K.M GANATRA & CO., MUMBAI V. DCIT 22(2), NAVI MUMBAI

ITA 987/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9624 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH KUMAR YADAVDR
• Keywords: Opportunity of being heard; Principle of natural justice; Non-deduction of tax
• Section: 142(1); 194C

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.987/MUM/2013 ASSESSMENT YEARS: 2009-10 M/S. K. M. GANATRA & CO. 702, KRUSHAL COMMERCIAL COMPLEX, M. G. ROAD, ABOVE SHOPPERS STOP, CHEMBUR (W), MUMBAI-400 089 / VS. DY. CIT, CIRCLE 22(2), 4 TH FLOOR, TOWER NO. 6, VASHI RAILWAY STATION BUILDING, VASHI, NAVI MUMBAI-400 703 ( ! /ASSESSEE) ( ' / REVENUE) P.A. NO. AAAFK 0966 F ITA NO.1758/MUM/2013 ASSESSMENT YEAR: 2009-10 DY. CIT, CIRCLE - 22(2) NAVI MUMBAI-400 703 / VS. M/S. K. M. GANATRA & CO. MUMBAI-400 089 ( ' / REVENUE) ( ! /ASSESSEE) ITA NOS.6789 TO 6792/MUM/2014 ASSESSMENT YEARS: 2005-06 TO 2008-09 ITO - 13(2)(1), ROOM NO. 421, 4 TH FLOOR, AAYKAR BHAWAN, MUMBAI / VS. M/S. K. M. GANATRA & CO. MUMBAI-400 089 ( ' / REVENUE) ( ! /ASSESSEE) ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 2 ! / ASSESSEE BY SHRI RAJESH KUMAR YADAV-DR ' # $ / REVENUE BY SHRI BHUPENDRA SHAH , '- # ! . / DATE OF HEARING : 20/09/2017 # ! . / DATE OF ORDER: 22/09/2017 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS IN APPEAL FOR THE A.Y. 2009-10 (ITA NO. 987/MUM/2013), WHEREAS THE REVENUE IS IN APPEAL FOR A.YS. 2005-06 TO 2009-10, MEANING THEREBY THERE IS A CROS S APPEAL FOR A.Y. 2009-10. 2. FIRST WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E (A.Y. 2009-10 IN ITA NO. 987/MUM/2013), WHEREIN THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY HAS BEEN CHALLENGED, DISALLOWING EXPORT SHIPPING FREIGHT OF ` 56,98,125/-, U/S. 40 (A)(IA) R/W S. 194C OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). DURING HEARING, THE CRUX OF ARGUMENT ADVANCED BY SH RI BHUPENDRA SHAH, LD. COUNSEL FOR THE ASSESSEE IS THA T THE PAYMENTS WERE MADE TO AGENTS OF FOREIGN SHIPPING CO MPANY WHICH ARE EXEMPTED UNDER CIRCULAR NO. 723 DATED 19. 09.2005. THEREFORE, NO TDS WAS TO BE DEDUCTED. IT WAS FAIRLY ADMITTED ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 3 BY THE LD. COUNSEL THAT PAYMENTS WERE MADE BY THE A SSESSEE. THE LD. COUNSEL FURTHER EXPLAINED THAT EXPORT WAS M ADE TO FIVE, SIX PARTIES, THE DETAILS OF WHICH COULD NOT BE FURN ISHED. THEREFORE, THE LD. A.O. MAY BE DIRECTED TO EXAMINE THE FACTUAL MATRIX. SHRI RAJESH KUMAR YADAV, LD. DR DEFENDED TH E ADDITION BY CONTENDING THAT NECESSARY DETAILS WERE NEVER FURNISHED BY THE ASSESSEE BEFORE THE LD. A.O. THERE FORE, GENUINENESS OF THE PAYMENTS/PARTIES, COULD NOT BE E XAMINED BY THE A.O. THEREFORE, IT HAS TO BE EXAMINED BY THE A.O. AND THE ASSESSEE MAY BE DIRECTED TO FURNISH NECESSARY E VIDENCE OF PAYMENTS/CLAIM. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE FA CTS IN BRIEF ARE THAT THE ASSESSEE IS IN THE BUSINESS OF E XPORT OF SPICES, PULSES AND FOOD GRAINS, DECLARED INCOME OF ` 55,36,369/- IN HIS RETURN FILED ON 28.09.2009. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, THEREFORE, NOTI CE U/S. 143(2) AND SUBSEQUENTLY U/S. 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE, ASKING THE ASSESSEE TO SUBMIT TH E NECESSARY DETAILS. THE ASSESSEE FURNISHED THE DETAI LS. IT WAS FOUND FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASS ESSEE HAD ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 4 DEBITED AN AMOUNT OF ` 1,32,27,198/-, ON ACCOUNT OF EXPORT SHIPPING FREIGHT PAID TO 25 DIFFERENT SHIPPING AGENCIES/COMPANIES. IT WAS FURTHER SEEN THAT THE TA X AT SOURCE AMOUNTING TO ` 54,070/- WAS ONLY DEDUCTED IN RESPECT OF 8 PARTIES. THE ASSESSEE WAS ASKED AS TO WHY THE TDS W AS NO DEDUCTED WITH RESPECT TO PARTIES (17) AS DETAILED A T PAGE 2 ONWARDS OF THE ASSESSMENT ORDER. THE ASSESSEE IN IT S REPLY CONTENDED THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON FREIGHT PAID TO VARIOUS SHIPPING AGENTS OF NON RESIDENCE SH IP OWNERS BECAUSE OF CIRCULAR NO. 723 DATED 19.09.1995 AS THE SAID FREIGHT IS COVERED U/S. 172 AND THE PAYMENTS MADE T O AGENTS OF NON-RESIDENCE SHIP OWNERS ARE EXCLUDED FROM THE PROVISIONS OF SECTION 194C AND 195 OF THE ACT. THE LD. A.O. DI SCUSSED THE DECISION IN CIT VS. ORIENT (GOA) PVT. LTD . IN ITA NO. 7 OF 2005 DATED 16.10.2009 (BOM) AND THUS DISALLOWED THE AMOU NT OF ` 1,06,15,271/- (IN AGGREGATE) PAID WITHOUT DEDUCTION OF TAX U/S.40(A)(IA) OF THE ACT. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE HAS CONTENDED THAT THE PRINCIPAL OF NATURAL JUSTICE HAS BEEN VIOLATED AS S UFFICIENT OPPORTUNITY OF BEING HEARD FOR MAKING THE DISALLOWA NCE WAS NOT PROVIDED TO THE ASSESSEE. IT WAS ALSO CLAIMED T HAT THE LD. ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 5 A.O. COULD NOT APPRECIATE THAT THE PROVISIONS OF SE CTION 194C, 194J AND 195 OF THE ACT ARE NOT APPLICABLE TO THE F ACTS OF THE CASE OF THE ASSESSEE AND, THUS, NO DISALLOWANCE WAS REQUIRED TO BE MADE U/S. 40(A)(IA) OF THE ACT. THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) AFFIRMED THE STAND OF THE LD. A.O. THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DR AWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSER TIONS MADE BY THE LD. RESPECTIVE COUNSELS, IF KEPT IN JUXTAPOS ITION AND ANALYZED, THERE IS NO DISPUTE TO THE FACT THAT COMP LETE DETAILS OF PARTIES TO WHOM PAYMENTS WERE MADE WERE NOT PROV IDED TO THE LD. A.O. THE ASSESSEE HAS ALSO CLAIMED THAT NO TDS WAS REQUIRED TO BE MADE ON THE PAYMENTS MADE TO NON-RES IDENT FOREIGN SHIPPING COMPANIES TOWARD FREIGHT