ITO, WARD-5(2)(5), AHMEDABAD vs. PRITESH D.SHAH(HUF), AHMEDABAD

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ITA 3403/AHD/2015Status: DisposedITAT Ahmedabad10 January 2018AY 2006-074 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal followed a co-ordinate bench's decision in the assessee's own case for a preceding year. It held that the assessee acted as a facilitator, receiving reimbursements and service charges, and the relationship of contractor and payee was not established, thus TDS provisions were not attracted.

What were the facts?

The Assessing Officer disallowed freight, CONCOR, warehousing, and ICD expenses for the assessment years 2006-07 and 2011-12, invoking Section 40(a)(ia) for failure to deduct TDS. The assessee argued that these were reimbursements of expenses and agency charges, not payments attracting TDS.

What were the issues?

Whether TDS provisions under Section 194C and 1941 are applicable to expenses incurred by a clearing and forwarding agent as reimbursements from clients, or if they are merely agency charges.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH AHMEDABAD

Hearing: 09.01.2018

PER S. S. GODARA, JUDICIAL MEMBER

These two Revenue’s appeals for assessment year 2006-07 and 2011-12 arise against the CIT(A)-5, Ahmedabad’s separate orders dated 24.09.2015 & 23.09.2015, in case no. CIT(A)-5/ITO.Wd.10(4)/374/2014-15 & CIT(A)- 5/ITO.Wd.5(2)(4)/53/2014-15, reversing Assessing Officer’s action

ITA Nos. 3403 & 3404/Ahd/15 [ITO vs. Pritesh D Shah (HUF)] - 2 - A.Ys. 2006-07 & 2011-12

disallowing/adding freight charges, CONCOR charges, ware housing charges, ICD expenses of Rs.5,30,07,940/-, Rs.3,48,91,954/-, Rs.6,46,095/- & Rs..12,04,440/- in former assessment year and CONCOR & freight charges in latter assessment year amounting to Rs.1,60,30,697/- & Rs.4,78,10,938/-; respectively; in proceedings u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961; in short “the Act” in former assessment year and u/s.143(3) of the Act in latter assessment year.

Heard learned Departmental Representative. Assessee’s written submission perused.

2.

It is evident at the outset that the Revenue seeks to revive Assessing Officer’s identical action disallowing assessee’s above narrated expenditure on account of its failure in deducting TDS by invoking Section 40(a)(ia) r.w.s. 194C of the Act. Learned Departmental Representative vehemently contends that the CIT(A) has erred in law as well as on facts in deleting the above identical disallowances. We notice that this is not the first instance wherein the very issue(s) have come up before the tribunal. A co-ordinate bench in assessment year 2010-11 has declined Revenue’s identical arguments raised in ITA No.625/Ahd/2014 decided on 03.01.2017 as under:

“1. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 16th December, 2013 passed by the ld. CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year 2010-11, on the following grounds :- “(1) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.3,27,35,109/-, Rs.1,91,44,649/- and Rs.9,08,767/- made u/s. 40(a)(ia) of the Act without considering the fact that the provisions of Section 40(a)(ia) of the Act without considering the fact that the provisions of Section 40(a)(ia) r.w.s. 194C & 1941 of the Act are squarely applicable to the facts of the assessee's case and the disallowance have correctly been made by the AO. (2) On the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. (3) It is therefore prayed that the order of the Ld. CIT(A) may be set aside and that of the order of the Assessing Officer be restored to the above extent."

ITA Nos. 3403 & 3404/Ahd/15 [ITO vs. Pritesh D Shah (HUF)] - 3 - A.Ys. 2006-07 & 2011-12

2.

Learned representatives fairly agree that the issue in appeal is row covered, in favour of the assessee, by a co-ordinate bench's decision in assessee's own case for the immediately preceding assessment year. Vide this decision dated (14.10,2013, the Tribunal has, inter alia, observed as follows :-

"5. We have considered the rival contentions and perused the order of the A.O. and CIT(A) and copies of various documents and details filed in the compilation before us. We find that the assessee is only a Clearing & Forwarding Agent and has charged its service charges known as agency charges from its clients whose goods are exported through various Ports mainly in Gujarat & Maharashtra. The assessee has received the railway freight, shipping freight, /CD charges etc. from its clients by way of reimbursement of expenses. Accordingly, the assessee is merely a facilitator in the export business of its clients and has received the reimbursement of expenses incurred and service charges in the name of agency charges from its clients. These facts could not be controverted on behalf of the Revenue before us. We find that the receipts were issued by the various parties in the name of clients of the assessee and not in the name of the assessee. On the perusal of the copy of the audited accounts, it shows that the assessee has received and credited to its P&L account agency charges apart from the reimbursement of expenses incurred on behalf of its clients. We find that the assessee facilitates to and fro movement of client's goods both in land and overseas, using road, rail, air and sea routes including temporary storage of the goods in custom bounding warehouses for legal and procedural purposes etc. For the applicability of provision of Section 194C & 1941, the relationship of contractor and payee pursuant to contract between the parties is essential. In the case before us, no such relationship has been found. The CIT(A) has given the finding that the clients of the assessee are reimbursing amount of monies paid by the assessee to such agencies along with the assessee's commission or handling charges. The CIT(A) has referred to number of decisions wherein the Hon'ble Courts held that TDS provisions are not attracted in cases involving reimbursement of expenses. In these facts of the case, we find that there is no mistake in the order of the CIT(A) in holding that the addition on account of payments, made to various parties on behalf of its clients by the assessee could not be sustained and deserves to be deleted. Accordingly, the order of the CIT(A) is confirmed and ground of the Revenue's appeal is dismissed."

3.

We see no reasons to take any other view of the matter than the view so taken by the co-ordinate bench.

4.

Respectfully following the Tribunal’s decision dated 04.10.2013, in assessee’s own case for the immediately preceding assessment year, we confirm the order of the ld. CIT(A) and dismiss the grounds raised by the Revenue.”

3.

Learned Departmental Representative is fair enough in not pointing out any distinction on facts as well as the issues involved herein. We thus adopt judicial

ITA Nos. 3403 & 3404/Ahd/15 [ITO vs. Pritesh D Shah (HUF)] - 4 - A.Ys. 2006-07 & 2011-12

consistency to affirm learned CIT(A)’s identical findings in both the impugned assessment years.

4.

The Revenue’s instant two appeals are accordingly dismissed. [Pronounced in the open Court on this the 10th day of January, 2018.]

Sd/- Sd/- (PRAMOD KUMAR) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 10/01/2018

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