Duncans Tea Ltd, Kolkata V. A.C.I.T.,Circle - 4(1), Kolkata, Kolkata

ITA 803/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9337 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 25-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANINDYA KR BANDOPADHYAY J
• Keywords: Business expenditure; TDS
• Section: 143(3); 40(a)(ia); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO. 803 /KOL/201 8 ASSESSMENT YEAR: 2011-12 DUNCANS TEA LTD., 31, NETAJI SUBHAS ROAD, KOLKATA-700 001 [ PAN NO.AABCD 0201 A ] / V/S . ACIT CIRCLE-4(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SUBASH AGARWAL, ADVOCATE /BY RESPONDENT SHRI ANINDYA KR. BANDOPADHYAY, JCIT-DR /DATE OF HEARING 19-11-2019 /DATE OF PRONOUNCEMENT 10-01-2020 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATAS O RDER DATED 29.04.2016 PASSED IN CASE NO.1290/CIT(A)-2/14-15 INVOLVING PROCEEDING S U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. THE ASSESSEES FORMER SUBSTANTIVE GROUND CHALLEN GES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING HANDLING & WA REHOUSE COLLECTION CHARGES OF 14,40,861/- INCURRED FOR WAREHOUSE AND FREIGHT MOVE MENT. BOTH THE LOWER AUTHORITIES ITA NO.803/KOL/2018 ASSESSMENT YEAR 2 011-12 DUNCANS TEA. LTD. VS ACIT, CIR-4(1) KOL. PAGE 2 CASE IS THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TH E TDS U/S. 194C OF THE ACT AND ITS FAILURE TO THIS EFFECT RENDERS THE ENTIRE AMOUNT NO T ALLOWABLE. 3. AFTER GIVING OUR THOUGHTFUL CONSIDERATION TO RIV AL CONTENTIONS AGAINST AND IN SUPPORT OF THE IMPUGNED HANDLING AND WAREHOUSE COLL ECTION CHARGES FREIGHT DISALLOWANCE, WE FIND THAT THIS ISSUE IS NO MORE RES INTEGRA. THE ASSESSEE HAD FILED ITA NO.1961/KOL/2016 IN ASSESSMENT YEAR 2012-13 CHALLENGING THE LOWER A UTHORITIES IDENTICAL ACTION. LEARNED CO-ORDINATE BENCHS ORDER DATED 31.07.2018 HAS DELETED THE SAME AS UNDER:- 7. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSEE HAS REIMBURSED THE COLLECTIO N CHARGES AND PICK UP CHARGES TO THE VARIOUS TRANSPORTERS, AND THIS FACT CAN BE VERIFIED FROM THE COPIES OF FREIGHT BILLS AND LEDGER ACCOUNT OF WAREHOUSING COLLECTION CHARGES ( PB.23 ). THE REIMBURSEMENT OF EXPENSES FOR AND ON BEHALF OF ASSESSEE IS NOT COVERED UNDER THE PROV ISIONS OF SECTION 194C OF THE ACT. THEREFORE, THESE EXPENSES ARE NOT LIABLE TO TDS AS THE TERM 'CONTRACT' IS ABSENT. THESE REIMBURSEMENT OF EXPENSES WERE NOT MADE BY THE ASSE SSEE TOWARDS ANY SERVICES RENDERED BY THE AGENT, BUT HAS BEEN MADE TO SET OFF THE EXPENSE S INCURRED BY THE AGENT ON BEHALF OF THE ASSESSEE. WE NOTE THAT THERE IS NO ELEMENT OF ' INCOME ' IN THESE TRANSACTIONS, IT IS JUST REIMBURSEMENT OF EXPENSES INCURRED BY THE AGENT FOR AND ON BEHALF OF ASSESSEE. THEREFORE, THE ASSESSEE WAS NOT OBLIGED TO DEDUCT TAX AT SOURCE. W E NOTE THAT IT IS NOT A DIRECT PAYMENT FOR FREIGHT TO THE TRANSPORTER. THEREFORE, WE ARE OF TH E VIEW THAT THERE IS NO TDS OBLIGATION ON THE ASSESSEE ON THE ALLEGED AMOUNT OF RS.18,16,096/-. F OR THAT WE RELY ON THE JUDGMENT OF THE CO- ORDINATE BENCH OF ITA T KOLKATA IN THE CASE OF SATY ENDRA JHUNJHUNWALLA VS. ITO, W-46(4), KOLKATA, ITA NO.1988/KOL/2009 , FOR THE A.Y 2005-06, WHEREIN IT WAS HELD AS FOLLO WS:- 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED IN RESPECT OF OCTROI CHARGES THAT FREIGHT IS LESS THAN RS.12,622/- AND IT DOES N OT ATTRACT TDS IN ANY CASE. FOR THIS HE REFERRED TO ASSESSEES PAPER BOOK WHEREIN DETAILS O F OCTROI CHARGES AND OTHER CHARGES PAID TO M/S INLAND TRANSPORT PVT. LTD. ARE DETAILED OUT AS UNDER: DATE FREIGHT CH. OCT.CH OS CH DEL.CH MIASC. CH INCL UNLOADING CHGS E CESS TOTAL 23/7/2004 523.00 597.00 30.00 5.00 30.00 -- 1,185.00 6/8/2004 573.00 1,265.00 67.00 5.00 1,537.00 -- 3,447.00 19/8/2004 978.00 2,705.00 137.00 5.00 1,538.00 -- 5,363.00 20/8/2004 388.00 806.00 41.00 5.00 2,030.00 - - 3,270.00 20/8/2008 1,285.00 3,300.00 165.00 5.00 30.00 -- 4,785.00 1/10/2004 812.00 2,640.00 133.00 5.00 2,823.00 -- 6,413.00 10/11/2004 523.00 1,518.00 74.00 5.00 30.00 -- 2,150.00 2/12/2004 1,078.00 2,200.00 112.00 5.00 30.00 -- 3,425.00 25/12/2004 1,111.00 2,846.00 143.00 5.00 3,030.00 -- 7,135.00 2/2/2005 843.00 2,200.00 112.00 5.00 30.00 25 .00 3,215.00 15/2/2005 599.00 1,595.00 83.00 5.00 30.00 18.00 2,330.00 24/2/2005 1,111.00 2,035.00 102.00 5.00 30.00 31.80 3,314.80 31/03/2005 -- -- 1,254.00 60.00 2,315.00 123.00 3,7 52.00 31/03/2005 -- -- 641.00 29.00 2,168.00 62.00 2,90 0.50 28/3/2005 1,361.00 2,640.00 135.00 5.00 30.0 0 39.00 4,210.00 11/1/2005 1,437.00 12,622.00 3,685.00 30,032.00 191.00 3.420.00 5.00 159.00 30.00 15,711.00 42.40 341.70 5,390.40 62,285.70 ITA NO.803/KOL/2018 ASSESSMENT YEAR 2 011-12 DUNCANS TEA. LTD. VS ACIT, CIR-4(1) KOL. PAGE 3 SIMILARLY, LD. COUNSEL FOR THE ASSESSEE STATED THAT SERVICE CHARGES PAID TO J.S. CLEARING SERVICES INCLUDES CUSTOM DUTY, PORT CHARGES, STAMP DUTY CHARGES, BONDAGE CHARGES, OCT. CHARGES APART FROM PAYMENT OF RENT AND REMOVAL DOCU MENTATION FEE AND DOCUMENT PROCESSING FEE. LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS CAN BE VERIFIED FROM COPES OF BILLS OF FREIGHT CHARGES AND COPIES OF BILLS OF CLEARING SERVICES CO UNSEL FOR THE ASSESSEE STATED THAT REIMBURSEMENT EXPENSES AND CUSTOM DUTY PAYMENTS BY AGENT FOR AND ON BEHALF OF THE ASSESSEE CANNOT BE COVERED UNDER THE TDS PROVISIONS. HENCE, THESE EXPENSES ARE NOT LIABLE TO TDS AND THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND NOT APPLICABLE. FOR THIS HE RELIED ON THE DECISION IN THE CASE OF ACIT V. GRANDPRIX FAB. (P) LTD., (2010) 128 TTJ 60 (DEL), WHEREIN THE TRIBUNAL VIDE PARA 16 HAS HELD AS UNDER:- 16. IN RESPECT OF THE PAYMENT TOWARDS AGENCY CHARG ES AMOUNTING TO RS.1,01,219, THE ASSESSEE HAS DEDUCTED TAX AMOUNTING TO RS.2,094 AT SOURCE, AND THE SAID PAYMENT HAS NOT BEEN DISALLOWED BY THE AO. THE OTHER TWO PAYMEN TS ARE TOWARDS PAYMENT OF CUSTOMS DUTY, AND OTHER EXPENSES PAID BY THE AGENT FOR // ON BEHALF OF THE ASSESSEE. THESE REIMBURSEMENT EXPENSES WERE NOT MADE TOWARDS ANY SERVICES RENDERED BY THE AGENT, BUT HAVE BEEN MADE TO SET OFF OF THE EXPENSE S INCURRED BY THE AGENT WHILE CLEARING THE IMPORTED GOODS FROM THE CUSTOMS FOR / ON BEHALF OF THE ASSESSEE. SINCE NO ELEMENT OF INCOME IS EMBEDDED IN REIMBURSEMENT OF E XPENSES INCURRED BY AGENCY FOR / ON BEHALF OF THE ASSESSEE, THE ASSESSEE WAS NOT O BLIGED TO DEDUCT TAX AT SOURCE, AND, THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 8. WE NOTE THAT PROVISION OF SECTION 194C OF THE AC T IS APPLICABLE, WHERE PAYMENTS IS MADE TO A CONTRACTOR/SUB-CONTRACTOR, WHERE CONTRACT IS EITH ER A WORK CONTRACT OR A CONTRACT FOR SUPPLY OF LABOUR. IN THE CASE OF BEFORE US, WE OBSERVE TH AT THE ASSESSEE HAS REIMBURSED THE EXPENSES TO ITS AGENT AND IT WAS NOT A DIRECT PAYMENT FOR FR EIGHT BY THE ASSESSEE TO THE TRANSPORTER. BESIDES, THE HON'BLE DELHI HIGH COURT IN THE CASE O F CIT VS. INDUSTRIAL ENGG. PROJECTS P. LTD. (202 ITR 1014), HELD THAT IT IS A SETTLED PROPOSITI ON OF LAW THAT WHEN THERE IS NO ELEMENT OF INCOME AND THE PAYMENT IS ONLY AS A REIMBURSEMENT O F EXPENSES INCURRED BY THE PAYEE, THEN NO DISALLOWANCE CAN BE MADE U/S. 40(A)(IA) OF THE A CT. WE FIND THAT THE ISSUE OF REIMBURSEMENT OF CHARGES WHICH ARE INCURRED BY AGENTS ON BEHALF OF ASSESSEE CANNOT BE SUBJECT MATTER OF TDS IN VIEW OF ABOVE CITED CASE LAWS. THEREFORE, CONSIDERING THE FACTUAL POSITION DISCUSSED ABOVE, W E ARE OF THE VIEW THAT THE AMOUNT PAID TO TRANSPORTERS ON ACCOUNT OF HANDLING WAREHOUSING COL LECTION CHARGES IS NOT LIABLE TO TDS, AS THE HANDLING AND WAREHOUSE COLLECTION CHARGES PAID TO TRANSPORTERS WERE HAVING VALID PAN NUMBER AND, IN ASSESSEE'S CASE UNDER CONSIDERATION NO INCOME ELEMENT IS THERE AND IT IS JUST REIMBURSEMENT OF EXPENSES AND MOREOVER, THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE PAYEE, HENCE, TDS OBLIGATION IS NOT APPLICABLE TO T HE ASSESSEE. THEREFORE, THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT-A NEEDS TO BE DE LETED. ACCORDINGLY, WE DELETE THE ADDITION. THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . LEARNED DEPARTMENTAL REPRESENTATIVE IS FAIR ENOUGH IN NOT PIN-POINTING ANY DISTINCTION ON FACTS OR LAW. WE THEREFORE ACCEPT ASSESSEES INS TANT FORMER GRIEVANCE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWAN CE. NECESSARY COMPUTATION TO FOLLOW AS PER LAW. ITA NO.803/KOL/2018 ASSESSMENT YEAR 2 011-12 DUNCANS TEA. LTD. VS ACIT, CIR-4(1) KOL. PAGE 4 4. NEXT COMES THE LATTER ISSUE OF DISALLOWANCE OF A SSESSEES DAMAGES CLAIM REGARDING LOSS OF PACKED TEA OF 1,87,160/-MADE IN THE LOWER PROCEEDINGS. THE CIT(A)S DETAILED DISCUSSION TO THIS EFFECT READS A S UNDER:- GROUND-4 THIS GROUND OF APPEAL IS AGAINST THE ACTION OF THE AO IN DISALLOWING A SUM OF RS.1,87,160/- BEING DAMAGE/LOSS OF PACKET TEA DEBITED TO THE PROF IT & LOSS ACCOUNT ON THE GROUND THAT NO EVIDENCES/DOCUMENTS WERE PRODUCED. AT THE TIME OF PASSING THE ASSESSMENT ORDER THE ASS ESSING OFFICER EXPRESSED HIS VIEW AS FOLLOWS:- DAMAGE/LOSS OF POCKET TEA . A SUM OF RS.1,87,160/- HAS BEEN DEBITED TO THE PROF IT AND LOSS ACCOUNT ON ACCOUNT OF DAMAGE/LOSS OF PACKET TEA. NO DETAILS/EVIDENCES REL ATING TO SUCH DAMAGE/LOSS HAS BEEN FILED BY THE ASSESSEE. DURING THE APPELLATE PROCEEDINGS, AR OF THE APPELLA NT SUBMITTED HIS WRITTEN SUBMISSIONS AS FOLLOWS:- THE APPELLANT IS ENGAGED IN THE BUSINESS OF BLENDI NG VARIOUS GRADES OF TEA AND PACKING THEM UNDER DIFFERENT BRAND NAMES. THE TEAS SO PACKED AT VARIOUS LOCATIONS ARE SOLD THROUGH MORE THAN 1200 KEY DEALERS APPOINT ED BY THE APPELLANT FOR THIS PURPOSES. THE KEY DEALERS, IN TURN, SUPPLY THE PACK ED TEA TO THE RETAILERS UNDER THEM. PACKET TEA AS A COMMODITY HAS A SHORTER SHELF LIFE. FURTHER, PACKET TEA BEING A FMCG PRODUCT IS MONITORED BY PREVENTION OF FOOD ADULTERA TION AUTHORITIES OF THE GOVT. OF INDIA. HENCE, PACKETS WHICH ARE DAMAGED OR FUNGUS A FFECTED ARE RETURNED BY THE RETAILERS TO THE KEY DEALERS WHO, IN TURN, CLAIM TH E REIMBURSEMENT IN RESPECT OF PACKET TEA DAMAGED AND RETURNED. THE TEAS WHICH ARE RETURN ED BY THE KEY DEALERS ARE DESTROYED SINCE THESE TEAS CANNOT BE SOLD IN THE MA RKET. DURING THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR, THE APPELLANT HAD WRITTEN OFF A SUM OF RS.1,87,160/- BEING LOSS OF DAMAGED PACKET TEA STOCK. THE APPELLANT SUBMITS THAT THE LOSS OR DAMAGE OF PA CKET TEA IS AN EVENT WHICH HAPPENS DURING THE NORMAL COURSE OF BUSINESS ACTIVITY. THE APPELLANT HAD, DURING THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR, SOLD PACKET TEA AGGREGATING TO RS.13499.04 LACS. OUT OF THIS, TEA AMOUNTING TO RS.1,87,160/- WAS DAM AGED, WHICH WORKS OUT 0.01% OF THE TOTAL TURNOVER. THE APPELLANT SUBMITS THAT THE LOSS COMPARED TO THE TOTAL TURNOVER IS NEGLIGIBLE AND HENCE HAS TO BE CONSIDERED AS A N ORMAL LOSS INCURRED DURING SALE OF TEAS THROUGH VARIOUS DEALERS SPREAD ALMOST ALL OVER THE COUNTRY. SIMILAR DISALLOWANCE MADE IN THE ASSESSMENT YEARS 2008-09 AND 2009-10 WE RE DELETED BY THE LEARNED C.I.T(A). COPIES OF THE ORDERS ARE ENCLOSED FOR YOU R KIND PERUSAL. IN VIEW OF THE ABOVE, IT IS HUMBLY PRAYED THAT THE DISALLOWANCE OF RS.1,87,160/- MADE BY THE LEARNED ASSESSING OFFICER MAY KINDLY BE DELETED . I HAVE CONSIDERED THE SUBMISSIONS OF THE AR OF THE APPELLANT. A SUM OF RS.1,87,160/- WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT O F DAMAGE/LOSS OF PACKET TEA. THE ASSESSEE DURING THE ASSESSMENT PROCEEDING MENTIONED THAT NO DETAILS / EVIDENCES RELATING TO SUCH DAMAGE /LOSS HAS BEEN FILED BY THE ASSESSEE. IN VI EW OF ABOVE, THE ORDER OF THE AO IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED . 5. WE HAVE HEARD RIVAL PLEADINGS AGAINST AND IN SUP PORT OF THE IMPUGNED DISALLOWANCE. THE ASSESSEES CASE THAT ITS PACKED T EA DAMAGES CLAIM IN QUESTION HAS ITA NO.803/KOL/2018 ASSESSMENT YEAR 2 011-12 DUNCANS TEA. LTD. VS ACIT, CIR-4(1) KOL. PAGE 5 BEEN WORKED OUT TO THE TUNE OF 0.01% OF THE TOTAL T URNOVER ONLY WHICH IS ALLOWABLE AS NORMAL BUSINESS EXPENDITURE. THE REVENUE ON THE OTH ER HAND QUOTES LOWER AUTHORITIES FINDINGS THAT THE IMPUGNED DISALLOWANCE HAS BEEN RI GHTLY MADE ON ACCOUNT OF ASSESSEES FAILURE IN FILING EXACT CORRESPONDING DE TAILS. AFTER GIVING OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS, WE OBSERVE THAT N EITHER PARTIES SUBMISSION DESERVE TO BE ACCEPTED IN ENTIRETY. THE FACT REMAINS THAT ASSE SSEE HAS NOT PLACED ON RECORD ALL THE NECESSARY DETAILS IN EITHER OF THE LOWER PROCEEDING S AND THE REVENUE ALSO FAILS TO DISPUTE THAT SUCH A LOSS OF PACKED TEA CANNOT BE AL TOGETHER RULED OUT IN REGULAR BUSINESS ACTIVITY. WE THEREFORE CONCLUDE THAT A LUM P SUM DISALLOWANCE OF 20,000/- ONLY WOULD MEET THE ENDS OF JUSTICE WITH A RIDER TH AT SAME SHALL NOT BE TREATED AS A PRECEDENT IN ANY OTHER ASSESSMENT YEAR. THE ASSESSE ES LATTER SUBSTANTIVE GRIEVANCE IS PARTLY ACCEPTED. 7. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOV E TERMS. ORDER PRONOUNCED IN OPEN COURT ON 10/01/2020 SD/- SD/- ( *) (, *) (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS - - 10/01/2020 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DUNCANS TEA LTD., 31, NETAJI SUBHAS ROAD , KOLKATA-001 2. /RESPONDENT-ACIT, CIR-4(1), AAYAKAR BHAWAN,P-7, CHO WRINGHEE SQ. KOL-69 3. 0 1 / CONCERNED CIT 4. 1 - / CIT (A) 5. 2 ,,0 , 0 /DR, ITAT, KOLKATA 6. 6 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ 0,