DCIT, New Delhi V. M/s Expenditors International (india) Pvt. Ltd., New Delhi

ITA 5454/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77574 (ITAT-DELHI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Assessee Lawyers: PRAVESH
• Keywords: Opportunity of being heard; Question of law
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NOS SS S. .. .5452/DEL/2013 TO 5457/DEL/2013 5452/DEL/2013 TO 5457/DEL/2013 5452/DEL/2013 TO 5457/DEL/2013 5452/DEL/2013 TO 5457/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2006 2006 2006 2006- -- -07 TO 2011 07 TO 2011 07 TO 2011 07 TO 2011- -- -12 1212 12 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME INCOME INCOME INCOME TAX, TAX, TAX, TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -49(1), 49(1), 49(1), 49(1), 403, AAYAKAR BHAWAN, 403, AAYAKAR BHAWAN, 403, AAYAKAR BHAWAN, 403, AAYAKAR BHAWAN, LAXMI NAGAR, LAXMI NAGAR, LAXMI NAGAR, LAXMI NAGAR, DISTRICT CENTRE, DISTRICT CENTRE, DISTRICT CENTRE, DISTRICT CENTRE, DELHI DELHI DELHI DELHI 110 092. 110 092. 110 092. 110 092. VS. VS. VS. VS. M/S EXPEDITORS INTERNATIONAL (INDIA) M/S EXPEDITORS INTERNATIONAL (INDIA) M/S EXPEDITORS INTERNATIONAL (INDIA) M/S EXPEDITORS INTERNATIONAL (INDIA) PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., 6, GROUND FLOOR, SECTOR 6, GROUND FLOOR, SECTOR 6, GROUND FLOOR, SECTOR 6, GROUND FLOOR, SECTOR- -- -C, C,C, C, POCKET POCKET POCKET POCKET- -- -8, CSC VASANT KUNJ, 8, CSC VASANT KUNJ, 8, CSC VASANT KUNJ, 8, CSC VASANT KUNJ, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : PAN : PAN : PAN : AAACE1795K. AAACE1795K. AAACE1795K. AAACE1795K. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. NIDHI SRIVASTAVA, CIT-DR. RESPONDENT BY : SMT. SHASHI M. KAPILA, SHRI R.R. MAURYA AND SHRI PRAVESH SHARMA, ADVOCATES. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XXX, NEW DELHI DATED 25 TH JULY, 2013 FOR THE AY 2006-07 TO 2011-12. 2. IN ALL THESE APPEALS, THE REVENUE HAS RAISED FOLLOWI NG COMMON GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A S WELL AS IN LAW, THE LD.CIT(APPEALS) HAS ERRED IN DELET ING THE DEMAND RAISED U/S 201(1)/201(1A) OF THE IT ACT, 1961 GIVING THE FINDING THAT THE A.O. HAS ACCEPTED THE PL EA THAT SECTION 194C OF THE IT ACT, 1961 IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. ITA-5452 TO 5457/D/2013 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(APPEALS) HAS ERRED IN OBSER VING THAT SECTION 172 OF THE IT ACT, 1961 IS APPLICABLE IN THE CASE OF THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(APPEALS) HAS ERRED IN ALLOW ING RELIEF TO THE ASSESSEE BY RELYING UPON THE CBDT CIRCULA RS NO.723 DATED 19.09.1995 AND 732 DATED 20.12.1995. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(APPEALS) HAS ERRED IN ALLOW ING RELIEF RELYING UPON CASE LAWS FROM WHICH FACTS OF THE PRESENT CASE ARE SQUARELY DISTINGUISHABLE. 5. THE REVENUE CRAVES LEAVE TO ADD, ALTER OR AMEND A NY OF THE GROUNDS ABOVE AT THE TIME OF HEARINGS. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY T HE LEARNED DR THAT THE ASSESSEE COMPANY IS AN INDIAN ARM OF A MULTINA TIONAL COMPANY EXPEDITORS INTERNATIONAL. THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF SUPPLYING CHAIN MANAGEMENT, LOGISTICS AND FR EIGHT FORWARDING WHICH IS RELATED TO MOVEMENT OF GOODS AND CARGO WITHIN INDIA OR OUTSIDE INDIA BY ROAD, RAIL, AIR OR SHIP. D URING THE COURSE OF SURVEY AT THE ASSESSEES PREMISES, IT IS SEEN THAT THE ASSESSEE IS MAKING PAYMENT TO SOME INDIAN SUBSIDIARIES OF FOREIGN SH IPPING COMPANY WITHOUT DEDUCTING TDS UNDER SECTION 194C OF THE INCOME-TAX ACT, 1961. THAT THE NAME OF SUCH COMPANIES IS INCLUDE D IN 26Q STATEMENT BUT THE TDS HAS BEEN SHOWN TO BE DEDUCTIBLE AT NIL RATE. AFTER CONSIDERING THE ASSESSEES ARGUMENT, THE ASSESSING OFFI CER RECORDED THE FINDING THAT THE AGENTS OF NON-RESIDENT SHIPPING COMPANY TO WHOM THE ASSESSEE MADE THE PAYMENT ARE NOT COVERED U NDER SECTION 172 AND CANNOT CLAIM THE BENEFIT OF SECTION 172. HE ALSO ARRIVED AT THE CONCLUSION THAT SECTION 194C IS APPLI CABLE TO THE PAYMENT MADE BY THE ASSESSEE TO THE SUBSIDIARIES OF FOREIG N SHIPPING AND AIRLINE COMPANIES. THAT THE LEARNED CIT(A) MISUN DERSTOOD THE ORDER OF THE ASSESSING OFFICER AND RECORDED THE FINDING THAT THE ITA-5452 TO 5457/D/2013 3 ASSESSING OFFICER HAS ACCEPTED THE PLEA OF THE ASSESSEE THAT SECTION 194C IS NOT APPLICABLE IN THE CASE OF THE APPELLANT A ND ONLY SECTION 172 IS APPLICABLE. THIS FINDING RECORDED BY THE LEAR NED CIT(A) IS CONTRARY TO THE FINDING OF THE ASSESSING OFFICER. SHE, THEREFORE, SUBMITTED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER SHOULD BE RESTORED. 4. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, ARGUED AT LENGTH. SHE STATED THAT BEFORE THE ASSESSING OFFICER A S WELL AS BEFORE THE CIT(A), THE ASSESSEE EXPLAINED THAT IN RESPECT OF A LL FOREIGN SHIPPING COMPANIES, SECTION 172 IS APPLICABLE AND THE FOREIGN SHIPPING COMPANIES ARE REQUIRED TO MAKE THE PAYMENT OF TAX AS PER SECTION 172 WHICH IS A SELF-CONTAINED CODE FOR THE LEVY AND RECOV ERY OF TAX SHIP- WISE AND JOURNEY-WISE. SHE ALSO REFERRED TO CIRCULAR NO.723 DATED 19.09.1995 AND CIRCULAR NO.732 DATED 20.12.1995 AND STATED THAT IN THE LIGHT OF THE ABOVE CIRCULARS, SECTION 194C WOULD NOT BE APPLICABLE WHERE THE PAYMENT IS MADE TO THE FOREIGN SHIPPING COM PANY OR TO THEIR AGENT BECAUSE PROVISION OF SECTION 172 WOULD BE APPLICABLE. SHE ALSO RELIED UPON THE DECISION OF HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT (TDS) VS. CONTINENTAL CARRIERS (P.) LTD. [2007] 163 TAXMAN 479 (DELHI) AND THE DECISION OF ITAT, DELHI B ENCH IN THE CASE OF ITO VS. FREIGHT SYSTEMS (INDIA) (P.) LTD. [2006] 6 SOT 473 (DELHI). 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. LEARNED C IT(A) ALLOWED THE RELIEF TO THE ASSESSEE WITH THE FOLLOWING FINDING:- 5. I HAVE CONSIDERED THE ORDER PASSED U/S 201(1)/201(1A) BY THE ACIT (TDS), CIR. 49(1) AND AL SO CONSIDERED THE WRITTEN SUBMISSION FILED BY THE AR OF TH E APPELLANT. FROM THE ORDER OF THE ACIT, TDS IT IS VE RY CLEAR THAT HE HAS ACCEPTED THE PLEA OF THE LD. AO THAT SEC. 194C IS NOT APPLICABLE IN THE CASE OF APPELLANT; ONLY SEC. 172 IS ITA-5452 TO 5457/D/2013 4 APPLICABLE IN THE CASE OF THE APPELLANT. HOWEVER, AO HAS TREATED ASSESSEE IN DEFAULT ON THE GROUND THAT CERTIFIC ATE ISSUED U/S 197 IS NOT FILED. IN THE CASE OF PAYMENT TO THE SHIPPING COMPANIES, SHIPPING COMPANIES HAS TO PAY THE TAX AND SHOW THE CHALLAN TO THE CUSTOM AUTHORITIES, ONLY THEN MOVEMENT OF SHIP IF ALLOWED, WITHOUT PAYMENT, SH IP CANNOT MOVE. THERE IS NO PROVISION U/S 197 TO OBTAIN A LOW OR NO DEDUCTION FOR TDS U/S 172. LD.ACIT, TDS HAS NO T APPLIED THE CORRECT LAW. RESPECTFULLY FOLLOWING THE CIRCULAR NO.723 DATED 19.09.1995 AND CIRCULAR NO.732 DATED 20.12.1995 AND ALSO FOLLOWING THE CASE LAW MENTIONED BY THE AR OF THE APPELLANT, I AM OF THE VIEW THAT IN T HE CASE OF APPELLANT TAX DEDUCTED AT SOURCE IS NOT APPLICABLE FO R THE PAYMENT MADE TO THE SHIPPING COMPANIES OR THEIR AGENT S. IN VIEW OF THESE FACTS THE ORDER OF THE ACIT, TDS TRE ATING THE ASSESSEE IN DEEMED TO BE IN DEFAULT U/S 201(1)/201(1 A) FOR RS.12,31,450/- (TDS RS.12,09,205/- + INTEREST RS.22,245/-_ IS HEREBY DELETED. (EMPHASIS BY UNDERLINING SUPPLIED BY US) 6. FROM THE ABOVE, IT IS EVIDENT THAT AS PER THE LEAR NED CIT(A), THE ASSESSING OFFICER HAS ACCEPTED THE PLEA OF THE ASSESSEE THAT SECTION 194C IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND ON LY SECTION 172 IS APPLICABLE. HOWEVER, FROM A PERUSAL OF THE ORDER OF THE ASSESSING OFFICER, WE FIND JUST THE CONTRARY FINDING HAVING BE EN RECORDED BY HIM WHICH WOULD BE EVIDENT FROM THE FOLLOWING OBSERVATIO NS FROM THE ASSESSMENT ORDER:- AS PER THE SECTION 172 TAXATION IN THE CASE OF SHIPPIN G COMPANIES IS AT THE RATE OF 7.5% OF THE GROSS RECEIPT. SINCE, THERE IS A TAXATION AT THE PRESUMPTIVE RATE IN THE CASE OF SUCH SHIPPING COMPANY THEREFORE THE LEGISLATURE HAS EXEMPTED THE AGENT OF SUCH COMPANIES FROM THE AMBI T OF TAXATION. THE AGENT OF NON-RESIDENT SHIPPING COMP ANY WITH SUBSIDIARY IN INDIA AND WHICH ARE NOT COVERED BY SECTION 172 CANNOT CLAIM THIS BENEFIT ALSO BECAUSE OF T HE FACT THAT THE PRINCIPAL IS NOT PAYING ANY TAX IN IND IA. THE ASSESSEE HAS ALSO NOT CLARIFIED THAT THE SHIPPING COMPANIE S ARE PAYING PRESUMPTIVE TAX U/S 172. SECTION 194C IS QUITE CLEAR THAT WHENEVER, A CONTRAC TOR MAKES PAYMENTS FOR WORK TO A RESIDENT THEN SECTION 194 C ITA-5452 TO 5457/D/2013 5 WILL GET ATTRACTED. AS THE SUBSIDIARY OF FOREIGN SHIPP ING AND AIRLINES COMPANIES ARE RESIDENTS OF INDIA, THEREFORE ON PAYMENTS MADE TO THESE RESIDENTS IT WAS IMPERATIVE THAT THE TDS SHOULD HAVE BEEN DEDUCTED. THEREFORE THE ASSESSEE IS TREATED AS IN DEFAULT U/S 201(1) ON PAYMENT MADE TO SUCH PARTIES WITHOUT DEDUCTION OF TAX. (EMPHASIS BY UNDERLINING SUPPLIED BY US) 7. THUS, THE ASSESSING OFFICER HAS RECORDED A CLEAR FINDI NG THAT THE AGENTS OF NON-RESIDENT SHIPPING COMPANY WITH SUBSIDIARY IN INDIA ARE NOT COVERED BY SECTION 172 AND SECTION 194C WOULD B E APPLICABLE IN RESPECT OF PAYMENT MADE TO THEM. THEREFORE, IT IS EV IDENT THAT LEARNED CIT(A) TOTALLY MISUNDERSTOOD THE ORDER OF THE ASSESSING OFFICER AND PROCEEDED WITH THE PRESUMPTION THAT AS PER ASSESSING OFFICER, SECTION 194C IS NOT APPLICABLE IN THE CASE OF THE APP ELLANT. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT EVEN IF SOME INCORRECT FINDING IS RECORDED BY THE CIT(A), IT WILL NOT AFFEC T THE OUTCOME OF THE APPEAL BECAUSE, WHEN, IN LAW, SECTION 172 IS APPLICAB LE AND THE SHIPPING COMPANIES HAVE PAID THE TAX AS PER SECTION 1 72, THERE IS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE UNDER SECT ION 194C. IN SUPPORT OF THIS CONTENTION, SHE HAS RELIED UPON THE DEC ISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CONTINENTAL CARRIERS (P.) LTD. (SUPRA). IN THE SAID CASE, HON'BLE JURISDICTIONAL HIGH COURT UPHELD THE ORDER OF ITAT HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES. THE FACTS AND THE FINDING OF THE ITAT IS RECORDED IN PARA GRAPH 4 OF THE ORDER WHICH READ AS UNDER:- 4. THE DEPARTMENTS APPEAL TO THE ITAT WAS DISMISSED. IT WAS NOTICED THAT THE ASSESSEE HAD SUBMITTED A LIST OF SHIPPING LINES ALONG WITH THE NAMES OF THE AGENTS AND CORRESPONDING BILLS OF LADING TO THE ASSESSING OFFICER A T THE TIME OF THE SURVEY ITSELF. IT WAS FURTHER HELD : IN CASE THE GOODS HAVE BEEN TRANSPORTED BY A FOREIGN SHIPPING LIN E, PAYMENTS HAVE OBVIOUSLY TO BE MADE TO THE FOREIGN SHIPPING LINES OR AGENTS THEREOF. EVEN IF PAYMENTS HAV E BEEN MADE TO SUB-AGENTS IN SOME CASES, THESE ARE PASSED ITA-5452 TO 5457/D/2013 6 ON TO THE AGENT, WHO FILE RETURN UNDER SECTION 172 I N RESPECT OF SUCH PAYMENTS ON BEHALF OF THE SHIPPING LINE S. THE FINDING OF CIT(APPEALS) IS THAT CONFIRMATIONS HAV E BEEN FILED FROM ALL THE AGENTS FOR FILING OF RETURNS UNDER SECTION 172. THUS, FINDING HAS NOT BEEN CONTROVERTED BY THE LEARNED DR BY PRODUCING ANY OTHER MATERIAL . (EMPHASIS BY UNDERLINING SUPPLIED BY US) 8. FROM THE ABOVE, IT IS EVIDENT THAT IN THE ABOVE C ASE BEFORE THE CIT(A), THE ASSESSEE HAS FURNISHED THE CONFIRMATION FROM ALL THE AGENTS FOR FILING OF THE RETURN UNDER SECTION 172 AND THIS FINDING REMAINED UNCONTROVERTED BEFORE THE ITAT. NO SUCH CONFIRMATIO NS WERE PRODUCED IN THE CASE UNDER APPEAL BEFORE US EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LEARNED CIT(A) OR BEFORE US. HOWEVER, CONSIDERING THE TOTALITY OF THE FACTS AND ARGUMENTS OF BOTH THE SIDES, IN OUR OPINION, IT WOULD MEET THE ENDS OF JUSTICE IF THE MATTER IS SET ASID E TO THE FILE OF LEARNED CIT(A) BECAUSE HE HAS BASED HIS FINDING ON WRON G APPRECIATION OF THE ORDER OF THE ASSESSING OFFICER. WE, THEREFORE, SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE THE MATTER TO HI S FILE FOR READJUDICATION AFRESH IN ACCORDANCE WITH LAW. THE L EARNED CIT(A) WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH T HE PARTIES AND THEREAFTER READJUDICATE THE ISSUE AFRESH, OF COURSE, KE EPING IN VIEW THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CONTINENTAL CARRIERS (P.) LTD. (SUPRA). 9. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL, 2014. SD/- SD/- ( (( (A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 04.04.2014 VK. ITA-5452 TO 5457/D/2013 7 COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TA X, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -49(1), 403, AAYA 49(1), 403, AAYA 49(1), 403, AAYA 49(1), 403, AAYAKAR BHAWAN, KAR BHAWAN, KAR BHAWAN, KAR BHAWAN, LAXMI NAGAR, DISTRICT CENTRE, DELHI LAXMI NAGAR, DISTRICT CENTRE, DELHI LAXMI NAGAR, DISTRICT CENTRE, DELHI LAXMI NAGAR, DISTRICT CENTRE, DELHI 110 092. 110 092. 110 092. 110 092. 2. RESPONDENT : M/S EXPEDITORS INTERNATIONAL (INDIA) PVT.LTD., M/S EXPEDITORS INTERNATIONAL (INDIA) PVT.LTD., M/S EXPEDITORS INTERNATIONAL (INDIA) PVT.LTD., M/S EXPEDITORS INTERNATIONAL (INDIA) PVT.LTD., 6, GROUND FLOOR, SECTOR 6, GROUND FLOOR, SECTOR 6, GROUND FLOOR, SECTOR 6, GROUND FLOOR, SECTOR- -- -C, C,C, C, POCKET POCKET POCKET POCKET- -- -8, CSC VASANT KUNJ, 8, CSC VASANT KUNJ, 8, CSC VASANT KUNJ, 8, CSC VASANT KUNJ, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR