ACIT, CHENNAI V. M/s. Velavan Impex Pvt. Ltd., CHENNAI

ITA 75/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61011 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: N QUADIR HOSEYN
• Keywords: Capital expenditure
• Section: 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.75/MDS/2012 ASSESSMENT YEAR : 2005-06 THE ACIT COMPANY CIRCLE III(4) CHENNAI VS M/S VELAVAN IMPEX PVT. LTD NO.27/1, JAMBULINGAM STREET NUMGAMBAKKAM CHENNAI 600 034 [PAN AABCV5193K] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B.RENGARAJAN, JR. STANDING COUNSEL RESPONDENT BY : SHRI N.QUADIR HOSEYN, ADVOCATE DATE OF HEARING : 11-04-2012 DATE OF PRONOUNCEMENT : 20-04-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENU E AGAINST THE ORDER OF THE LD.CIT(A)-III, CHENNAI, DATED 12.10.2011. 2. THE SOLE GRIEVANCE OF THE REVENUE IN THIS APPEA L IS THAT THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S 4 0(A)(IA) OF THE ACT TO THE EXTENT OF ` 14,91,489/-. I.T.A.NO.75/12 :- 2 -: 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED FROM THE RETURN OF INCOME FILED BY THE ASSESSEE THAT THE ASSESSEE HA D PAID C&F CHARGES OF ` 17,14,039/- ON WHICH TDS WAS DEDUCTIBLE. HE OBSER VED FROM THE TDS CERTIFICATES ENCLOSED THAT TDS WAS DEDUCTED ON ` 2,02,750/- ONLY AND NO TDS WAS DEDUCTED ON THE BALANCE AMOUNT OF ` 15,11,289/-. THE ASSESSING OFFICER ALSO OBSERVED FROM THE LEDGER ACCOUNT FILED BY THE ASSESSEE THAT THE ENTIRE SUM WAS PAYABLE TO M/ S G.MASILAMANI ON VARIOUS DATES WITH NARRATION AS C&F CHARGES PAYABL E TO G.MASILAMANI. THE ASSESSING OFFICER OBSERVED THAT NO EVIDENCE OF ACCRUAL OF EXPENDITURE OR THAT M/S G.MASILAMANI WAS AN AGENT F OR ANY NON- RESIDENT SHIPPERS OR WHETHER THE EXPENDITURE WAS AC TUALLY INCURRED TOWARDS C&F CHARGES WAS FILED BY THE ASSESSEE. TH EREFORE, THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF ` 15,11,289/- U/S 40(A)(IA) AS WELL AS U/S 37 OF THE ACT. ON APPEAL BEFORE TH E LD.CIT(A), IT WAS SUBMITTED THAT BILLS/INVOICES AND STATEMENT OF ACCO UNT RELATED TO C&F CHARGES WERE PRODUCED AT THE TIME OF ASSESSMENT PRO CEEDINGS. THE ASSESSING OFFICER AGREED AND ACCEPTED THEIR CLAIM. THE PAYMENTS WERE SUPPORTED BY INVOICES OF C&F AGENT M/S G.MASIL AMANI AND THAT PAYMENTS WERE MADE BY ACCOUNT PAYEE CROSSED CHEQUES ONLY. ALL EXPENDITURES WHICH WERE NOT IN THE NATURE OF EXPEND ITURE DESCRIBED I.T.A.NO.75/12 :- 3 -: UNDER SECTIONS 32 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE, HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE AND HENCE, ALLOWABLE U/S 37 OF THE ACT. THE ASSE SSEE SUBMITTED THAT OUT OF C&F CHARGES OF ` 17,14,039/-, TOTAL SERVICE CHARGES PAID TO M/S G.MASILAMANI WAS ONLY ` 2,04,000/- ON WHICH TDS WAS DEDUCTED. OTHER EXPENSES OF ` 15,11,289/- WERE ONLY REIMBURSEMENT OF VARIOUS CHARGES AND EXPENSES INCLUDING PAYMENT OF CUSTOM DU TY, PUBLIC HEALTH OFFICE CHARGES, PQFS CHARGES AND OTHER PAYMENTS. T HUS, THERE WAS NO NEED TO DEDUCT TDS ON THE REIMBURSEMENT OF EXPENSES AND CHARGES PAID TO THE AGENT. THE ASSESSEE RELIED ON THE DEC ISION OF ITAT, DELHI BENCH IN THE CASE OF ITO VS DR.WILLMAR SCHWABE INDI A (P) LTD (2005) 3 SOT 71, AND ALSO QUESTION NO.30 OF BOARDS CIRCULAR NO.715 DATED 8.8.1995. 4. THE LD.CIT(A) SENT THE SUBMISSIONS OF THE ASSESSE E TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASSESSING OFFICER, IN THE REMAND REPORT DATED 21.7.2011 STATED THAT PAYMENTS MADE TO C&F AGENT, M/S G.MASILAMANI WERE BY ACCOUNT PAYEE CHEQU ES. THE ASSESSEE HAS NOT PROVED THAT THE PAYMENTS WERE MADE TO GOVERNMENT OR GOVERNMENT AGENCIES WITH PROPER EVIDENCE AND BIL LS. THE BILLS WERE I.T.A.NO.75/12 :- 4 -: PAID BY THE AGENT AND NOT BY THE ASSESSEE. HENCE, CONTENTION THAT THE AMOUNT PAID WAS TOWARDS REIMBURSEMENT WAS NOT C ORRECT. 5. IN REPLY TO THE REMAND REPORT, THE ASSESSEE SUBMIT TED THAT THE REIMBURSEMENT TO THE C&F AGENT WAS MADE FOR ACT UAL EXPENSES INCURRED AND ARE SUPPORTED BY BILLS AND INVOICES. SINCE THERE WAS NO INCOME ELEMENT IN THE REIMBURSEMENT, TDS OBLIGATION S WERE NOT ATTRACTED AND CONSEQUENTLY THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE ACT CANNOT BE INVOKED. THE ASSESSING OFFICER FAILE D TO NOTE THAT CLAIM FOR REIMBURSEMENT OF EXPENSES WERE SEPARATELY RAISE D. COPIES OF BILLS RAISED BY THE C&F AGENT AND BREAK-UP DETAILS FOR ` 17,14,020/- WERE ALREADY SUBMITTED. IT WAS SUBMITTED THAT BILLS FOR REIMBURSEMENT OF EXPENSES OF ` 15,11,289/- WERE SEPARATELY RAISED AND FOR SERVICE CHARGES OF ` 2,04,000/- WERE ALSO SEPARATELY RAISED ON WHICH TD S WAS DEDUCTED. IT WAS ALSO POINTED OUT TO THE LD.CIT(A ) THAT IN THE REMAND REPORT, THE ASSESSING OFFICER HAS STATED NOTHING AB OUT THE BILLS RAISED BY THE C&F AGENT. 6. THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, HELD THAT IT IS SEEN FROM THE C&F CHARGES OF ` 17,14,040/- THAT IT INCLUDES TRAILOR FREIGHT CHARGES, SHIPPING/ AIR FREIGHT CHARGES, CCLT CHARGES, CUSTOMS DUTY, CUSTOMS EXAMINATION/REP ACKING COOLY, PQFS CHARGES, IMPORT PERMIT, PHO/PRFO CHARGES, SERV ICE CHARGES, I.T.A.NO.75/12 :- 5 -: FUMIGATION CHARGES ETC. THE LD.CIT(A) ALSO OBSERV ED THAT THE ASSESSEE HAS DEDUCTED TAX ON SERVICE CHARGES PAID T O THE AGENT OF ` 2,04,000/-. PAYMENTS WERE MADE BY ACCOUNT PAYEE CH EQUES AND HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE REMAN D REPORT. THE AGENT HAS GIVEN PARTICULARS OF EXPENSES/CHARGES ETC . IN THE BILLS SUBMITTED BY THE ASSESSEE. THUS, THE GENUINENESS OF THE PAYMENT WAS PROVED, HENCE, DISALLOWANCE MADE WAS NOT CORREC T. HOWEVER, THE LD.CIT(A) OBSERVED THAT THE ASSESSEE COULD NOT PRO PERLY EXPLAIN THE IMPORT PERMIT AND PQFS CHARGES OF ` 9,800/- AND ` 10,000/- RESPECTIVELY. THEREFORE, HE SUSTAINED THE DISALLOW ANCE OF ` 19,800/- AND DELETED THE DISALLOWANCE OF BALANCE AMOUNT OF ` 14,91,489/-. 7. THE LD. DR RELIED ON THE ASSESSMENT ORDER WHEREAS T HE LD. A.R OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). WE FIND THAT THE LD.CIT(A), AFTER EXAMINING THE BREAKUP OF THE DETAILS AND THE BILLS RAISED BY C&F AGENT, FOUND THAT THE SUM OF ` 14,91,489/- WERE REIMBURSEMENT OF EXPENSES TO THE C&F AGENT. THE L D.CIT(A) ALSO FOUND THAT THE REIMBURSEMENT WAS OF THE ACTUAL AMOU NT OF EXPENSES INCURRED BY THE C&F AGENT ON BEHALF OF THE ASSESSE E. THE LD.CIT(A) ALSO FOUND THAT ALL PAYMENTS WERE MADE BY THE ASSE SSEE BY ACCOUNT PAYEE CHEQUES TO THE C&F AGENT WHICH FACT HAS BEEN ADMITTED BY THE ASSESSING OFFICER IN HIS REMAND REPORT. THEREFORE, THE LD.CIT(A) HAS I.T.A.NO.75/12 :- 6 -: RIGHTLY DELETED THE DISALLOWANCE OF ` 14,91,489/-. NO SPECIFIC ERROR IN THE ABOVE FINDING OF THE LD.CIT(A) COULD BE POINTE D OUT BY THE LD.DR. THE LD. DR COULD NOT PRODUCE ANY MATERIAL BEFORE US TO SHOW THAT THE AMOUNT OF ` 14,91,489/- DID NOT REPRESENT ACTUAL REIMBURSEMENT OF EXPENSES INCURRED BY THE C&F AGENT ON BEHALF OF THE ASSESSEE. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE D O NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE O RDER OF THE LD.CIT(A) WHICH IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 0-04-2012. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 20 TH APRIL, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR