Kamino International Logistics Pvt. Ltd., V. Addl. CIT,

ITA 4961/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71830 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 17-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 12-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M N NANDGAONKAR; VIPUL R SHAH
• Keywords: Double taxation relief; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH L, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 4961/DEL/2010 ASSESSMENT YEAR: 2007-08 TIGERS WORLDWIDE LOGISTICS PVT. LTD (FORMERLY KNOWN AS KAMINO INTERNATIONAL LOGISTICS PVT. LTD.) 301, SANGEET PLAZA, MAROL, ANDHERI (E) MUMBAI-. 400 059 VS. JT. COMMISSIONER OF INCOME TAX RANGE, 8(2), MUMBAI (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :-AAACK 4578 L APPELLANT BY : SHRI M.N. NANDGAONKAR & MR. VIPUL R. SHAH RESPONDENT BY : MS. NEERAJA PRADHAN. DATE OF HEARING : 28.10.2013 DATE OF PRONOUNCEMENT : 06.12.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -8, MUMBAI DATED 07.09.2010 FOR THE ASSESSMENT YEAR 20 07-08. 2. IN GROUND NOS. 1 TO 3 THE ASSESSEE HAS AGITATED THE ACTION OF THE LD.CIT(A) CONFIRMING THE DECISION IN HOLDING THAT THE ASSESSE E IS LIABLE TO DEDUCT TAX AT SOURCE U/S 195 OF THE ACT ON FREIGHT PAID TO THE NON-RESIDENT PAYEES. 2.1 BRIEFLY STATED THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF FREIGHT FORWARDING AND CUSTOMS HOUSE CLEARING AGENT WHICH I NTER ALIA INCLUDES EXPORTS AND IMPORTS CARGO BY AIR AS WELL AS SEA AND ALSO GETTIN G IMPORTED CARGO CLEARED FROM THE CUSTOM AUTHORITIES OF INDIA, DURING THE YEAR UNDER CONSIDERATION HAD DECLARED A TOTAL INCOME OF RS.1,36,25,910/. IN THE ASSESSMENT FRAMED U/S 143(3), THE AO FOUND THAT THE ASSESSEE HAD REMITTED THE PAYMENTS TO THE NON RESID ENT PAYEES WITHOUT DEDUCTING THE TAX ITA NO. 4961/DEL/2010 TIGERS WORLDWIDE LOGISTICS PVT. LTD ASSESSMENT YEAR: 2007-08 2 AT SOURCE AS PER SECTION 195 ON SUCH A REMITTANCES AND ACCORDINGLY MADE THE DISALLOWANCE U/S 40 (I) (A). 2.2 AT THE OUTSET THE LD.AR FOR THE ASSESSEE HAS DR AWN OUR ATTENTION THAT THE CASE OF THE ASSESSEE IS COVERED BY THE ORDER OF THE TRIBUNA L DATED 13.11.2009 AND 18.12.2009 IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 20 01-02 AND 2004-05, 2005-06 & 2006-07 RESPECTIVELY AND IN THE SAID ORDER, THE TRI BUNAL HAS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR A FRESH ADJUDICATION. ON THE OTHER HAND THE LD.DR BY DRAWING OUR ATTENTION TO THE REASONINGS AND FINDINGS OF THE LD. CIT(A), HAS CONTENDED THAT THE LD.CIT(A) HAS CORRECTLY HELD THAT THE ASSESSEE IS L IABLE TO DEDUCT TAX AT SOURCE AND SINCE THE ISSUE HAS ELABORATELY BEEN DISCUSSED BY THE LD. CIT(A), THE SAME OUGHT TO BE CONFIRMED. 2.3 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD IT IS RELEVANT TO MENTION THAT THE TRIBUNAL IN THE ASSESSEES OWN CAS E FOR THE ASSESSMENT YEARS 2001-02, 2004-05, 2005-06 & 2006-07 HAS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR A FRESH ADJUDICATION. IT IS NOTED THAT THE LD.CIT(A) HAS CO NFIRMED THE IMPUGNED DISALLOWANCES FOLLOWING THE ORDERS OF THE PREDECESSORS FOR THE AS SESSMENT YEARS 2001-02 & 2004-05. THIS IS EVIDENCED IN PARA 5.3 OF THE ORDER OF THE L D.CIT(A). IT IS PERTINENT TO MENTION THAT AGAINST THE ORDERS OF THE LD.CIT(A) FOR THE AYS 200 1-02 & 2004-05, THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE AO FOR A FRESH ADJUDICATION . THEREFORE, IT WOULD BE JUST AND PROPER THAT THIS ISSUE IS ALSO RESTORED BACK TO THE FILE O F THE AO FOR FRESH ADJUDICATION IN THE SIMILAR LINE OF DIRECTION GIVEN BY THE TRIBUNAL IN THE SAID CASES. WHILE DECIDING THE ISSUE AFRESH, THE AO IS DIRECTED TO DECIDE THE ISSUE ON T HE BASIS OF THE FACTS EMERGING FROM THE RECORDS FOR THE YEAR UNDER CONSIDERATION AS IT IS B ROUGHT TO OUR NOTICE BY THE LD.AR THAT MAJOR PORTION OF REMITTANCES DURING THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION ARE MADE TO NON GROUP PAYEES OU T OF THE TOTAL REMITTANCES TO 49 PAYEES AND THE ORDERS OF THE LD.CIT(A) & THE TRIBUN AL HAVE CONSIDERED THE FACTS EMERGING FROM RECORDS OF THE AY 2001-02 WHERE REMIT TANCES HAVE BEEN MADE TO GROUP COMPANIES ONLY AND ALSO THAT REMITTANCES TO THESE P AYEES ARE COVERED BY ARTICLE 7 OF THE VARIOUS DTAAS AS THE REMITTANCE ARE OF BUSINESS PRO FIT. ACCORDINGLY, THE AO IS DIRECTED TO DECIDE WHETHER THE ASSESSEE IS LIABLE TO DEDUCT ANY TAX U/S 195 OF THE ACT IN THE LIGHT OF THE PROVISIONS CONTAINED IN ARTICLE 7 OF APPLICABLE DTAA. WE ORDER AND DIRECT ACCORDINGLY. ITA NO. 4961/DEL/2010 TIGERS WORLDWIDE LOGISTICS PVT. LTD ASSESSMENT YEAR: 2007-08 3 3. IN GROUND NO. 4 THE ASSESSEE HAS AGITATED THE AC TION OF THE LD.CIT(A) ENHANCING THE DISALLOWANCE MADE BY THE AO AT 5% OF THE ENTIRE REMITTANCE OUT SIDE INDIA OF RS.10,34,05,331/-, BEING RS.51,70,287/-, TO RS.72,3 2,373/-, BEING 7% OF THE ENTIRE REMITTANCES OF RS.10,34,05,331/-. 3.1 THE RELEVANT FACTS ARE THAT WHILE MAKING THE DI SALLOWANCE U/S 40(A)(I) OF THE ACT, THE AO CONSIDERED THE PROFIT ELEMENT AT 5% ON THE A IR AND SEA FREIGHT AND THEREBY DISALLOWED AMOUNT OF RS.51,70,267/- ON THE ENTIRE R EMITTANCES OUT SIDE INDIA OF RS.10,34,05,331/-. HOWEVER, ON APPEAL, THE LD.CIT(A ) HAS ENHANCED THE DISALLOWANCE @ 7% BEING THE PROFIT ELEMENT ON THE BASIS THAT THE A O FOR THE ASSESSMENT YEARS 2001-02, 2003-04, 2004-05 & 2005-06 HAS APPLIED 7% AS THE PR OFIT WHICH HAS BEEN CONSIDERED FOR MAKING THE SAID DISALLOWANCE. AGGRIEVED BY THE IMPU GNED DECISION, THE ASSESSEE HAS RAISED THIS GROUND BEFORE US. 3.2 BEFORE US, THE LD.AR HAS CONTENDED THAT THE AO HAS INDEPENDENTLY EXAMINED THE CASE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AN D MADE THE DISALLOWANCE OF 5% OF THE REMITTANCES AFTER DUE EXAMINATION. EACH ASSESSM ENT YEAR IS INDEPENDENT AND THE PERCENTAGE OF DISALLOWANCE ON THE BASIS OF THE EMBE DDED PROFIT HAS TO BE ESTIMATED SHOULD BE BASED ON THE FACTS OF EACH ASSESSMENT YEA R. ON THE OTHER HAND THE LD.DR HAS ARGUED THE ASSESSEE HAS WITHDRAWN THIS SPECIFIC GRO UND IN THE APPEAL BEFORE THE LD.CIT(A) AND HENCE THIS CANNOT BE RAISED AS A GROU ND DURING THE SECOND APPELLATE PROCEEDING AT THIS STAGE. FURTHER, THE LD.DR HAS ST ATED THAT 7% OF THE ESTIMATION OF THE PROFIT ON THE BASIS OF THE EARLIER YEARS IS REASONA BLE AND JUSTIFIED. 3.3 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD IT IS PERTINENT TO NOTE THAT THOUGH THE PERUSAL OF THE ORDER THE LD.CI T(A) EVIDENCES THAT THE ASSESSEE HAS WITHDRAWN THE SPECIFIC GROUND ON THE ISSUE OF ESTIM ATION OF 5% OF THE EMBEDDED PROFITS FOR THE PURPOSE OF DISALLOWANCE, IT IS PERTINENT TO NOTE THAT THE LD.CIT(A) HAS ENHANCED THE DISALLOWANCE FROM 5% TO 7% RELYING ON THE EARLI ER ASSESSMENT ORDERS AND HENCE THE ASSESSEE IS ENTITLED TO RAISE THE ISSUE IN THE APPE AL BEFORE US. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS WORKED OUT THE DISALLOWANCE APPLYING 5% AS EMBODIED PROFIT TO THE REMITTANCES MADE DURING THE YEAR UNDER CONSIDERATION AFTER THE EXAMINATION OF THE FACTS. SINCE THE MAIN ISSUE OF D ISALLOWANCE U/S 40(A)(I) IS RESTORED TO THE FILE OF THE AO FOR FRESH CONSIDERATION, WE ARE OF THE CONSIDERED VIEW THAT IT IS JUST AND ITA NO. 4961/DEL/2010 TIGERS WORLDWIDE LOGISTICS PVT. LTD ASSESSMENT YEAR: 2007-08 4 PROPER TO RESTORE BACK THIS ISSUE ALSO TO FILE OF T HE AO FOR DECIDING THE PERCENTAGE OF DISALLOWANCE, IF APPLICABLE, ON THE BASIS OF FACTS AND RECORDS RELEVANT TO THE YEAR CONSIDERATION. WE DIRECT AND ORDER ACCORDINGLY. 4. IN GROUND NO. 5, THE ASSESSEE HAS AGITATED THE A CTION OF THE LD.CIT(A) CONFIRMING THE DISALLOWANCE OF EXPENDITURE OF RS.5,442/- U/S 1 4A OF THE ACT. THE RELEVANT FACTS ARE THAT THE AO IN THE COURSE OF EXAMINATION OF ACCOUNT S FOUND THAT THE ASSESSEE COMPANY HAD MADE INVESTMENT IN SHARES AND OTHER SECURITIES WHICH HAD POTENTIAL TO YIELD INCOME NOT LIABLE TO BE INCLUDED IN THE TAXABLE INCOME. AS PER THE FINDINGS RECORDED BY THE AO, THE VALUE OF INVESTMENTS MADE BY THE ASSESSEE COMPA NY WAS RS.1742457 AND RS.434332 AS ON 01.04.2006 AND 31.03.2007 RESPECTIVELY. THUS, ACCORDING TO THE AO, THE AVERAGE VALUE OF INVESTMENT WHICH IS LIKELY TO YIELD EXEMPT INCOME WAS RS.1088394. THEREFORE, THE AO MADE THE SUBJECT DISALLOWANCE BEING 0.5% OF THE AVERAGE VALUE OF INVESTMENT IN TERMS OF RULE 8D OF THE IT RULES, 1962. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO. 5. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD IT IS PERTINENT TO MENTION THAT RULE 8D OF THE INCOME TAX RULES IS APP LICABLE WITH EFFECT FROM ASSESSMENT YEAR 2008-09. HOWEVER, CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) IN CONFIRMING THE SAID DISALLOWANCE BEING 5% ON THE AVERAGE VALUE OF INVESTMENT WHICH IS JUST AND REASONABLE FOR THE PURPOSE OF SECTION 14A OF THE ACT. THEREFORE, THE ORDER OF THE LD.CIT(A) ON THIS COUNT IS UPHELD. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF DECEMBER, 2013. SD/- SD/ - (SANJAY ARORA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 06.12.2013. *SRIVASTAVA ITA NO. 4961/DEL/2010 TIGERS WORLDWIDE LOGISTICS PVT. LTD ASSESSMENT YEAR: 2007-08 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR L BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.