ITO (TDS) RG 2, MUMBAI V. MANILAL PATEL CLEARING FORWARDING P.LTD, MUMBAI

ITA 4856/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2776 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GYANESHWAR Y KATARAM
• Keywords: Non-deduction of tax
• Section: 133A; 14A; 201(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4950/MUM/2013 ASSESSMENT YEAR- 2009-10 DCIT-2(2), R. NO.545, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S MANILAL PATEL CLEARING FORWARDING PVT. LTD. 3 RD FLOOR, KAMER BUILDING, 38 CAWASJI PATEL STREET, FORT, MUMBAI-400001 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO.AAACM3908L ITA NOS.4856 TO 4858/MUM/2013 ASSESSMENT YEARS- 2008-09 TO 2010-11 ITO(TDS)(OSD)-RANGE-2, R.NO.704, 7 TH FLOOR, SMT. K.G. MITTAL AYURVEDIC HOSPITAL, BUILDING, CHARNI RAOD, MUMBAI-400002 / VS. M/S MANILAL PATEL CLEARING FORWARDING PVT. LTD. 3 RD FLOOR, KAMER BUILDING, 38 CAWASJI PATEL STREET, FORT, MUMBAI-400001 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO. AAACM3908L / REVENUE BY SHRI VIJAY KUMAR SONI-DR !'# $ / ASSESSEE BY SHRI GYANESHWAR Y. KATARAM % & $ ' / DATE OF HEARING : 29/10/2015 & $ ' / DATE OF ORDER: 06/11/2015 M/S MANILAL PATEL CLEARING FORWARDING PVT. LTD. ITA NO. 4856 TO 4858 &4950/MUM/2013 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) ALL THESE APPEALS ARE BY THE REVENUE FOR ASSESSMEN T YEARS 2008-09 TO 2010-11, WHEREIN, IN THE IMPUGNED ORDERS, THE LD. FIRST APPELLATE AUTHORITY HELD THAT THE ASS ESSEE WAS NOT LIABLE TO DEDUCT TAX U/S 194I OF THE ACT AND DE LETING THE DOCK FEES AND AIRPORT TERMINAL CHARGES DETERMINED U /S 201(1)/201(1A) OF THE ACT AND FURTHER DELETING THE INTEREST LEVIED U/S 201(1A) BY HOLDING THAT THE PAYMENT OF C ARGO HANDLING CHARGES DOES NOT FALL WITHIN THE AMBIT OF SECTION 194J OF THE ACT. 2. IN ITA NO.4950/MUM/2013 (ASSESSMENT YEAR 2009-1 0), THE GROUND RAISED PERTAINS TO HOLDING THAT NO DISAL LOWANCE U/S 14A R.W.R. 8D (2)(II) IS CALLED FOR OVERLOOKING THAT THE ASSESSING OFFICER CORRECTLY MADE THE DISALLOWANCE A S THE ASSESSEE COULD NOT ESTABLISH THE NEXUS BETWEEN ITS OWN FUNDS AND INVESTMENT MADE IN TAX FREE INCOME AND FURTHER DELETING THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT, IGN ORING THE FACT THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOUR CE AS REQUIRED U/S 194-I AND 194J OF THE ACT. 2.1. FIRST, WE SHALL TAKE UP THE APPEAL IN ITA NO. 4856, 4857 AND 4858/MUM/2013 WITH RESPECT TO THE ISSUE U/ S 201(1) AND 201(1A) OF THE ACT. THE CRUX OF ARGUMENT ADVANCED BY SHRI VIJAY KUMAR SONI, LD. DR, IS IDENTICAL TO T HE GROUND RAISED, WHEREAS, SHRI GYANESHWAR Y KATARIA, DEFENDE D THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDERS. M/S MANILAL PATEL CLEARING FORWARDING PVT. LTD. ITA NO. 4856 TO 4858 &4950/MUM/2013 3 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS CUSTOM HOUSE AGENTS FILED TDS RETURNS. SURVEY U/S 133A OF THE ACT WAS CARRIED OU T ON 24/02/2011. THE ASSESSEE DISCLOSED THE MATERIAL FACTS/DOCUMENTS DURING SURVEY AND ALSO DURING SUBSE QUENT SUBMISSION DATED 18/03/2011 AND 23/03/2011 MADE BEF ORE THE ASSESSING OFFICER. THE ASSESSING OFFICER PASSED ORDER U/S 194C, 194 I AND 194J OF THE ACT, RAISING THE DEMAND U/S 201(1), AMOUNTING TO RS.24,18,860/- AND INTEREST TH EREUPON U/S 201(1A) AMOUNTING TO RS.10,15,921/-, THUS, THE TOTAL DEMAND WAS RAISED TO THE TUNE OF RS.34,34,881/-. TH E AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. FIRS