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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ITA No. 2816/Ahd/2016 Assessment Year 2008-09
The DCIT, M/s. Plastene India Ltd. Circle-3(1)(1), Ahmedabad H.B. Jirawala House, (Appellant) Vs 13, Navbharat Society, Opp. Panchshil Bus Stop, Ahmedadad PAN: AAAC03087C (Respondent)
Revenue by: Shri V.K. Singh, Sr. D.R. Assessee by: Shri Astha Maniar, A.R. Date of hearing : 20-03-2018 Date of pronouncement : 10-05-2018 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This Revenue’s appeal for A.Y. 2008-09, arises from order of the CIT(A)- 9, Ahmedabad dated 26-08-2016, in proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short “the Act”.
The revenue has raised following grounds of appeal:- “1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,96,33,029/- made u/s.40(a)(ia) of the Act. 2. On the facts and circumstances of the case, the Ld, Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer to the above extent. 3. It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored to the above extent.”
I.T.A No. 2816 /Ahd/2016 A.Y. 2008-09 Page No 2 DCIT vs. M/s. Plastene India Ltd.
The brief fact of the case is that the original assessment u/s. 143(3) of the act in this case was passed on 28th March, 2013 by determining the total income of Rs. 6,82,35,270/-. Subsequently, the case was reopened u/s. 147 on the ground that assessee has not deducted TDS u/s. 195 on the amount relating to discount charge of Rs. 1,96,33,029/- on letter of credit. The assessee has explained that it purchases from supplier and as per the agreed arrangement, the supplier discount the letter of credit with the bank and the bank deduct the amount for early payment and the assesse has to reimburse the supplier such charges deducted by the bank. Therefore, the assessee has claimed that the LC discount charges is nothing but reimbursement of total expenses incurred by the supplier under agreed commercial arrangement and its additional cost towards purchases of goods. The assessing officer has not agreed with the assessee and disallowed the amount of Rs. 1,96,33,029/- u/s. 40(a)(ia) of the act.
Aggrieved assessee filed appeal before he ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee by stating that asssseee has purchased raw material from supplier on credit and for discharging its purchase commitments, the assessee opened letter of credit in favour of the supplier. The supplier en cashes the letter of credit with the bank and the bank deducted certain amount on account of negotiation, interest bank charges etc. The quantum which is deducted by bank when the LC is discounted by the supplier with bank is reimbursed by the assessee to the supplier.
We have heard the rival contentions and perused the material on record carefully. During the course of re-assessment proceedings, the assessing officer noticed that assessee has debited letter of credit (LC) discount charges for Rs. 1,94,65,150/- to the P & L a/c. The assessing officer observed that the assessee was required to deduct tax u/s. 195 of the act on the payment of LC. interest. The assessee demonstrated with the supporting material that L.C. discount charges is the reimbursement of cost/expenses incurred by the supplier of goods
I.T.A No. 2816 /Ahd/2016 A.Y. 2008-09 Page No 3 DCIT vs. M/s. Plastene India Ltd.
which is additional cost towards purchase of goods. The supplier of goods discounts the L.C. with the bank and the bank deducts discounting charges on making the payment to the supplier on behalf of the assessee. In this type of commercial arrangement, the bank discharge the purchase commitments as per the terms/conditions of letter of credit opened by the assesee. The assesse reimburse its supplier of goods the discounting charges deducting by the bank while making payment of purchase commitments on behalf of the assesse as per the terms of letter of credit. It is clear from the above facts that LC discount charge is a reimbursement of the expenses to the suppliers of goods as additional cost towards purchase of goods. In view of the above facts and findings, we are inclined with the decision of ld. CIT(A) that the assessee is paying only the cost of goods that it has purchased from the suppliers by way of LC and secondly by reimbursing the bank charges and u/s., 194A(3)(iii)(a), the provision of section 194 are not applicable to banking company regulated by banking regulation act. Therefore, the appeal of the Revenue is dismissed.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 10-05-2018 Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 10/05/2018 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद