M/s Sri. Ganesh Shipping Agency, Mangalore V. ACIT, Mangalore

ITA 833/BANG/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2291 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-02-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 23-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA CITIDR
• Assessee Lawyers: S VENKATESAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.833/BANG/2011 ASSESSMENT YEAR : 2005-06 M/S. SRI GANESH SHIPPING AGENCY, SRI RAM BUILDING, 04-152, KOTTARA CHOWKI, DEREBAIL, MANGALURU 575 006. PAN : AAFFS 2694K VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), MANGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI S. VENKATESAN, C.A. RESPONDENT BY : SHRI S.K. AMBASTHA, CIT-I(DR) DATE OF HEARING : 10.06.2013 DATE OF PRONOUNCEMENT : 14.06.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 11.11.2009 OF THE CIT(APPEALS), MANGALURU RELATING TO ASSESSME NT YEAR 2005-06. 2. THERE IS A DELAY OF ABOUT 680 DAYS IN FILING THI S APPEAL BY THE ASSESSEE. BY ORDER DATED 03.01.2013, THE TRIBUNAL HAD CONDONED THE DELAY IN FILING THE APPEAL AFTER ACCEPTING THE AFFI DAVIT FILED BY THE ASSESSEE IN WHICH THE ASSESSEE HAD POINTED OUT THAT IT HAD F ILED WRIT PETITION BEFORE ITA NO.833/BANG/2011 PAGE 2 OF 8 THE HONBLE HIGH COURT OF KARNATAKA CHALLENGING THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT A ND WAS NOT AWARE THAT DESPITE SUCH WRIT PETITION, REGULAR APPEAL HAD TO B E FILED AGAINST THE ORDER OF THE CIT(APPEALS). IT WAS FURTHER MENTIONED IN T HE AFFIDAVIT THAT IT WAS ONLY AFTER THE DISCUSSION WITH THE PRESENT COUNSEL, IT WAS ADVISED TO FILE AN APPEAL AND IMMEDIATELY AN APPEAL WAS FILED AFTER RE CEIVING SUCH PROFESSIONAL ADVISE. 3. THE FIRST ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE CIT(APPEALS) WAS JUSTIFIED IN RESTRICTI NG THE DISALLOWANCE ON ACCOUNT OF PAYMENT OF INCENTIVES OR SPEED MONEY TO LABOURERS AT NEW MANGALORE PORT TRUST (NMPT) FROM 20% OF THE TOTAL E XPENDITURE OF RS.1,40,25,087 TO 10% OF THE AFORESAID SUM. 4. THE ASSESSEE IS IN THE BUSINESS OF STEVEDORING I .E., CLEARING & FORWARDED OF EXPORTS & IMPORTS. WHILE COMPUTING IN COME, THE ASSESSEE HAD CLAIMED AS DEDUCTION A SUM OF RS.1,40,25,087 PA ID IN CASH TO VARIOUS MOOPAS (GANG LEADERS) TOWARDS INCENTIVES (SPEED MON EY) THROUGH VOUCHERS OVER AND ABOVE THE REGULAR PAYMENT THROUGH NMPT. THE VOUCHERS FOR THE ENTIRE EXPENDITURE WAS SUPPORTED O NLY BY SELF-MADE VOUCHERS. ON VERIFICATION OF THE VOUCHERS, THE AO NOTICED THE FOLLOWING DEFECTS:- (A) THE PAYMENTS ARE MADE IN CASH TO EACH GANG LEAD ER. (B) WHAT WAS THE OBLIGATION OF THE ASSESSEE TO PAY IS NOT CLEAR. ITA NO.833/BANG/2011 PAGE 3 OF 8 (C) NEITHER THE IDENTITY OF THE GANG LEADER NOR TH E WORKER CAN BE VERIFIABLE. (D) THE RECIPIENTS ARE NOT ASSESSEES EMPLOYEES. 5. THE AO ALSO NOTICED THAT EACH VOUCHER HAD BEEN M ADE IN RESPECT OF PAYMENTS BELOW RS.20,000. THE AO CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE PAYMENT WAS MADE TO THE LABOURE RS OVER AND ABOVE WHAT IS PAYABLE AS REGULAR PAYMENT. IN REPLY, IT W AS SUBMITTED THAT PAYMENT WAS SPEED MONEY WAS A PRACTICE WHICH IS PRE VALENT IN THE TRADE AND ACROSS ALL PORTS AS WELL AS NMPT TO PAY LABOURE RS SPEED MONEY OR INCENTIVE TO ENSURE COMPLETION OF THE WORK DONE AT THE PORT VESSEL. IT WAS THE ASSESSEES SUBMISSION THAT TIME IS THE ESSENCE OF THEIR BUSINESS AND THEREFORE THE AFORESAID PAYMENT WAS MADE TO ENSURE SMOOTH CARRYING ON OF THE STEVEDORING BUSINESS BY THE ASSESSEE. IT WAS A LSO SUBMITTED THAT SUCH PAYMENTS HAVE BEEN HELD TO BE NOT ILLEGAL BY THE HO NBLE HIGH COURT OF KARNATAKA IN THE CASE OF KONKAN MARINE AGENCIES, 313 ITR 308 (KARN.) . IT WAS POINTED OUT THAT THIS ARRANGEMENT WITH TH E GANG LEADERS WAS ARRIVED AT BY THE ASSOCIATION OF STEVEDORING AG ENTS AND PORT LABOURERS WITH THE CONSENT OF PORT AUTHORITIES. TH E ASSESSEE POINTED OUT THAT FOR THE A.Y. 2004-05, 20% OF SUCH EXPENSES WER E DISALLOWED BY THE AO AND THE SAME WAS RESTRICTED TO 10% BY THE CIT(AP PEALS) AND THE ORDER OF THE CIT(A) HAD BEEN CONFIRMED BY THE ITAT IN ITA NO.1230(BANG)2007 DATED 18.07.2008 IN ASSESSEES OWN CASE FOR THE A.Y . 2004-05. ITA NO.833/BANG/2011 PAGE 4 OF 8 6. THE AO HOWEVER WAS OF THE VIEW THAT THE DECISION OF THE ITAT IN KONKAN MARINE AGENCIES IN ITA NO.607/BANG/2010 DATE D 17.05.2004 WHICH LATER CONFIRMED BY THE HONBLE HIGH COURT OF KARNATAKA REFERRED TO IN THE EARLIER PART OF THIS ORDER WAS NOT ACCEPTABLE T O THE DEPARTMENT AND AN APPEAL HAD BEEN FILED BEFORE THE HONBLE HIGH COURT . THE AO WAS OF THE FURTHER VIEW THAT THE SELF-MADE VOUCHERS IN RESPECT OF THE PAYMENTS CONTAINED THE FOLLOWING DEFECTS VIZ., PAYMENTS WERE MADE BY CASH, RECIPIENTS WERE NOT IDENTIFIABLE, WORK TURNED OUT O R BENEFIT/ADVANTAGE DERIVED BY THE ACTIVITY OF THE ASSESSEE COULD NOT B E MEASURED OR QUANTIFIED FROM THE VOUCHERS. THE AO WAS OF THE VIEW THAT THE RE WAS EVERY SCOPE FOR INFLATION OF THE EXPENSES. HE WAS THEREFORE OF THE VIEW THAT 20% OF THE EXPENSES CLAIMED SHOULD BE DISALLOWED, ACCORDINGLY HE DISALLOWED A SUM OF RS.28,05,017. 7. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOLL OWING THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE, RESTRICTED THE DISALLOWANCE TO 10% OF THE TOTAL EXPENSES OF RS.1,40,25,087. 8. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. DR. THE FACTS ARE IDENTICAL TO THE FAC TS AS IT PREVAILED IN ASSESSEES OWN CASE FOR THE A.Y. 2004-05. IN THAT YEAR, THE TRIBUNAL HAD CONSIDERED IDENTICAL FACTS AND CIRCUMSTANCES AND WA S OF THE VIEW THAT ITA NO.833/BANG/2011 PAGE 5 OF 8 DISALLOWANCE OF 10% OF THE EXPENSES WOULD BE JUST A ND FAIR. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER PLACED STRONG RELI ANCE ON THE DECISION OF THE ITAT BANGALORE IN THE CASE OF DCIT VS. M/S. HML AGENICES PVT. LTD. ITA NO.1209/BANG/2009 FOR AY 2005-06 IN WHICH THIS TRIBUNAL CONFIRMED ORDER OF CIT(A) IN AN IDENTICAL CASE OF S TEVEDORE AGENT DELETING ADHOC ADDITION OF 25% OF SPEED MONEY EXPENSES. WE HAVE CONSIDERED THE AFORESAID DECISION AND FIND THAT THE AFORESAID DECISION WAS RENDERED ON THE BASIS OF FACTS AS IT PREVAILED IN THAT CASE. W E HOWEVER FIND THAT THIS TRIBUNAL HAS TAKEN A PARTICULAR VIEW IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEAR. WE ARE OF THE VIEW THAT THE DECIS ION OF TRIBUNAL IN ASSESSEES OWN CASE HAS TO BE FOLLOWED. RESPECTFUL LY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, WE UPHOLD THE ORDE R OF THE CIT(APPEALS) ON THIS ISSUE AND DISMISS GROUND NO.2 RAISED BY THE AS SESSEE IN THIS REGARD. 10. THE OTHER ISSUE RAISED IN GROUNDS NO.3, 3.1 & 4 IS WITH REGARD TO DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT IN RESP ECT OF THE PAYMENTS MADE BY THE ASSESSEE TO NMPT ON BEHALF OF THE SHIP OWNERS. 11. THE MAIN SOURCE OF INCOME OF THE ASSESSEE IS IN THE FORM OF AGENCY COMMISSION FOR ASSISTING THE FOREIGN OR INDIAN SHIP COMPANIES WHENEVER THEIR SHIP REACHES NMPT. THE CUSTOMERS MAKE ADVANC E PAYMENT TO THE ASSESSEE TO MEET THE VARIOUS CHARGES TO BE PAID TO NMPT LIKE GROUND RENT, PORT LABOUR CHARGES, OTHER CORE DUES, BERTH HIRE, C OST OF FRESH WATER, PILOTAGE ETC. THE ASSESSEE MAKES PAYMENT TO THE PO RT AUTHORITIES AS AND ITA NO.833/BANG/2011 PAGE 6 OF 8 WHEN BILLS ARE RAISED BY THEM AND SUCH PAYMENTS ARE MADE ON BEHALF OF ITS CUSTOMERS. DURING THE PREVIOUS YEAR RELEVANT TO A .Y. 2005-06, THE ASSESSEE HAD MADE THE FOLLOWING PAYMENTS TO NMPT ON BEHALF OF ITS CUSTOMERS: GROUND RENT PAID RS. 74,56,840 PORT LABOUR CHARGES PAID ON BEHALF OF THE SHIPS RS.3,38,40,450 PORT DUES, BERTH HIRE, COST OF FRESH WATER AND PILOTAGE ON BEHALF OF THE SHIPS RS. 9,17,12 ,103 12. THE ASSESSING OFFICER CONSIDERED THE TOTAL PAYM ENT MADE TO NMPT AT A SUM OF RS.15,23,85,805. THE AO CALLED FOR THE TDS DETAILS ON THE AFORESAID PAYMENTS AND FINDING THAT THE TDS HAD BEE N REMITTED BELATEDLY, INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND MADE AN ADDITION OF RS.17,67,50,315 COMPRISING OF THE FOLLOWING TWO SUMS:- (A) BELATED PAYMENT OF TDS RS.15,23,85,805 (B) NON-DEDUCTION OF TDS RS. 2,43,64,510 13. IT IS THE PLEA OF THE ASSESSEE THAT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE BECAUSE THE AFORESAID SU MS WERE NOT CLAIMED AS DEDUCTION BY THE ASSESSEE WHILE COMPUTING ITS INCOM E. IN THIS REGARD, THE ASSESSEE HIGHLIGHTED THAT ITS SOURCE OF INCOME FROM THE AGENCY COMMISSION IT DERIVES FOR VARIOUS SERVICES IT RENDE RS TO FOREIGN AND INDIAN ITA NO.833/BANG/2011 PAGE 7 OF 8 SHIPPING COMPANIES. THE ABOVE SUBMISSION OF THE AS SESSEE WAS NEITHER CONSIDERED BY THE AO OR THE CIT(A). 14. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, BOT H THE PARTIES AGREED THAT THE ORDER OF THE CIT(APPEALS) ON THE ABOVE ISS UE SHOULD BE SET ASIDE AND THE ISSUE REMANDED TO THE AO TO GIVE A FINDING AS TO WHETHER THE AMOUNT DISALLOWED BY THE AO AND CONFIRMED BY THE CI T(A) WAS IN FACT CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM BU SINESS. IF IT IS FOUND THAT THE AMOUNT HAS BEEN CLAIMED AS DEDUCTION, THEN THE INVOKING OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WILL BE JUSTIFIED. OTHERWISE, THOSE PROVISIONS CANNOT BE INVOKED. THUS, GROUNDS 3, 3.1 & 4 RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PUR POSES. 15. THE OTHER GROUNDS OF APPEAL WERE NOT PRESSED AN D ARE THEREFORE DISMISSED AS NOT PRESSED. 16. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF JUNE, 2013. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 14 TH JUNE, 2013. DS/- ITA NO.833/BANG/2011 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.