T APPELLATE AUTHORITY CHALLENGING THE ORDER PASSED U/S 201(1) A ND 201(1A) OF THE ACT. THE EXPLANATION OF THE ASSESSE E IS THAT THE ASSESSEE DULY ASSESSED TO TAX AND HAD BEEN FILING R ETURN OF INCOME BY INCLUDING THE IMPUGNED AMOUNTS IN THE RET URN BY CLAIMING THAT TAX HAS ALREADY BEEN PAID BY THE PAYE ES, WHICH CANNOT BE RECOVERED AGAIN FROM THE ASSESSEE, THEREB Y NO DEFAULT HAS BEEN COMMITTED, AS HAS BEEN ALLEGED BY THE LD. ASSESSING OFFICER. WE NOTE THAT THE LD. COMMISSION ER OF INCOME TAX (APPEALS) DULY CONSIDERED THE SUBMISSION S OF THE ASSESSEE, VARIOUS CASE LAWS AS MENTIONED IN VARIOUS PARAS OF THE IMPUGNED ORDERS AND THE CHARGES SEPARATELY. THE SUBMISSIONS OF THE ASSESSEE HAS BEEN REPRODUCED IN THE IMPUGNED ORDER AS IS EVIDENT FROM PARA 3.8 ONWARDS. WE HAVE GONE THROUGH THE FACTS AND THE CASE LAWS SUCH AS HA H LOGISTICS VS DCIT (ITA NO.1864/DEL./2011) ORDER DA TED M/S MANILAL PATEL CLEARING FORWARDING PVT. LTD. ITA NO. 4856 TO 4858 &4950/MUM/2013 4 04/11/2011 AND DCIT VS JAY KAY FREIGHTERS PVT. LTD. (ITA NO.3407/DEL./2011) ORDER DATED 08/08/2012, WITH RES PECT TO SECTION 194C, WHEREIN, THE DECISION FROM HONBLE DE LHI HIGH COURT IN THE CASE OF CARGO LINKERS (218 CTR 295) (D EL.) WAS RELIED UPON. WE NOTE THAT THE ASSESSEE WAS ACTING ONLY AS AN INTERMEDIATERY BETWEEN THE IMPORTERS/EXPORTERS AND THE PORT AUTHORITIES. THE ASSESSEE MERELY COLLECTED PAYMENTS FROM ITS CUSTOMERS AND DISBURSED THE SAME TO THEM. THE GROUN D RENT, TERMINAL HANDLING AND DEMURRAGE WERE ALSO THE SOLE LIABILITY OF THE CLIENTS. THUS, IN THE ABSENCE OF ANY PRIVITY OF CONTRACT BETWEEN THE PORT AUTHORITIES AND THE ASSESSEE, IT C AN BE SAID THAT THE ASSESSEE IS NOT A PERSON RESPONSIBLE FOR D EDUCTING TAX U/S 194 I OF THE ACT, CONSEQUENTLY, IT CAN BE CONCL UDED THE ASSESSEE CANNOT BE SAID TO BE ASSESSEE IN DEFAULT I N RESPECT OF PAYMENTS MADE TO AAI/BPT AND THE DEMAND RAISED U/S 201(1)/201(1A) OF THE ACT. THE REGULATIONS PRESCRI BE THE RESPONSIBILITIES OF THE CUSTODIANS, WHO ARE ALLOWED TO OPERATE IN THE CUSTOM AREA TO HANDLE THE GOODS. SUCH PERSO NS ARE CALLED CUSTOM CARGO SERVICE PROVIDERS (CCSP) AND TH EIR OBLIGATIONS AND RESPONSIBILITIES HAVE BEEN ELABORAT ELY SET OUT IN CLAUSE-6 OF THE SAID REGULATIONS. CLAUSE-5 OF TH E REGULATIONS SETS OUT VARIOUS CONDITIONS WHICH AN APPLICANT IS R EQUIRED TO FULFILL TO GET RECOGNITION FROM THE AUTHORITIES/CUS TOM AUTHORITIES TO FUNCTION AS CCSPS. THE STAND OF THE REVENUE/ASSESSING OFFICER IS THAT THE TERM RENT D EFINED IN EXPLANATION (1) TO SECTION 194 I IS VERY WIDE IN IT S AMBIT AND INCLUDES EVERY KIND OF PAYMENT BY WHATEVER NAME THE Y CALLED, WHICH IS PAID PURSUANT TO ANY AGREEMENT OR ARRANGEM ENT. M/S MANILAL PATEL CLEARING FORWARDING PVT. LTD. ITA NO. 4856 TO 4858 &4950/MUM/2013 5 ADMITTEDLY, SUCH CCSPS ARE PROVIDING VARIOUS RANGES OF SERVICES, ENABLING THE IMPORTER/EXPORTER, TO COMPLY WITH CUSTOM REGULATIONS TILL CLEARANCE IS OBTAINED, THUS , CHARGES PAID TO CCSPS ARE NOT IN THE NATURE OF RENT SIMPLIC ITOR BUT THEY WERE IN THE NATURE OF STATUTORY CHARGES OR LEV IES, PAID FOR COMPLYING WITH THE NOTIFIED PROCEDURE. THE ASSESSEE IS MERELY WORKING AS INTERMEDIATERY AND THEIR FUNCTIONS ARE GOVERNED/REGULATED BY THE CUSTOM HOUSE AGENTS LICEN SING REGULATIONS 2004. REGULATION 13 EXHAUSTIVELY LIST O UT THE OBLIGATIONS AND RESPONSIBILITIES OF CUSTOM HOUSE AG ENTS. AS PER THE CUSTOM REGULATIONS, THE OBLIGATION TO MAKE THE PAYMENTS OF SUCH