09.2011, 18.10.2011 AND 15.11.2011. ON 16. 11.2011 ASSESSEE SUBMITTED THAT OUT OF THE TOTAL AMOUNT OF RS. 14.11 LAKHS TOWARDS CTC PAID TO CONCOR IT HAD SUBMITTED BILL OF RS. 3.58 LAKHS, THAT PAYMENTS OF BALANCE AMOUNT OF RS. 6.941 AKHS WERE NOT TRACEABLE AND THEREFORE, COULD NOT BE PRODUCED BEFORE HIM,THAT CTC PAID TO CONCOR WERE IN THE NATURE OF FREIGHT. 3 AFTER CONSIDERING THE REPLY OF THE ASSESSEE, FAA HE LD THAT ASSESSEE HAD FAILED TO PRODUCE THE BILL OF RS.6,49,485/-,THAT THOSE PAYMENTS WERE NOT MADE TO RAILWAYS OR CONCOR. HE CONFIRMED THE ADDITION OF RS. 6.49 LAKHS AND PARTLY ALLOWED THE A PPEAL OF THE ASSESSEE.HE FURTHER DIRECTED THE ASSESSEE TO PRODUCE BILLS OF BALANCE AMOUNT BEFORE THE AO SHOWING PAYMENTS TO CONCORI RAILWAYS.HE ALSO DIRECTED THE AO TO VERIFY THE SAME AND ALLOWED/DISALLOWED THE AMOUNT IN QUESTION U/S.40(A)(IA),AS THE PAYMENTS TO CARRIES O F GOODS BY RAILWAY WAS EXCLUDED FROM THE PURVIEW OF DEFINITION WORK.HE ALSO HELD THAT IDS WA S NOT DEDUCTIBLE ON THE PAYMENTS MADE TO RAILWAYS/CONCOR. 4.1 .WITH REGARD TO THE SHC,HE HELD THAT THOSE WERE FOR THE USE OF PROFESSIONAL SERVICES OF SHIP AGENTS,THAT TDS WAS TO BE MADE ON SUCH PAYMENTS, TH AT THE ASSESSEE HAD FAILED TO GIVE THE LIST AND DETAILS OF PAYMENTS OF THE PERSONS TO WHOM PAYM ENT BELOW SPECIFIED MONETARY LIMIT OF SECTION 194C OF THE ACT WAS MADE, THAT THE LEDGER A CCOUNT OF SHC DID NOT CONTAIN FULL DETAILS, THAT IT DID NOT SHOW THE AMOUNT OF PAYMENT MADE TO EACH PERSON DURING THE YEAR. HE FINALLY HELD THAT NO EVIDENCE OF PAYMENT MADE TO EACH PARTY DURI NG THE YEAR HAD BEEN FURNISHED SO THE PLEA TAKEN BY THE ASSESSEE WAS NOT ALLOWABLE. HE CONFIRM ED THE ORDER PASSED BY THE AO. 5 .BEFORE US, AUTHORISED REPRESETATIVE(AR)STATED THAT PAYMENT MADE TO RAILWAY/CONCOR WERE NOT COVERED BY THE PROVISIONS OF SECTION 194C OF TH E ACT, THAT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE NOT APPLICABLE TO THE FACTS AND CIRCUM STANCES OF THE CASE, THAT THE FAA HAD NOT SPECIFICALLY ALLOWED THE DEDUCTION OF RS.7.62 LAKHS .DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAD ASKED THE ASSESSEE TO PRODUCE THE EVIDENCES OF PAYMENT MADE TO RAILWAY/CONCOR ON MORE THAN ONE OCCASIONS AND ASSESSEE HAD, ON 16.11.2011, ADMITTED THAT IT WAS NOT IN A POSITION TO SUBMIT THE BILLS OF RS. 6.49 LAKHS. BEFORE US ALSO, AR FAIRLY CONCEDED THAT EVEN ON TODAY IT WAS NOT POSSIBLE FOR THE ASSESSEE TO PRODUCE THE BILLS FOR RS. 6,49,485/-. CONSIDERING THESE FACTS, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES N OT SUFFER FROM ANY LEGAL INFIRMITY. HE HAD DISALLOWED ONLY THAT EXPENSES FOR WHICH A CLAIM WAS MADE BY THE ASSESSEE BUT THAT WAS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCES. PROVISIONS OF SECTION 37 ARE VERY CLEAR IN THIS REGARD- THEY REQUIRE THE ASSESSEE TO PRODUCE NECESSARY EVID ENCES/DOCUMENTS WHENEVER IT MAKES A CLAIM OF ANY EXPENDITURE.AS THE ONUS WAS ON THE ASSESSEE TO SUBSTANTIATE THE CLAIM MADE BY IT AND IT DID NOT DISCHARGE THE SAME, SO THE FAA WAS LEFT THA T NO OPTION BUT TO CONFIRM THE DISALLOWANCE MADE BY THE AO. IN OUR OPINION, HIS DIRECTION TO TH E AO TO ALLOW THE EXPENDITURE AFTER MAKING VERIFICATION OF THE BILLS IS AS PER LAW. THE ASSESS EE HAD CLAIMED THAT IT HAD MADE PAYMENTS TO RAILWAY/CONCOR,SO IT WAS THE DUTY OF THE ASSESSEE T O SUPPORT ITS CLAIM. THEREFORE, IN OUR OPINION, DIRECTIONS GIVEN BY THE FAA TO THE AO AND THE ASSESSEE DO NOT REQUIRE ANY INTERFERENCE FROM OUR SIDE. GROUNDS NO. 1 TO 4 ARE DECIDED AGAIN ST THE ASSESSEE-COMPANY. 7 .GROUND NO. 5 TO 7 ARE ABOUT DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT TOWARDS SHC OF RS. 2. 09 LAKHS,AS STATED EARLIER.DURING THE COURSE OF HEA RING BEFORE US,AR FAIRLY CONCEDED THAT ASSESSEE WAS NOT IN A POSITION TO PROVE THE CLAIM THAT THE P AYMENTS MADE TO VARIOUS PARTIES WAS BELOW MONETARY LIMIT,AS ENVISAGED BY THE PROVISIONS OF SE CTION 194C OF THE ACT.DR SUPPORTED THE ORDER OF THE FAA. 4 IN OUR OPINION,THE FAA HAS RIGHTLY DISMISSED THE AP PEAL AND HAD CONFIRMED THE ADDITION MADE BY THE AO,AS THE ASSESSEE WAS NOT IN A POSITION TO SUP PORT HIS CLAIM.IN THE CASE OF RAMANAND SAGAR (256 ITR134),HON'BLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER: 'SECTION 37 OF THE INCOME-TAX ACT, 1961, DEALS WITH THE QUESTION RELATING TO THE ALLOWABILITY OF THE EXPENDITURE INCURRED FOR THE PURPOSES OF BUSINESS. THE ONUS OF PROOF IS UPON THE ASSESSEE TO PROVE EACH OF THE FOLLOWING INGREDIENTS BEFORE THE EXPEND ITURE CAN BE ALLOWED AS DEDUCTION: (A) THE ITEM OF EXPENDITURE MUST NOT BE OF THE NATURE DESCRIBED UNDER SECTIONS 30 TO 36 OF THE ACT; (B) THE ITEM OF EXPENDITURE MUST NOT BE IN THE NATURE OF CAPITAL OR PERSONAL EXPENSES OF THE ASSESSEE; (C) THE EXPENDITURE MUST BE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION. IF THE ASSESSEE/AILS TO SATISFY ANY OF THESE TESTS, THE EXPENDITURE CLAIMED IS NOT ALLOWABLE.' RESPECTFULLY.FOLLOWING THE ABOVE DECISION,WE CONFIR M THE ORDER OF THE FAA. GROUNDS NO. 5 TO 7 ARE DECIDED AGAINST THE ASSESSEE. 