DCIT 13(1), MUMBAI V. RANGEELA EXPORT, MUMBAI

ITA 7752/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75599 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 11-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 7752/MUM/2010 ( / ASSESSMENT YEAR: 2006-07) ASST. CIT-13(1), ROOM NO.418, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020 VS. RANGEELA EXPORTS 246, 2 ND FLOOR, INDIA HOUSE, ABDUL REHMAN STREET, MUMBAI-400 003 ! ' ./PAN/GIR NO. AADFR 4227 K ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#&' / APPELLANT BY : SHRI SANJEEV JAIN $%!#&' / RESPONDENT BY : NONE ( )*&+, / DATE OF HEARING : 10.02.2014 -./&+, / DATE OF PRONOUNCEMENT : 19.02.2014 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-24, MUMBAI (CIT(A) FOR SH ORT) DATED 31.08.2010, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2006-07 VIDE ORDER DATED 09.12.2008. 2 ITA NO. 7752/MUM/2010 (A.Y. 2006-07) ASST. CIT VS. RANGEELA EXPORTS 2. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS THE DISALLOWANCE IN THE SUM OF RS.18,53,095/- U/S.40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE U/S.194C OF THE ACT ON CHARGES PAID BY THE ASSESSEE , AN EXPORTER OF IMITATION JEWELLERY, COSMETICS AND OTHER ITEMS, TO ITS CLEARING AND FORW ARDING (C & F) AGENTS. THE NON- DEDUCTION OF TAX AT SOURCE BEING ADMITTED, THE BASI S OF THE RELIEF ALLOWED BY THE LD. CIT(A), FOLLOWING THE DECISIONS BY THE HONBLE HIG H COURTS/TRIBUNAL, IS THAT THE SAME IS NOT APPLICABLE TO REIMBURSEMENT. RELIANCE STOOD PLA CED BY THE ASSESSING OFFICER (A.O.) ON THE CBDT CIRCULAR NO.715 DATED 08.08.1995 IN THE MATTER, WHICH CLARIFIED THAT AN EXCEPTION IN RESPECT OF REIMBURSEMENT CHARGES IS AD MISSIBLE ONLY WHERE BILLS ARE RAISED SEPARATELY FOR PROFESSIONAL CHARGES/FEES AND REIMBU RSEMENT OF EXPENSES, AND NOT WHERE THE GROSS AMOUNT, I.E., INCLUSIVE OF BOTH THE PROFE SSIONAL FEE AS WELL AS REIMBURSEMENT OF ACTUAL EXPENSES, IS RAISED. THE SAME STANDS MET BY THE LD. CIT(A) ON THE BASIS OF THE AFORE-SAID DECISIONS STATING THAT THE PROVISION COU LD NOT BE APPLIED TO REIMBURSEMENT OF EXPENSES NOTWITHSTANDING THE CIRCULAR BY THE CBDT I NASMUCH AS THERE IS NO ESTOPPEL AGAINST LAW. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ONLY ISSUE, AS PROJECTED BEFORE US BY THE REVEN UES GROUNDS; THE IMPUGNED ORDER; AND THE ARGUMENTS BY THE LD. DEPARTMENT REPR ESENTATIVE (DR), IS WHETHER SECTION 40(A)(IA) WOULD APPLY IN CASE OF NON-DEDUCTION OF T AX ON REIMBURSEMENT, PARTICULARLY IN VIEW OF CBDT CIRCULAR NO.715 (SUPRA). THE PAYMENTS, AS EXPLAINED BY THE LD. CIT(A), DID NOT INVOLVE ANY CONTRACTUAL CONSIDERATION AND, ACCORDINGLY, NO TAX WAS REQUIRED TO BE DEDUCTED, RELYING ON THE FOLLOWING DECISIONS : A) EAST INDIA HOTELS VS. CBDT [2010] 320 ITR 526 (BOM); B) CIT VS. UNITED RICE LAND LTD. [2010] 322 ITR 594 (P & H); C) MYTHRI TRANSPORT CORPORATION VS. ASST. CIT [2010] 124 ITD 40 (VISH); AND. D) ITO VS. DR. WILLMAR SCHWABE INDIA (P) LTD. [2005] 3 SOT 71 (DEL). 3 ITA NO. 7752/MUM/2010 (A.Y. 2006-07) ASST. CIT VS. RANGEELA EXPORTS IT NEEDS TO BE APPRECIATED THAT THE DEDUCTION OF TA X AT SOURCE IN RESPECT OF THE EXPENSES, CLAIMED BY THE C & F AGENT FROM THE EXPOR TER, THOUGH DEDUCTIBLE BY HIM (AGENT) INASMUCH AS HE IS THE PERSON RESPONSIBLE FO R MAKING THE PAYMENT TO THE SERVICE PROVIDER, THE DISALLOWANCE U/S.40(A)(IA), WHICH REQ UIRES AS A PREREQUISITE THE CLAIM OF THE CORRESPONDING EXPENDITURE, WOULD ARISE ONLY IN THE HANDS OF THE PERSON WHO CLAIMS THE SAME AS EXPENDITURE, OR THE FINAL PAYER, THE ASSESS EE-EXPORTER IN THE PRESENT CASE. THAT IS, WHILE THE PRIVITY OF THE RELEVANT CONTRACT, I.E., I N RESPECT OF THE WORK FOR WHICH THE EXPENDITURE UNDER REFERENCE IS INCURRED, IS BETWEEN THE ASSESSEE (EXPORTER) AND THE WORKS CONTRACTOR, IT IS THE C & F AGENT WHO IS RESPONSIBL E FOR THE PAYMENT AND, THUS, LIABLE TO DEDUCT TAX AT SOURCE U/S.194C. THIS WOULD OBTAIN EV EN WHERE THE CONTRACT IS BETWEEN THE AGENT AND THE WORKS CONTRACTOR. ACCORDINGLY, NO DIS ALLOWANCE QUA THE ASSESSEE WOULD ARISE ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE. REFERENCE IN THIS CONTEXT IS MADE TO THE DECISION IN THE CASE OF MITRA LOGISTIC PVT. LTD. VS. ITO [2012] 139 ITD 420 (KOL). IN THE FACTS OF THAT CASE, THE TRIBUNAL RESTORED THE M ATTER BACK TO THE FILE OF THE A.O. TO DETERMINE WHETHER AND TO THE EXTENT THERE WAS IN FA CT A REIMBURSEMENT, I.E., AFTER EXPLAINING THE PROVISION AS DELINEATED ABOVE. IN TH E INSTANT CASE, HOWEVER, THE ISSUE OF THE SUMS UNDER REFERENCE CONSTITUTING REIMBURSEMENTS IS NOT IN DISPUTE, WITH THE REVENUE INVOKING S.40(A)(IA) THEREON. THE CBDT CIRCULAR SUP RA IN FACT RECOGNIZES THIS POSITION, THOUGH STIPULATES THE CONDITION OF THE REIMBURSEMEN T BEING CLAIMED SEPARATELY FOR BEING RECOGNIZED AS SUCH, AND WHICH THE HONBLE COURTS/TR IBUNAL HAVE FOUND AS NOT CONSTITUTING A VALID BAR/LIMITATION. IN VIEW OF THE FOREGOING, WE HAVE NO HESITATION IN CONFIRMING THE ORDER BY THE LD. CIT(A). 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 1/+2)& 1&+3 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 19, 2014 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER 4 ITA NO. 7752/MUM/2010 (A.Y. 2006-07) ASST. CIT VS. RANGEELA EXPORTS ( 4* MUMBAI; 5 DATED : 19.02.2014 )6 ROSHANI , SR. PS !' # $%&' (!'% COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 7+ 8 9 / THE CIT(A) 4. ( 7+ / CIT - CONCERNED 5. :);<$6+6=> ,=>/ ( 4* / DR, ITAT, MUMBAI 6.