J-ARK LOGISTICS PVT. LTD. (FORMERLY KNOWN AS TAEWOONG LOGISTICS PVT LTD),CHENNAI V. ACIT, COPORATE CIRCLE 3(1), CHENNAI

CO 116/CHNY/2018

AI Insights

The case involves the Assistant Commissioner of Income Tax, Corporate Circle 3(1), Chennai, as the appellant, and M/s. J-Ark Logistics (P) Ltd., as the respondent. The core issue was whether the assessee, acting as an intermediary in international freight forwarding, was required to deduct TDS on payments made to Container Freight Stations (CFS) and airlines/shipping lines. The Assessing Officer initially disallowed these expenses under Section 40(a)(ia) of the Income Tax Act, 1961, due to non-deduction of TDS. However, the CIT(A) reversed this decision, citing that the payments were statutory and not contractual, thus not attracting Section 194C. The Revenue appealed this decision, leading to the constitution of a Special Bench to resolve conflicting views on the matter. The Special Bench concluded that the assessee acted as a principal, not an intermediary, and thus the initial premise for the Special Bench's formation was non-existent. Consequently, the matter was remanded for fresh adjudication under this new understanding.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107326 (ITAT-CHENNAI)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Other Referred Cases: M/s. Express Transport Pvt. Ltd., ITO Vs. M. Dharmadas and Company, CIT Vs. Cargo Linkers, PraharI Agency Pvt. Ltd vs. ITO, Shri Shanmugar Services vs. ITO, Welgrow Line (India) p Ltd vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S. RAGHUNATHAN; S. SANKARA NARAYANAN
• Assessee Lawyers: E.PAVUNA SUNDARI
• Keywords: TDS
• Section: 40(a)(ia); 194C