8 . EXT GROUND OF APPEAL IS ABOUT SETTING OFF OF THE BROUGHT FORWARD BUSINESS LOSS OF RS. 5.87 LAKHS AND UNABSORBED DEPRECIATION OF RS. 5.12 LAKHS FOR T HE A Y 2007-08 AGAINST THE BUSINESS INCOME FOR THE YEAR UNDER APPEAL. BEFORE US, AR ARGUED THA T SPECIFIC GROUND WAS TAKEN BEFORE THE FAA (GROUND OF APPEAL NO.3) IN THIS REGARD, THAT FAA HA D NOT ADJUDICATED THE ISSUE WHILE PASSING THE ORDER ON 16.11.2011, THAT FAA HAD HELD THAT THE ISS UES RELATED TO MISTAKES APPARENT FROM THE RECORD, THAT THE ASSESSEE HAD FILED AN APPLICATION U/S. 154 OF THE ACT ON 22.11.2010, THAT HE DIRECTED THE AO TO RECTIFY THE MISTAKE.DR STATED TH AT CLAIM FOR CARRY FORWARD WAS NOT MADE IN PART IV OF THE RETURN OF INCOME.IN THE REJOINDER,AR STATED THAT CLAIM WAS MADE IN THE COMPUTATION OF INCOME AS WELL AS IN THE PART IV OF THE RETURN. 9 .WE HAVE PERUSED THE MATERIAL ON RECORD.WE FIND THA T THE CLAIM FOR CARRYING FORWARD OF LOSS WAS MADE BY THE ASSESSEE AS PER THE PROVISIONS OF LAW I N THE RETURN OF INCOME AND IN THE COMPUTATION ALSO. WE ARE OF THE OPINION THAT ONCE A SPECIFIC GR OUND WAS TAKEN BY THE ASSESSEE ABOUT CARRYING FORWARD OF LOSS OF EARLIER YEAR AGAINST THE BUSINES S INCOME FOR THE YEAR UNDER APPEAL,IT WAS DUTY OF THE FAA TO PASS A SPEAKING ORDER ABOUT THE ISSUE RAISED BEFORE HIM. PENDENCY OF ANAPPLICATION,FILED BY THE ASSESSEE BEFORE THE AO, CANNOT BE A BASIS FOR NOT PASSING A REASONED ADJUDICATION ORDER.PROVISIONS OF SECTION 250(6)OF T HE ACT ARE VERY CLEAR AND UNAMBIGUOUS IN THIS REGARD.IN OUR OPINION,IN THE INTEREST OF JUSTICE, M ATTER SHOULD BE RESTORED BACK TO THE FILE OF THE FAA TO DECIDE THE ISSUE OF CARRY FORWARD OF LOSS OF EARLIER YEAR. HE WILL AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.3 IS ALLOWED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT, APPEA L FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 26 !12 8!! (!9 / 4 526 ):2 / $!2 ; . ORDER PRONOUNCED IN THE OPEN COURT ON 2ND,JULY, 201 4 . (%5 / 3* ! % &!! < =(! 2 $> YKBZ YKBZ YKBZ YKBZ ,24 / 4 ? SD/- SD/- ( . / D.MANMOHAN ) ( !$%&' !$%&' !$%&' !$%&' / RAJENDRA ) !'# / VICE PRESIDENT %! %! %! %! () () () () / ACCOUNTANT MEMBER / MUMBAI , =(! /DATE: 02.07.2014. SK 5 (%5 (%5(%5 (%5 / // / -2@ -2@ -2@ -2@ A%@*2 A%@*2 A%@*2 A%@*2 / COPY OF THE ORDER FORWARDED TO : 1 . ASSESSEE / !+, 2. RESPONDENT / -.+, 3. THE CONCERNED CIT(A)/ B C , 4. THE CONCERNED CIT / B C 5. DR F BENCH, ITAT, MUMBAI / @D!4 -2 , . . &!! . 6. GUARD FILE/ 4! ! .!@2 .!@2 .!@2 .!@2 -2 -2-2 -2 //TRUE COPY// (%5!! / BY ORDER, / ! $! DY./ASST. REGISTRAR , /ITAT, MUMBAI