CHARGES IS UPON THE IMPORTER/EXPOR TER, WHOSE GOODS ARE HANDLED BY THEM. THE ASSESSEE IS ME RELY PROVIDING SERVICES TO THE EXPORTERS/IMPORTERS. VIE WED FROM THIS ANGLE, WE FIND MERIT IN THE CONCLUSION DRAWN B Y THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSES SEE IS NOT A PERSON RESPONSIBLE AS DEFINED U/S 194 I, THEREFOR E, REGARDED IN DEFAULT FOR NON-DEDUCTION OF TAX. THEREFORE, IMP OSITION OF SECTION 201(1) AND CONSEQUENT INTEREST 201(1A), AS ALLEGED BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. IDENTICAL IS THE SITUATION FOR CARGO HANDLING CHARGES. SO FAR AS, F EE FOR TECHNICAL SERVICES IS CONCERNED, IT HAS BEEN CLARIF IED IN MERCHAN SHIPPING SERVICES PVT. LTD. (2011) 9 TAXMAN .COM 17 (MUM.) AND HCL INFOTEL LD. VS ITO 99 TTJ 440 (CHAND IGARH) IN WHICH THE DECISION FROM HONBLE MADRAS HIGH COURT W AS RELIED UPON. THE STAND OF THE REVENUE IS THAT THESE PAYMEN TS REPRESENTS FEE FOR TECHNICAL SERVICES, REQUIRING DE DUCTION OF TAX U/S 194J OF THE ACT. THE ASSESSEE FURTHER FIND SUPP ORT FROM M/S MANILAL PATEL CLEARING FORWARDING PVT. LTD. ITA NO. 4856 TO 4858 &4950/MUM/2013 6 THE DECISION IN SKYCELL COMMUNICATIONS LTD. VS DCIT AND HCL INFOTEL LTD. VS ITO (SUPRA), THUS, NO DEFAULT WAS C OMMITTED BY THE ASSESSEE U/S 194J OF THE ACT. WE AFFIRM THE ST AND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 3. NOW, WE SHALL TAKE UP APPEAL IN ITA NO.4950/MUM/2013, WHEREIN, FIRST GROUND PERTAINS TO DISALLOWANCE U/S 14A OF THE ACT, R.WR. 8D(2)(II) OF THE RULES. THE STAND OF THE REVENUE IS THAT THE ASSESSEE DID N OT ESTABLISH THE NEXUS BETWEEN OWN FUNDS AND INVESTMEN T MADE TO EARN TAX FREE INCOME. THE ASSESSEE DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE STAND OF THE ASSESSING OFFICER IS THAT SINCE THE TOTAL RESERVES EXCEEDS THE INVESTMENT IN SECURITIES, INCOME FROM WHICH IS EXEM PT, THEREFORE, IT CAN BE PRESUMED THAT INVESTMENT WERE OUT OF BORROWED FUNDS. HOWEVER, THE INVESTMENTS WERE MADE BY THE ASSESSEE OVER THE YEARS AND THE TOTAL RESERVES IN T HE RESPECTIVE YEARS WERE MORE THAN THE TOTAL INVESTMENTS DURING T HE YEAR. THUS, IN VIEW OF THE DECISION IN RELIANCE UTILITIES IN 313 ITR 340 (MUM.), WE FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. IT IS ALSO NOTED THAT THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) UPHOLD THE DISALLOWANCE AMOUNTING TO RS.3 304. WE AFFIRM THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). M/S MANILAL PATEL CLEARING FORWARDING PVT. LTD. ITA NO. 4856 TO 4858 &4950/MUM/2013 7 3.2. SO FAR AS, DISALLOWANCE OF PAYMENTS MADE IN VIOLATION OF THE PROVISIONS U/S 40(A)(IA) R.W.S 194 I AND 194J IS CONCERNED, WE NOTE THAT IN PARA 4.1 OF THE IMPUGNED ORDER, THE BRAKE UP OF THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER HAS BEEN DISCUSSED. SINCE, WE HAVE HELD THA T THE ASSESSEE IS NOT COVERED U/S 194I/194J AND THE ASSES SEE CANNOT BE TREATED IN DEFAULT, THEREFORE, WE AFFIRM THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). RESUL TANTLY, THIS APPEAL OF THE REVENUE IS ALSO HAVING NO MERIT. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 29/10/2015. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ( DATED : 06/11/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 1$ ( *+ ) / THE CIT, MUMBAI. 4. 0 0 1$ / CIT(A)- , MUMBAI 5. 34 .$ ! , 0 *+' *! 5 , % / DR, ITAT, MUMBAI 6. 6' 7% / GUARD FILE. / BY ORDER, /3+$ .$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI.