ITO, Bangalore V. M/s Elegant Stones Pvt. Ltd., Bangalore

ITA 93/BANG/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51322 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KUMAR AJEET JT
• Assessee Lawyers: H GANAPATLAL KAWAD
• Keywords: Opportunity of being heard
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 93/BANG/2011 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER, WARD 11(1), BANGALORE. VS. M/S. ELEGANT STONES PVT. LTD., NO.15, OPP. BPL DYNAMICS LTD., 6 TH CROSS, N.S. PALYA, BILEKALLI POST, BTM LAYOUT 2 ND STAGE, BANGALORE 560 076. PAN: AABCE 1975E APPELLANT RESPONDENT APPELLANT BY : SHRI KUMAR AJEET, JT.CIT(DR) RESPONDENT BY : SHRI H. GANAPATLAL KAWAD, FCA DATE OF HEARING : 19.10.2011 DATE OF PRONOUNCEMENT : 19.10.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE DEPARTMENT IS AGAINST THE ORDE R DATED 30.11.2010 OF THE CIT(APPEALS)-I, BANGALORE. 2. THE ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APP EAL RELATES TO DELETION OF ADDITION OF RS.32,80,153 MADE BY THE AS SESSING OFFICER U/S. ITA NO.93/BANG/11 PAGE 2 OF 6 40(A)(IA) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT] FOR NOT DEDUCTING TDS U/S. 194C OF THE ACT. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WAS AN EXPORTER OF GRANITE/MARBLE STONES AND TILES AND FILED RETURN OF INCOME ON 27.8.2007 DECLARING A TOTAL INCOME OF RS.7,08,090, WHICH WAS PROCESSED U/S. 143(1) OF THE ACT. LATER ON, THE CASE WAS SELECTED FOR SC RUTINY. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAD NOT DEDUCTED TDS ON RS.26,98,549 AND RS.7,13,054 WHICH WERE THE EXPENSES INCURRED FOR CLEARING & FORWARDING CHARGES AND OCEA N FREIGHT RESPECTIVELY. ACCORDINGLY HE MADE DISALLOWANCE U/S. 40(A)(IA) OF RS.34,11,603. 4. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS) AND FURNISHED WRITTEN SUBMISSIONS WHICH WAS FORWARDED T O THE AO FOR A REMAND REPORT. THE CONTENTION OF THE ASSESSEE WAS THAT TH E PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE TO PAYMENTS MAD E TO RESIDENT WHILE MOST OF THE PAYEES WERE NON-RESIDENTS AND THAT THE PAYME NT TO THE RESIDENTS ALSO DO NOT ATTRACT TDS AS THEY WERE ONLY AGENTS OF THE ASSESSEE. THE ASSESSEE FURNISHED CERTAIN DETAILS IN THE SHAPE OF DOCUMENTS TO DEMONSTRATE THAT THE PAYMENTS OF RS.26,98,549 AS CL EARING & FORWARDING EXPENSES AND RS.7,13,054 AS OCEAN FREIGHT WERE NOT LIABLE FOR TDS, BECAUSE THOSE PAYMENTS WERE MADE MOSTLY TO SHIPPING COMPANIES WHO HAD OBTAINED TDS EXEMPTION CERTIFICATES FROM THE CO MPETENT AUTHORITIES OF INCOME-TAX DEPARTMENT AND THE BALANCE WAS BELOW THE LIMITS PRESCRIBED UNDER THE TDS PROVISIONS. IT WAS ALSO STATED THAT THOSE DOCUMENTS COULD NOT BE FURNISHED BEFORE THE AO. SINCE THOSE DOCUME NTS WERE NOT CONSIDERED BY THE AO DURING THE ASSESSMENT PROCEEDI NGS, THE LD. CIT(A) ITA NO.93/BANG/11 PAGE 3 OF 6 CALLED FOR A REMAND REPORT. IN THE SAID REPOT, THE AO STATED THAT TDS EXEMPTION CERTIFICATES ISSUED BY THE INCOME-TAX AUT HORITIES WERE IN THE NAMES OF SHIPPING LINERS WHEREIN THE GRANITE AND MA RBLE SLABS OF THE ASSESSEE WERE LOADED, BUT THE ASSESSEE HAD NOT MADE ANY PAYMENTS TO THOSE SHIPPING LINERS DIRECTLY NOR TO THEIR AGENTS SO AS TO ATTRACT THE PROVISIONS OF SECTION 172 OF THE ACT. IT WAS ALSO POINTED OUT THAT THE PAYMENTS FOR CLEARING & FORWARDING AND OCEAN FREIGH T HAD BEEN MADE TO TWO PERSONS VIZ., M/S. TRANS ASIA SHIPPING SERVICES AND M/S. DOMINO CARGOS, WHO WERE THIRD PARTIES HAVING NO TDS EXEMPT ION CERTIFICATES. ACCORDING TO THE AO, THE PAYMENTS TO THOSE TWO CONC ERNS WERE IN THE NATURE OF WORK CONTRACT AND TDS NOT BEING DEDUCTED THEREFROM U/S. 194C OF THE ACT, THE PAYMENT WAS TAXABLE U/S. 40(A)(IA) OF THE ACT. 5. IN HIS REJOINDER, THE ASSESSEE PLEADED THAT M/S. TRANS ASIA SHIPPING SERVICES AND M/S. DOMINO CARGOS WERE AGENTS OF THE ASSESSEE, WHO HIRED THE FOREIGN LINERS ON BEHALF OF THE ASSESSEE AND TH E ASSESSEE REIMBURSED THE AMOUNT PAID BY THE AGENTS TO THE NON-RESIDENT L INERS OR THEIR RESIDENT AGENTS. IT WAS ALSO ARGUED THAT AS PER THE AGENCY LAW, THE PAYMENT BY THE AGENCY IS AS GOOD AS THE PAYMENT BY THE PRINCIPAL. IT WAS CONTENDED THAT THE ASSESSEE FILED SUPPORTING BILLS AND VOUCHERS WH EREIN THESE TWO CONCERNS HAD PRESENTED BILLS FOR REIMBURSEMENTS TO THE ASSESSEE. IT WAS ALSO POINTED OUT THAT ONLY RS.1,31,450 NEEDED TO BE ADDED U/S. 40(A)(IA) OF THE ACT BEING TRANSPORTATION CHARGES ABOVE RS.20,00 0 LIABLE FOR TDS AND TDS BEING NOT MADE THEREFROM U/S. 194C OF THE ACT. 6. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE AND THE REMAND REPORT OF THE ASSESSING OFF ICER, OBSERVED THAT ITA NO.93/BANG/11 PAGE 4 OF 6 M/S. TRANS ASIA AND M/S. DOMINO CARGO HAD ACTED AS AGENT OF THE ASSESSEE AND HAD EVEN PAID TO THE NON-RESIDENT SHIP PING LINERS AND THEIR RESIDENT AGENTS ON BEHALF OF THE ASSESSEE. ACCORD ING TO THE LD. CIT(A), IT WOULD BE INJUSTICE TO HOLD THOSE TWO CONCERNS AS TH IRD PARTY AND NOT THE AGENTS OF THE ASSESSEE AND THAT THOSE TWO CONCERNS LEGALLY ACTED AS AGENTS OF THE ASSESSEE, THEREFORE, REIMBURSEMENT MA DE TO THEM BY THE ASSESSEE WAS NOT COVERED U/S. 194C OF THE ACT BEING COVERED U/S. 172 OF THE ACT. HE ACCORDINGLY RESTRICTED THE ADDITION TO RS.1,31,450 AND ALLOWED RELIEF OF RS.32,80,153. 7. NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR STR ONGLY SUPPORTED THE ORDER OF THE AO AND FURTHER SUBMITTED THAT THE LD. CIT(A) DELETED THE ADDITION WITHOUT VERIFYING THE FACT THAT THE PAYMEN T WAS ACTUALLY RECEIVED BY THE PARTIES WHO WERE HAVING TDS EXEMPTION CERTIFICA TES. IT WAS FURTHER STATED THAT THE ASSESSEE MADE PAYMENTS TO THE PARTI ES WHO WERE NOT HAVING TDS EXEMPTION CERTIFICATES, THEREFORE THE BE NEFIT U/S. 172 OF THE ACT WAS NOT AVAILABLE TO THE ASSESSEE AND THE PROVISION S OF SECTION 194C WERE ATTRACTED, AS SUCH THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. 8. IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND FURT HER SUBMITTED THAT THE ASSESSEE MADE PAYMENTS TO M/S. TRANS ASIA SHIPPING SERVICES AND M/S. DOMINO CARGOS, WHO ACTED AS ITS AGENTS AND IN TURN MADE THE PAYMENT TO M/S. CHAKIAT SHIPPING SERVICES (P) LTD. AND M/S. CR ESCENT SHIPPING AGENCY (I) PVT. LTD.. WHO WERE ACTING AS AGENTS OF THE NON-RESIDENT COMPANIES WHO OBTAINED TDS EXEMPTION CERTIFICATES, THEREFORE ULTIMATE ITA NO.93/BANG/11 PAGE 5 OF 6 PAYMENT WAS MADE TO THE PARTIES WHO WERE HAVING TDS EXEMPTION CERTIFICATES, AS SUCH THE LD. CIT(A) WAS FULLY JUST IFIED IN DELETING THE ADDITION MADE BY THE AO. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE INSTANT CASE, IT APPEARS THAT THE ASSESSEE DID NOT FURNISH REQUIS ITE DETAILS BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, HOWEVER THOSE WERE FURNISHED BEFORE THE LD. CIT(A) AT THE F IRST APPELLATE STAGE. THE LD. CIT(A) ALSO CALLED FOR A REMAND REPORT ON THOSE DOCUMENTS AND THE AO CLEARLY STATED THAT THERE WAS NO TDS EXEMPTION CERT IFICATES ISSUED BY THE INCOME-TAX AUTHORITIES IN THE NAME OF PARTIES TO WH OM THE ASSESSEE MADE THE PAYMENTS AND THE PAYMENTS MADE WERE IN THE NATU RE OF WORK CONTRACTS. THE LD. CIT(A), ON THE CONTRARY, HELD THAT THE AGEN TS OF THE ASSESSEE MADE THE PAYMENTS AND CLAIMED REIMBURSEMENT FROM THE ASS ESSEE, WHICH WAS NOT COVERED U/S. 194C OF THE ACT BEING COVERED U/S. 172 OF THE ACT. 10. IN THE INSTANT CASE, THE LD. CIT(A) HAD NOT THR OWN ANY LIGHT ON THIS ASPECT THAT THE PAYMENTS MADE BY THE ASSESSEE WERE ULTIMATELY RECEIVED BY THE NON-RESIDENTS WHO WERE HAVING TDS EXEMPTION CERTIFICATES. WE, THEREFORE, DEEM IT APPROPRIATE TO SET ASIDE THE IMP UGNED ORDER PASSED BY THE LD. CIT(A) AND REMAND THE ISSUE BACK TO THE FIL E OF THE ASSESSING OFFICER TO BE ADJUDICATED AFRESH, IN ACCORDANCE WITH THE LA W AND BY CONSIDERING ALL THE DETAILS AND DOCUMENTS FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A). THE AO IS ALSO DIRECTED TO ALLOW DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.93/BANG/11 PAGE 6 OF 6 PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF OCTOBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 19 TH OCTOBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.