RAJ GIRISH KARIA, MUMBAI V. DCIT 23(3), MUMBAI

ITA 7767/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79253 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K SHAH
• Keywords: Residential status
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , ./I.T.A. NO.7232/MUM/2011 ( / ASSESSMENT YEAR : 2008-09) THE ASST. COMMISSIONER OF INCOME TAX, 23(3), C-10, 4 TH FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051 / VS. RAJ GIRISH KARIA GARAGE NO.3, VASUDHA BPS ROAD, MULUND (W), MUMBAI-400080. ( !' / APPELLANT) .. ( #$!' / RESPONDENT) ./I.T.A. NO.7767/MUM/2011 ( / ASSESSMENT YEAR : 2008-09) SHRI RAJ GIRISH KARIA GARAGE NO.3, VASUDHA BPS ROAD, MULUND (W), MUMBAI-400080. / VS. THE DY. COMMISSIONER OF INCOME TAX, 23(3), C-10, 4 TH FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051 ( !' / APPELLANT) .. ( #$!' / RESPONDENT) ! ./ % ./PAN/GIR NO. : AHXPK7597E !' & / REVENUE BY : SHRI SANJEEV JAIN #$!' ' & /RESPONDENT BY : SHRI J K SHAH ( ) ' *+ / DATE OF HEARING : 17.6.2014 ,- ' *+ /DATE OF PRONOUNCEMENT : 25.6.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS-APPEALS HAVE BEEN FILED BY THE PARTIES CHALLENGING THE ORDER DATED 30.8.2011 PASSED BY LD. CIT(A)-33, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2008-09. I.T.A. NO.7232/MUM/2011 I.T.A. NO.7767/MUM/2011 2 2. THE COMMON ISSUE ARISING FOR ADJUDICATION IN B OTH THESE APPEALS RELATES TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40( A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT) IS IN RESPECT OF FREIGHT AND INSURANCE CHARGES PAID TO SHIPPING COMPANIES. 3. THE FACTS RELATING TO THE ISSUE HAS STATED IN BR IEF. THE ASSESSEE IS A DEALER IN MARBLES, GRANITES AND THE SAID BUSINESS IS CARRIED ON UNDER THE NAME AND STYLE OF M/S RAJGIRI MAMO. THE ASSESSEE IMPORTED MARBLES AND G RANITES FROM THE VARIOUS COUNTRIES WHICH WERE RECEIVED THROUGH SHIPS. IN THE PROCESS , THE ASSESSEE PAID FREIGHT AND INSURANCE CHARGES ON THE GOODS IMPORTED BY IT AND C LAIMED THE SAME AS DEDUCTION DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE INCURRED A SUM OF RS.29,45,405/- TOWARDS FREIGHT AND INSURANCE CHARGES. THE ASSESS EE DID NOT DEDUCT TAX AT SOURCE FROM THE ABOVE SAID PAYMENTS AND HENCE AO ASKED THE ASSE SSEE TO OFFER EXPLANATIONS FOR NON-DEDUCTION OF TDS. IN RESPONSE THERETO, THE ASS ESSEE PLACED RELIANCE ON THE CIRCULAR NO.723 DATED 19.9.1995 ISSUED BY CBDT WHER EIN IT HAS BEEN STATED THAT PROVISIONS OF SECTION 194C AND 195 RELATING TO TA X DEDUCTION AT SOURCE ARE NOT APPLICABLE IN RESPECT OF FOREIGN SHIPPING COMPANIE S WHOSE INCOME IS SUBJECTED TO TAX U/S 172 OF THE ACT. THE ASSESSEE SUBMITTED THAT HE HAS MADE PAYMENTS TO EITHER FOREIGN SHIPPING COMPANIES DIRECTLY OR TO THE AGENT S OF THE FOREIGN SHIPPING COMPANIES. HOWEVER, THE AO PLACED RELIANCE ON THE DECISION REN DERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S ORIENT GOA PVT.LTD IN INCOME TAX APPEAL NO.7/2005 DATED 16.10.2009 AND HELD THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENT CITED ABOVE AND ACCORDINGLY HE DISALLOWED THE SAME BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. 4. IN THE FIRST APPELLATE PROCEEDINGS, THE LD. CIT( A) NOTICED THAT THE ASSESSEE HAS MADE PAYMENT TO FOREIGN SHIPPING COMPANIES TO THE T UNE OF RS.20.42 LAKHS AND THE REMAINING BALANCE OF RS.9.03 LAKHS WAS PAID TO THE FOLLOWING INDIAN COMPANIES : (A) MSC AGENCY INDIA PVT LTD (B) ASIS LOGISTIC LTD; THE LD. CIT(A) HELD THAT THE BENEFIT OF CIRCULAR N O.723 OF CBDT (SUPRA) SHALL BE AVAILABLE ONLY TO THE FOREIGN SHIPPING COMPANIES AN D ACCORDINGLY HE DELETED THE DISALLOWANCE OF RS.20.42 LAKHS RELATING TO PAYMENTS MADE TO THE FOREIGN SHIPPING COMPANIES AND CONFIRMED THE DISALLOWANCE OF RS.9.0 3 LAKHS RELATING TO THE PAYMENTS MADE TO INDIAN COMPANIES. AGGRIEVED BY THE ORDER O F LD. CIT(A) BOTH THE PARTIES ARE IN APPEAL BEFORE US. I.T.A. NO.7232/MUM/2011 I.T.A. NO.7767/MUM/2011 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE LD. D.R PLACED HEAVY RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF ORIENT GOA PVT LTD. (SUPRA) AND SUBMITTED THAT THE PAYMENTS MADE TO THE INDIAN RESIDENTS ARE NOT COVERED BY THE CIRCULAR OF CBDT, REFERRED SUPRA. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE DECISION IN THE CASE OF O RIENT GOA PVT LTD WAS RENDERED IN RESPECT OF DEMURRAGE CHARGES PAID AND HENCE THE SAM E CANNOT APPLIED TO THE FACTS OF THE INSTANT CASE. THE LD A.R PLACED HEAVY RELIANCE ON THE CIRCULAR OF CBDT, REFERRED SUPRA. 6. A CAREFUL PERUSAL OF THE CIRCULAR NO.172 ISS UED BY THE CBDT (SUPRA) WOULD SHOW THAT THE CBDT HAS MADE IT CLEAR THAT THE PROVISIONS OF SEC. 194C AND 195 RELATING TO TAX DEDUCTION AT SOURCE WILL NOT APPLY TO THE PAYMENTS MADE TO NON-RESIDENT SHIPPING COMPANIES ONLY IF THEIR INCOME IS ASSESSED U/S 172 OF THE ACT. HENCE, IN OUR VIEW, THE ASSESSEE HAS TO SHOW THAT THE SHIPPING COMPANIES TO WHOM PAYMENTS WERE MADE ARE NOT ONLY NON-RESIDENTS, BUT ALSO HE HAS TO SHOW THE Y WERE ASSESSED U/S 172 OF THE ACT. ONLY IF THE ASSESSEE IS ABLE TO PROVE THE ABOVE FAC TS, THEN HE WILL BE RELIEVED OF FROM THE LIABILITY TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO THEM TOWARDS FREIGHT AND INSURANCE CHARGES. IN THIS CONNECTION, WE MAY STAT E THAT THE LEGAL POSITION WILL NOT CHANGE IF THE PAYMENTS TO THE NON-RESIDENT SHIPPING COMPANIES ARE MADE THROUGH THEIR INDIAN AGENTS ALSO. HOWEVER, WE NOTICE THAT THE LD CIT(A) WAS CARRIED AWAY BY THE RESIDENTIAL STATUS OF THE AGENTS AND ACCORDINGLY DE LETED THE ADDITION RELATING TO THE PAYMENTS MADE TO NON-RESIDENTS AND CONFIRMED THE PA YMENTS MADE TO THE RESIDENTS. IN OUR VIEW, THE CRITERIA FOLLOWED BY THE LD CIT(A) IS NOT IN ACCORDANCE WITH THE LEGAL PROVISIONS, WHICH HAS BEEN EXPLAINED IN THE CIRCULA R OF THE CBDT. 7. BEFORE US, THE ASSESSEE HAS FURNISHED A CERTIFIC ATE OBTAINED FROM M/S MSC AGENCY (INDIA ) PVT LTD, WHEREIN IT IS STATED THAT THE SAID CONCERN IS THE GENERAL AGENTS OF MSC MEDITERRANEAL SHIPPING COMPANY. APPARENTLY, THIS CERTIFICATE WAS NOT CONSIDERED BY BOTH THE TAX AUTHORITIES. SINCE THE FACT RELATI NG TO THE ASSESSMENT OF SHIPPING COMPANIES TO WHOM OR ON BEHALF OF WHOM THE CHARGES WERE PAID BY THE ASSESSEE WERE NOT BROUGHT ON RECORD, WE ARE NOT IN A POSITION TO ADJUDICATE THE ISSUE URGED BEFORE US BY BOTH THE PARTIES. ACCORDINGLY, WE ARE OF THE VI EW THAT THE IMPUGNED ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFIC ER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND RESTORE THE MATTER TO THE FI LE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH BY DULY CONSI DERING THE CIRCULAR OF CBDT REFERRED SUPRA. BEFORE PARTING, WE MAY STATE THAT THE DECIS ION RENDERED BY HONBLE BOMBAY I.T.A. NO.7232/MUM/2011 I.T.A. NO.7767/MUM/2011 4 HIGH COURT IN THE CASE OF ORIENT GOA PVT LTD MAY NO T BE APPLICABLE TO THE FACTS PREVAILING IN THE INSTANT CASES, AS THE SAID DECISI ON WAS RENDERED IN THE CONTEXT OF DEMURRAGE CHARGES. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESS EE AND REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 25TH JUNE, 2014. ,- ( ./ 0 1 25TH JUNE, 2014 - ' ) 2 SD SD ( /SANJAY GARG) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER . ( ) MUMBAI: 25TH JUNE,2014. . . ./ SRL , SR. PS ! '#$%& '&($ / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT. 3. ( 4* ( ) / THE CIT(A)- CONCERNED 4. ( 4* / CIT CONCERNED 5. 5 #* 6 , + 6 , . ( ) / DR, ITAT, MUMBAI CONCERNED 6. 7) / GUARD FILE. 8 ( / BY ORDER, TRUE COPY 9 (ASSTT. REGISTRAR) + 6 , . ( ) /ITAT, MUMBAI