Judgement Text

"आयकर अपीलीय अिधकरण, ’ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी अिमताभ शुƑा, लेखा सद˟ क े समƗ Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Amitabh Shukla, Accountant Member आयकर अपील सं./I.T.A. No.17/Chny/2018 िनधाŊरण वषŊ/Assessment Year: 2014-15 & C.O. No. 116/Chny/2018 [In ITA No. 17/Chny/2018] The Assistant Commissioner of Income Tax, Corporate Circle 3(1), Chennai. Vs. M/s. J-Ark Logistics (P) Ltd., (Formerly known as Taewoong Logistics (P) Ltd),South Side, Eastern Wing, 7th floor, Kattima Isana Building, 497 & 498, Poonamalle High Road, Arumbakkam, Chennai – 600 106. [PAN: AADCT0692D] (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Ms. E. Pavuna Sundari, Addl. CIT ŮȑथŎ की ओर से/Respondent by : Shri S. Raghunathan, Advocate & Shri S. Sankara Narayanan, Advocate सुनवाई की तारीख/ Date of hearing : 07.01.2025 घोषणा की तारीख /Date of Pronouncement : 10.01.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order dated 29.09.2017 passed by the ld. Commissioner of Income Tax (Appeals) - 11, Chennai for the assessment year 2014-15. 2. Before adverting to the grounds of appeal raised by the Revenue, we note that the issue raised in this appeal has to be decided in terms of the order dated 05.08.2024 of Special Bench in assessee’s own case. I.T.A. No.17/Chny/18 & C.O. No. 116/Chny/18 2 3. We note that brief facts of the case are that the assessee is providing international freight forwarding, and other related services to its customers. It involves assisting its customers (importers/exporters) to comply with the formalities in importing/exporting goods by air or ship, obtaining clearances from Port Trust, Airport authorities and the Customs; providing logistics support for movement of goods etc. In the course of rendering these services, the assessee is making payments to shipping lines/airlines in relation to freight charges and terminal handling/ warehousing expenses to Container Freight Stations (‘CFS’). The Assessing Officer asked assessee for the TDS compliance thereof, while making these payments and found that assessee didn’t deduct any taxes at source and therefore, according to him, the assessee was in default for not deducting taxes at source on such payments. Accordingly, the Assessing Officer disallowed the expenses claimed by way of freight charges and CFS charges by invoking Section 40(a)(ia) of the Income Tax Act, 1961 [“Act” in short]. 3. On appeal, the ld. CIT(A) allowed the appeal of the assessee by holding that no TDS was required to be made in respect of statutory payments, as they are not in the nature of contractual payments, so as to attract provisions of section 194C of the Act by relying on the decision of I.T.A. No.17/Chny/18 & C.O. No. 116/Chny/18 3 ITAT, Mumbai Benches in the case of M/s. Express Transport Pvt. Ltd., [in ITA Nos.1426 to 1429/Mum/2013] and in the case of ITO Vs. M. Dharmadas and Company [in ITA Nos.1505, 1506 & 1507/Mum/2013]. The ld.CIT(A) also took note of the decision of Hon’ble High Court of Delhi in the case of CIT Vs. Cargo Linkers reported in (2008) 218 CTR 695 (Del), wherein, it was held that if the assessee is only intermediary, it is not a “person responsible” for deduction of TDS in terms of section 194C of the Act. The ld. CIT(A) also noted that the assessee is also an intermediary, similar to the facts of the case of CIT Vs. Cargo Linkers (supra) and further, he followed his predecessor’s order for the assessment year 2013-14 and directed to delete the additions. Aggrieved by the aforesaid action of the ld. CIT(A), the Department preferred an appeal before this Tribunal and CO was preferred by the assessee supporting the action of the ld.CIT(A). 4. At the time of hearing before the Division Bench of this Tribunal, the assessee moved a proposal for constitution of Special Bench, by contending that there were divergent views on the issue of deduction of TDS on payment made to CFS. It was the contention of the assessee that the views expressed by the Coordinate Bench at Chennai in favour of Department in the cases of Prahari Agency Pvt. Ltd. vs. ITO (ITA I.T.A. No.17/Chny/18 & C.O. No. 116/Chny/18 4 No.1701/Chny/2018), Shri Shanmugar Services vs. ITO (ITA No. 1136 & 1137/Chny/2017), Welgrow Line (India) p Ltd vs. ACIT (ITA No. 1719/Chny/2014), , whereas, contrary views in favour of assessee were expressed by the Hon’ble High Court of Delhi in the case of CIT v. Cargo Linkers (179 Taxman 151) and Coordinate Benches of Tribunal at Mumbai in the case of M/s. Express Transport Pvt. Ltd (ITA Nos. 1473 to 1475 /Mum/ 2013). Therefore, the proposal for constitution of Special Bench to resolve the conflicting views was placed before the Hon’ble President, which was acceded to, by order dated 17.05.2024; and questions were framed for determination by the Special Bench, which assembled on 05th July, 2024. 5. Upon hearing initial arguments from both sides, the Special Bench, at the first instance, required the assessee to clarify the relevant fact as to, whether the assessee was at all an ‘intermediary’ making payment on behalf of customers, so as to ascertain whether the conflicting decisions, as pointed out above, had any bearing on the issue involved in the present case before us. The assessee, in response, had placed on record, copy of agreement with Samsung. Reading of the agreement revealed that, it was executed on principal to principal basis. Thereafter, I.T.A. No.17/Chny/18 & C.O. No. 116/Chny/18 5 sample service invoices were also examined which showed that the CFS charges were being invoiced to the customers. 6. The Special Bench, having heard, observed that the assessee has abandoned the contention of whether the payments being made as an intermediary on behalf of their principal, which, were subjected to section 194C of the Act and held the assessee conceded that it was acting as a principal and not as an intermediary. The relevant portion in para 9 are reproduced herein below for better understanding: 9. Having heard both the parties, we find that the foundational premise on which this Special Bench was constituted is now non-existent. This Special Bench was constituted to resolve the conflicting views of the coordinate Benches at Mumbai vis-à-vis the coordinate Benches at Chennai on the issue viz., whether the payments being made by an ‘intermediary’ on behalf of their principal were subject to Section 194C and consequently whether such non- deduction of tax on such payments would result in inviting rigors of Section 40(a)(ia) of the Act. The assessee has abandoned this contention and conceded that it was acting as a principal and not as an intermediary. In the given circumstances the learned AR is also not placing reliance on the decision of the Delhi High Court. Accordingly, we find that there is no alleged legal conflict involved in the present case, which is required to be resolved by this Special Bench. 7. On perusal of the above findings of the Special Bench, we have to decide the issue of whether the payments being made by the assessee being a principal were subjected to section 194C of the Act and consequently whether such deduction of tax on such payments would result in inviting disallowance under section 40(a)(ia) of the Act as a principal and not as an intermediary. I.T.A. No.17/Chny/18 & C.O. No. 116/Chny/18 6 8. During the course of hearing, the ld. AR Shri S. Raghunathan, Advocate explained his inability to produce all invoices, payment receipts, etc. as required for fair adjudication of the issue in terms of the findings of the Special Bench. He fairly conceded that this evidences were not asked by the Assessing Officer in view of the contention raised, the assessee being all along as an intermediary. He further submits that the invoices, receipts, etc. showing the payments to Container Freight Station (CFS) in statutory nature runs into voluminous and prayed to remand the matter to the file of the Assessing Officer for fresh adjudication in terms of the findings of the Special Bench treating the assessee as principal. He further reiterated that the assessee is ready to produce all evidences showing the payments made towards CFS are statutory in nature attracting no TDS. Therefore, taking into account the assessee’s inability to produce all the required evidences and also AY being identified as old, we deem it proper to remand the matter to the file of the Assessing Officer with a direction to adjudicate the issue by treating the assessee as principal taking into account all relevant evidences on record that may be produced by the assessee and pass order in accordance with law. Thus, the ground raised by the assessee is allowed for statistical purposes. I.T.A. No.17/Chny/18 & C.O. No. 116/Chny/18 7 C.O. No. 116/Chny/2018 9. In view of our decision in remanding the matter to the file of the Assessing Officer, the Cross Objection arising out of appeal requires no adjudication being academic in nature and accordingly, the CO stands dismissed. 10. In the result, the appeal filed by the Revenue is allowed for statistical purposes and the CO filed by the assessee is dismissed. Order pronounced on 10th January, 2025 at Chennai. Sd/- Sd/- (AMITABH SHUKLA) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 10.01.2025 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. "