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Income Tax Appellate Tribunal, BANGALORE BENCHES “B”, BANGALORE
Before: Shri Chandra Poojari, AM & Shri George George K, JM
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE Before Shri Chandra Poojari, AM & Shri George George K, JM ITA No.1569/Bang/2018: Asst.Year 2014-2015 M/s.APL Worldwide Express (P) The Income Tax Officer Limited, No.717, 3rd Cross, BSK Ward 1(1)(2) v. Bengaluru. 1st Stage, 2nd Block, Ashok Nagar Bengaluru – 560 001. PAN : AAJCA9474A. (Appellant) (Respondent) ITA No.1042/Bang/2018: Asst.Year 2014-2015 The Income Tax Officer M/s.APL Worldwide Express Ward 1(1)(2) (P) Limited, No.717, 3rd Cross, v. Bengaluru. BSK 1st Stage, 2nd Block, Ashok Nagar Bengaluru – 560 001. (Appellant) (Respondent) Assessee by : Sri.Ramesh Babu Revenue by : Sri.Jairam Raipura, CIT-DR Date of Pronouncement : 03.01.2022 Date of Hearing : 29.12.2021 O R D E R Per George George K, JM These cross appeals are directed against CIT(A)’s order dated 31.01.2018. The relevant assessment year is 2014- 2015.
The assessee in its grounds of appeal has raised eleven grounds. However, during the course of hearing, the learned AR has pressed only ground 4, which reads as follows:-
“4. The learned Commissioner of Income-tax (Appeals) was not justified in directing the learned assessing officer to disallow by invoking the provisions of section 40(a)(ia) of the Act, to the extent of 5% of Rs.7,24,94,301/- being the payments made by the appellant towards Freight Charges
2 ITA No.1569 & 1042/Bang/2018 M/s.APL Worldwide Express (P) Limited. paid to the Airline Companies of Indian Origin without any proper basis or reasoning and arbitrary in nature, on the facts and circumstances of the case.” 3. In the Revenue’s appeal, the following grounds are raised:- “1. The order of the learned CIT(Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The ld.CIT(A) erred in holding that the assessee was an intermediary and thus not liable for deduction of TDS u/s 194C of the Income Tax Act, 1961 on payment made to the Domestic Cargo Airlines as the matter has not reached its finality and an SLP of the Revenue in the case of CIT v. Cargo Linkers (2009) 179 Taxman 151 (Delhi) is pending for consideration before the Hon’ble Apex Court. 3. The ld.CIT(A) erred in holding that the assessee to be facilitator not liable to deduct tax at source u/s 194C of the Income Tax Act, 1961 on payment made to both the Domestic and the International Cargo Airlines. 4. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the ld.CIT(A) be reversed and that of the Assessing Officer be restored. 5. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal.” 4. The Revenue has also filed additional grounds, without a petition for admission of additional grounds. Moreover, no arguments were raised by either of the Counsels on the additional grounds, hence, the additional grounds are rejected.
Brief facts of the case are as follows: The assessee is a company engaged in the business of clearing, forwarding (C&F) and is a travel agent. It also
3 ITA No.1569 & 1042/Bang/2018 M/s.APL Worldwide Express (P) Limited. provides various services relating to the export and import of goods. For the relevant assessment year 2014-2015, the return of income was filed on 30.11.2014 declaring total income of Rs.22,29,720. The assessment was completed u/s 143(3) of the I.T.Act vide order dated 26.12.2016, wherein the A.O. by invoking the provisions of section 40(a)(ia) of the I.T. Act had disallowed freight paid to domestic airline companies amounting to Rs.7,29,94,301.
Aggrieved, the assessee filed an appeal before the first appellate authority. The CIT(A) by relying on the judgment of the Hon’ble Delhi High Court in the case of CIT v. Cargo Linkers (2009) 179 Taxman 151 (Delhi) held that the assessee is only a facilitator and is not liable to deduct tax at source u/s 194C of the I.T.Act. However, the CIT(A) held that if the exporter has spent Rs.95 and C&F agent (the assessee) has spent additional amount of Rs.5, the deductibility of tax on Rs.5 is necessary. The CIT(A) directed the A.O. to treat 5% as expenditure component of the assessee, i.e., C&F agent, and restricted the disallowance to 5%. The CIT(A) thereby granted relief on the balance 95%. The relevant finding of the CIT(A) reads as follows:-
“26. The decision of the ITAT Bangalore Bench in the above case negates the CBDT clarification and holds that tax is not deductible on the limb (F) of the transaction holding it to be reimbursement. 27. The sum and substance of these decisions is that TDS need not be deducted on the reimbursement made (Dhaanya Seeds case – cited supra). TDS need not be deducted on the payments made by the C&F agents in the capacity of an intermediary. The exporter (and not the appellant) is a “person
4 ITA No.1569 & 1042/Bang/2018 M/s.APL Worldwide Express (P) Limited. responsible” for deduction of tax at source under section 194C of the Act (Cargo Linkers case – cited supra). 28. However, one aspect here has missed attention of the Honourable Courts is the payment made by the C&F agent (the appellant) is slightly more than the payment made by the exporter. So if the exporter has spent an amount of Rs.95 and the C&F agent (the appellant) has spent an additional amount of Rs.5, the deductibility of tax on this Rs.5 is not considered in the above decisions. 29. Vide letter dated 11.1.2018 the appellant has also made another argument that when its gross income is around 3% to 5% of the total Billing, disallowing 95% of the expenses being Airfreight etc., will adversely affect its business. This is considered. I find that the appellant has not deducted TDS on this 5% amount also. 30. I have considered the issue. I find that the TDS must be made on the expenditure made by the appellant excluding the amount of reimbursement. Thus, TDS must have been made on (D) minus (F) i.e. on Rs.5 above. I hold accordingly. The AO is directed to treat 5% as the expenditure component of the C&F agent (the appellant) and restrict the disallowance to the same. Balance 95% is allowed.”
