SHRI RAXESH CHANDRAVADAN SATIA (H.U.F.),,AHMEDABAD vs. THE DY. CIT, CIRCLE-5(2)., AHMEDABAD

The solitary ground of appeal in this case is against the decision of ld. CIT(A) in confirming the addition to the extent of Rs. 3,90,909/- on account of non-deduction of tax at source u/s. 40(a)(ia) of the act.

The brief fact of the case is that the assessee has filed return of income on 18th Sep, 2013 declaring total income at Rs. 30,50,850/-. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act. During the course of assessment proceedings, the assessing officer noticed that the assessee has debited in P & L a/c by amount of Rs. 26,30,639/- on account of shipping, clearing and forwarding expenses. The assessee was asked to furnish the detail of TDS made on above expenses. The assessee explained that M/s. C Jivram Joshi & Sons were working as clearing and forwarding agent and incurring the sea freight and other charges on assessee,s behalf which were subsequently reimbursed by the assessee to them. The assessee also explained that tax was deducted in respect of agency charges. but no tax has been deducted in respect of sea freight charges paid to shipping company namely MSC Mediterranean which was not subject to TDS. It was further mentioned that assessee had also made certain payment to Hetal Clearing and Forwarding, APL Pvt. Ltd. and Laldhar Passo, however, no TDS had been deducted stating that these expenses were only reimbursement. The assessing officer had not accepted the explanation of the assessee stating that assessee failed to furnish the copy of contract and held that expenses claimed by the assessee under Shipping Clearing and Forwarding were to be disallowed u/s. 40(a)(ia) of the act. Therefore, the assessing officer has made addition of Rs. 6,12,186/- in the total income of the assessee.

Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee. The relevant part of the decision of ld. CIT(A) is reproduced as under:- “Decision: 4.3. The only issue in appeal is regarding disallowance of Rs.6,12,186/- u/s.40(a)(ia) of the Act, The AO has noticed that the assessee has debited an amount of Rs.26,30,639/- on account of shifting, clearing and forwarding expenses. Out of these expenses, the AO has noticed that the assessee has not deducted tax on expenses amounting to Rs.6,12,186/-. Therefore, the AO has disallowed the same u/s.40(a)(ia) of the Act. 4.4. During the appellate proceedings, the appellant has contended that there are two types of payments made to the clearing and forwarding agents one in respect of reimbursement of actual expenses supported by vouchers and another is the payments

We have heard rival contentions and perused the material on record carefully. The assessee has claimed an amount of Rs. 26,30,639/- on account of shipping clearing and forwarding expenses. Out of these expenses, an amount of Rs. 6,12,186/- was disallowed on the ground that assessee has not deducted tax on such expenses. The ld. CIT(A) has partly allowed the appeal of the assessee directing the assessing officer to verify the payments to Hetal Clearing Rs. 62,224/-, APL(I) Pvt. Ltd. Rs. 33,964/- and Liladhar Passo Rs. 69,747/- and other charges paid to Shri Jivram Joshi & Co Rs. 55,342/- and if the payment is below prescribed limit then the addition to be deleted. In this connection, we observed that assessee claimed that it had not deducted TDS on the expenses which were merely reimbursement nature of expenses. We observe that lower authorities had not controverted the claim of the assessee that TDS on the impugned expenses were not deducted because of being reimbursement expenses. It is noticed that assessee has made two kinds of payments to the clearing and forwarding agents one in respect of reimbursement of actual expenses and other in respect of services provided by the agents. In the light of the above facts and circumstances, we are of the view that it will be appropriate to verify the claim of the assessee on the basis of relevant supporting bills and vouchers to find out the expenses in the category of reimbursement expenses and the other category of expenses for the services provided by the agents.

In the result, the appeal of the assessee is allowed for statistical purposes.