ON EXPORT SHIPMENTS WHICH ARE COVERED U/S. 172 FOR WHICH THE ASSESSEE HAS TO BRING ON RECORD THE DETAILS OF THE SHIPPING COMPANY TO WHOM PAYMENTS ARE MADE AND THEY ARE COVERED U/S.172 AS CERTIFIED BY THE INCOME TAX DEPARTMENT. THE ASSESSE E HAS ALSO MADE PAYMENT FOR EXPORT COMMISSION WHICH ASSESSEE H AS TO ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 6 PROVE THAT THE SAID EXPORT COMMISSION IS NOT CHARGE ABLE TO TAX IN INDIA. CONSIDERING THE TOTALITY OF THE FACTS, TH E ASSESSEE IS DIRECTED TO PRODUCE THE NECESSARY EVIDENCE LIKE DET AILS OF THE PARTY/AGENTS TO WHOM PAYMENTS WERE MADE WITHOUT DED UCTION OF TAX AT SOURCE AND FURTHER TO EXPLAIN THE LEGAL P OSITION BEFORE THE ASSESSING OFFICER FOR SUCH CLAIM. MOST IMPORTAN T EXPRESSION IN SECTION 195(1) CONSIST OF THE WORDS CHARGEABLE UNDER THE PROVISIONS OF THE ACT, THUS, THE PAYER IS BOUND TO DEDUCT TAX AT SOURCE ONLY IF THE SUM PAID IS ASSESS ABLE TO TAX IN INDIA. A PERSON PAYING INTEREST OR ANY OTHER SUM TO A NON- RESIDENT IS NOT LIABLE TO DEDUCT TAX IF SUCH SUM IS NOT CHARGEABLE TO TAX UNDER THE INCOME TAX ACT. SECTION 195 ALSO COVERS COMPOSITE PAYMENTS WHICH HAVE AN ELEMENT INC OME EMBEDDED OR INCORPORATED IN THEM. THUS, WHERE AN AM OUNT IS PAYABLE TO A NON-RESIDENT, THE PAYER IS AN UNDER OB LIGATION TO DEDUCT TAX IS LIMITED TO THE APPROPRIATE PROPORTION OF INCOME WHICH IS CHARGEABLE UNDER THE ACT. THIS OBLIGATION FOLLOWS FROM THE WORDS USED IN SECTION 195(1). SECTION 195(2) PR ESUPPOSES THAT THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT TO THE NON RESIDENT IS IN NO DOUBT THAT TAX IS PAYABLE IN RESP ECT OF SOME PART OF THE AMOUNT TO BE REMITTED BUT IS NOT SURE A S TO WHAT ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 7 SHOULD BE THE PORTION SO TAXABLE OR THE AMOUNT TO B E REMITTED. BUT IS NOT SURE AS TO WHAT SHOULD BE THE PORTION SO TAXABLE OR THE AMOUNT OF TAX TO BE DEDUCTED. IN SUCH A SITUATI ON HE IS REQUIRED TO MAKE AN APPLICATION TO THE ITO (TDS) FO R DETERMINING THE AMOUNT. IT IS ONLY WHEN THESE CONDI TIONS ARE SATISFIED THAT THE QUESTION OF MAKING AN ORDER U/S. 195(2) ARISES. THE ASSESSEE IS EXPECTED TO PROVIDE THE COM PLETE LIST OF THE PAYEES/AGENTS AND THE DETAILS OF THE NON-RESIDE NTS AND NON CHARGEABILITY OF TDS, IF ANY. IN SUCH A SITUATI ON, THE GENUINENESS OF THE PAYMENTS ALONG WITH THE GENUINEN ESS OF THE PAYEES ALSO HAS TO BE ESTABLISHED BY THE ASSESS EE. THUS, THE LD. ASSESSING OFFICER IS DIRECTED TO EXAMINE TH E CASE OF THE ASSESSEE AND DECIDE IN ACCORDANCE WITH LAW. THE ASS ESSEE BE GIVEN OPPORTUNITY OF BEING HEARD WITH FURTHER LIBER TY TO PRODUCE NECESSARY EVIDENCE IN SUPPORT OF ITS CLAIM. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 5. THE REVENUE HAS ALSO FILED CROSS APPEAL FOR A.Y. 2009-10 (ITA NO.1758/MUM/2013), WHEREIN ALLOWING PART RELIE F ON THE DISALLOWANCE OF EXPORT SHIPPING FREIGHT PAYMENT AMO UNTING TO ` 49,16,848/-, WITHOUT TDS, AS PER SECTION 194C R.W.S . 40(A)(IA) ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 8 OF THE ACT HAS BEEN CHALLENGED. THE CRUX OF ARGUMEN T IS IDENTICAL TO THE GROUND RAISED. IT WAS ALSO PLEADED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRANTED RELIEF TO THE ASSESSEE BY PLACING RELIANCE UPON THE DECISION OF T HE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT COMPANY WHICH HAS BEEN STATE BY THE HON'BLE ANDHRA PRADESH HIGH COURT VIDE ORDER DATED 08.10.2012. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE T OTALITY OF THE MATERIAL FACTS AND SINCE THE CROSS APPEAL OF THE AS SESSEE HAS BEEN REMANDED BACK TO THE FILE OF THE LD. ASSESSING OFFICER, THEREFORE, WITHOUT GOING IN TO MUCH DELIBERATION, T HIS APPEAL OF THE REVENUE DESERVES TO BE SENT BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR FRESH ADJUDICATION. THE ASSES SEE IS DIRECTED TO FURNISH THE NECESSARY DETAILS OF PAYMEN T AND THE REASON/EXPLANATION OF NON-DEDUCTION OF TAX AT SOURC E, AS WE ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 9 HAVE DISCUSSED IN THE PRECEDING PARAS. THUS, THIS A PPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. SO FAR AS REMAINING APPEALS OF THE REVENUE (A.Y. 2005-06 TO 2008-09) ARE CONCERNED, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCES OF THE RESP ECTIVE AMOUNTS ON NON-DEDUCTION OF TAX ON EXPORT SHIPPING FREIGHT AND EXPORT COMMISSION OF THE RESPECTIVE AMOUNT WITH OUT APPRECIATING THE DECISION FROM HON'BLE HIGH COURT I N THE CASE OF ORIENT (GOA) PVT. LTD. (SUPRA). CONSIDERING THE FACTUAL MATRIX AND THE DECISION ARRIVED AT IN EARLIER PARAS OF THI S ORDER, THE ASSESSEE IS DIRECTED TO FURNISH THE NECESSARY DETAI LS OF THE PAYMENTS MADE WITHOUT DEDUCTION OF TAX AT SOURCE, D ETAILS OF THE PARTIES AND THE REASON OF ALLOWABILITY, ETC. BE FORE THE LD. ASSESSING OFFICER. THUS, THE APPEALS OF THE REVENUE ARE ALSO ALLOWED FOR STATISTICAL PURPOSES. 8. FINALLY, THE APPEAL OF THE ASSESSEE AS WELL AS T HE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES . THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22/ 09/2017 SD/- SD/- ( RAMIT KOCHAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ITA NOS. 987 & 1758/MUM/2013, 6789 TO 6792/MUM/2014 M/S. K. M. GANATRA & CO. 10 , - MUMBAI; 0 DATED : 22/09/2017 ROSHANI, SR. PS %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. 1234 / THE APPELLANT 2. 5634 / THE RESPONDENT. 3. 7 7 , 8! ( 12 ) / THE CIT, MUMBAI. 4. 7 7 , 8! / CIT(A)- , MUMBAI 5. :'; 5! , 7 12. 1 < , , - / DR, ITAT, MUMBAI 6. = >- / GUARD FILE. / BY ORDER, 6:2! 5! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , , - / ITAT, MUMBAI,