Aggrieved by the order of the CIT(A), both the assessee and the Revenue have filed these cross appeals. It was submitted by both the parties that the issue in both the appeals is only with regard to freight charges paid to the domestic airline companies.
We have heard rival submissions and perused the material on record. The learned AR submits that the assessee is only a C&F agent, who is n intermediary between the exporter and the airlines. Further, the learned AR submits that the gross income, i.e., commission of 3 to 5% is subjected to TDS by the airlines as per Circular No.5/2002 dated 30.07.2002. The balance payment after the TDS alone
5 ITA No.1569 & 1042/Bang/2018 M/s.APL Worldwide Express (P) Limited. form part of assessee’s gross total income. In this context, the assessee has filed a petition for admission of additional evidence, namely, Form No.26 in respect of payment made to M/s.Jet Airlines (India) Limited and Form No.26AS in respect of payment made to M/s.Interglobe Aviation Limited. The assessee has filed an affidavit of the Managing Director praying for the admission of the additional evidence. The relevant portion of the affidavit reads as follows:-
“2. That the above assessee appellant has instituted an appeal being the aggrieved by the order of the assessment passed U/s :1.43(3) of the Act, dt.23.12.2016, which has since been partially upheld by the learned CIT-A by the order in ITA No.ITBA No.10009/CIT(A)-g/2017-18, dt. 31.01.2018 and aggrieved by the order of the learned CIT-A, the assessee appellant has instituted an appeal before the Hon'ble IT AT. 3. That the issue involved in the impugned appeal relates to the disallowance made U/s 40(a)(ia) of the Act in respect of payments made to resident Company for reimbursement freight charges, which has been considered as in violation of section 40(a)(ia) of the Act by the lower authorities. 4. That it has always been our contention that the real actual nature of the transaction relating to the payment of freight to resident is reimbursement of the actual freight charges. Hence, the provisions of section 40(a)(ia) is not applicable. 5· Without prejudice that the provision of section 40(a)(ia) is not applicable the assessee appellant Company, it is necessary to consider the following accompanying document to support that in terms of second proviso to section 40(a)(ia) added through the Finance Act 20:1.2 the assessee appellant submits the following Form NO.26A a. Form No.26A in respect of payment made to M/s. Jet Airways (India) limited b. Form No.26A in respect of payment made to M/s. Interglobe Aviation limited. 6. That the above documents were not produce the before the lower authority all though the contention based on the same were advanced and pleaded before the lower authorities
6 ITA No.1569 & 1042/Bang/2018 M/s.APL Worldwide Express (P) Limited. and hence, these documents are produced for a clear appreciation of the issues involved the before the Hon'ble Bench and the failure to produce the additional evidence before the authorities below was due the reason that these Annexure - A to the Form No.26 was received subsequent to order of the CIT(A) - 9, Bangalore.” 8.1 The additional evidence now produced goes to the root of the matter. Since the additional evidence was obtained subsequent to the CIT(A)’s order, for substantial justice and equity, we admit the same on record. Since the additional evidence is admitted on record, in the interest of justice and equity, the matter needs to be examined by the A.O. afresh. The assessee’s and department’s appeal is with regard to non- deduction of TDS on freight charges made to domestic airlines, therefore, the entire issues raised in the cross appeals are restored to the files of the A.O. for de novo consideration. The A.O. shall afford a reasonable opportunity of hearing to the assessee and shall take a decision in accordance with law.
In the result, the appeal filed by the assessee and Revenue are allowed for statistical purposes.
Order pronounced on this 03rd day of January, 2022. Sd/- Sd/- (Chandra Poojari) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 03rd January, 2022. Devadas G*
7 ITA No.1569 & 1042/Bang/2018 M/s.APL Worldwide Express (P) Limited.
Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-9, Bengaluru. 4. The Pr.CIT-1, Bengaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore