HIND GEO P. LTD., MUMBAI V. ITO WARD-1(1)(2), MUMBAI

ITA 546/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8385 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 11-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITHA NAIR
• Assessee Lawyers: DEVENDRA KOTHARI
• Keywords: TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘H‘ BENCH MUMBAI BEFORE: SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA No.546/Mum/2021 (Asse ssment Year : 2014-15) M/s. Hind Geo Pvt. Ltd., I-C, Ground Floor Wakefield House Narottam Morarji Road Ballard Estate Mumbai – 400 001 Vs. I.T.O.Ward 1(1)(2) Mumbai Ayakar Bhavan M.K.Road, Churchgate Mumbai – 400 020 PAN/GIR No. AABCF4436B (Appellant) .. (Respondent) Assessee by Shri Devendra Kothari Revenue by Ms. Smitha Nair Date of Hearing 31/01/2022 Date of Pronouncement 22/02/2022 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.546/Mum/2021 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-2, Mumbai in appeal No.CIT(A)-Mumbai-2/10321/2016-17 dated 03/03/2021 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 09/12/2016 by the ld. Income Tax Officer 1(1)(2), Mumbai (hereinafter referred to as ld. AO). ITA No. 546/Mum/2021 M/s. Hind Geo Pvt. Ltd., 2 2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the disallowance of expenditure representing reimbursement thereon u/s.40(a)(ia) of the Act in the facts and circumstances of the instant case. 3. We have heard rival submissions and perused the materials available on record. The assessee Company is in the business of providing Marine Seismic Services used for Research and Development to explore the utilisation of recourses available in sea and also provide complete Survey Solution including Bathmetry, Fishing Managements, Chase Boats and other related logistic services for data processing services required. 3.1. During the year under consideration the Company entered into a Geophysical services contract with "Distinct Energy -OMAN" vide agreement dated 23/12/2013 on Terms and conditions agreed therein, wherein the Company was referred as Contractor. As per clause No. 7, Mobilisation and Demobilisation responsibility was of Contractor and accordingly the Company provided all services to the "Distinct Energy- Oman". In order to provide the contractual services to "Distinct Energy –Oman”, the assessee company took a Vessel "Geo Hindsagar" From M/s Hind offshore Pvt Ltd - Mumbai and paid Rs. 2,57,55,269/- towards Mobilisation Charges and standby Charges as shown in their Invoice No.3670/HOPL/2014 dated 31/03/2014. 3.2. It was pleaded that the said mobilization charges are nothing, but reimbursement of expenses incurred by the owner of a vessel such as Fuel, Survey, arrangement of Expat Seismic Crew, Port charges, and various clearing charges from Naval & custom authorities to upgrade the Vessel so as to qualify as per Seismic norms prescribed under the ITA No. 546/Mum/2021 M/s. Hind Geo Pvt. Ltd., 3 contract. The amount towards Mobilisation was agreed at USD 255,000 vide agreement dated 01/10/2013 between assessee company and vessel owner Company. The ld. AR drew our attention to the ledger account showing incurrence of expenses by ship owner for updating the same as per requirement of contract but the ship owner billed to assessee company only USD 2,55,000/- as agreed in the contract. Accordingly, it was pleaded that the said mobilisation expenses of USD 255,000 is nothing but reimbursement of expenses incurred while vessel was made available for conducting seismic survey in Oman from India. The Ship Owner Company also billed stand by charges of USD 173,541.67 as stated in Invoice No.3670/HOPL/2014 which was nothing but the reimbursement cost towards vessel made available at the field for operation to the Company. Eventually, such reimbursement cost incurred towards port charges, victualising charges, on board crew salary, fuel, fresh water consumption etc. during the stand by period at operational field. In view of these facts, the assessee company has paid Rs.2,57,55,269/- as per Invoice and debited to Hire Charges (Geo Hindsagar ). The fact of reimbursement of expenses was not accepted by the ld. AO despite the fact that the aforesaid details were provided to the ld. AO during the course of assessment proceedings. We find that the ld. AO had treated the aforesaid expenditure as rent of equipment liable for TDS u/s.194I of the Act, failure of which had resulted in disallowance u/s.40(a)(ia) of the Act. In fact the assessee had also submitted before the lower authorities that the payment made by the assessee was duly shown as receipt by the ship owner company as its income and offered the same to tax. The ld. AR placed on record the profit and loss account and balance sheet of the ship owner company wherein this sum of Rs.257,55,269/- was included as income under the head ‘sale of services’ as on 31/03/2014 in the audited financial statements and a Chartered Accountant Certificate dated ITA No. 546/Mum/2021 M/s. Hind Geo Pvt. Ltd., 4 27/12/2017 was also furnished in the prescribed format stating that recipient had duly offered to tax the said sum of Rs.2,57,55,269/- together with the PAN of the recipient company. We find that the ld. CIT(A) had merely reiterated the ultimate conclusions reached by the ld. AO without appreciating evidences filed by the assessee on record. But, the evidences filed by the assessee which are enclosed in the paper book filed before us together with the submissions thereon are staring on us which goes to prove clearly that the payments made by the assessee are nothing but reimbursements on which deduction of tax at source is not warranted. Hence, there cannot be any disallowance u/s.40(a)(ia) of the Act. Moreover, we also find that the payee had duly reflected the said receipt as its income in its profit and loss account. This is also supported by the certificate from Chartered Accountant. Hence, on this count also there cannot be any disallowance u/s.40(a)(ia) of the Act in terms of second proviso thereon. Accordingly, the grounds raised by the assessee are allowed. 4. In the result, appeal of the assessee is allowed. Order pronounced on 22/02/2022 by way of proper mentioning in the notice board. Sd/- (VIKAS AWASTHY) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 22/02/2022 KARUNA, sr.ps ITA No. 546/Mum/2021 M/s. Hind Geo Pvt. Ltd., 5 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//