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Income Tax Appellate Tribunal, “C(SMC
Before: Shri A. T. Varkey, JM]
ORDER Per Shri A.T.Varkey, JM This is an appeal preferred by the assessee against the order of Ld. CIT(A)-2, Kolkata dated 18.07.2019 for AY 2013-14.
In respect of ground no. 1, according to the Ld. AR Shri Subash Agarwal, the AO erred in appreciating the fact that in this case as a matter of fact the agents of the assessee had incurred the transportation/freight charges and the assessee had only reimbursed the same i.e. freight/transport charges incurred by them was given back to the agents. Without appreciating this fact, according to Ld. A.R. the AO has disallowed the same u/s. 40(a)(ia) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) read with section 194C of the Act. According to Ld. A.R, this issue is no longer res-integra and the Ld. AR drew our attention to the decision of this Tribunal in the case of Satyendra Jhunjhunwala Vs. ITO in for AY 2005-06 dated 11.11.2011 wherein the Tribunal held that the issue of reimbursement of customs duty charges and other charges which are incurred by agents on behalf of the assessee cannot be subject matter of TDS. It is noted that the Tribunal in the case of Satyendra Jhunjhunwala (supra) upholding this contention of the assessee has held as under:
“……Ld. Counsel for the assessee stated that reimbursement expenses and custom duty payments by agent for and on behalf of the assessee cannot be covered under the TDS provisions. Hence, these expenses are not liable to TDS and the provisions of section 40(a)(ia) of the Act and not applicable. For this, he relied on the decision in the case of Rheabari Tea Company Pvt. Ltd. AY: 2013-14 ACIT V. Grandprix Fab. (P) Ltd,. (2010) 128 TTJ 60 (Del.), wherein the Tribunal vide para 16 has held as under: “16. In respect of the payment towards agency charges amounting to Rs.1,01,219, the assesee has deducted tax amounting to Rs.2,094 at source, and the said payment has not been disallowed by the A.O. The other two payments are towards payment of customs duty, and other expenses paid by the agent for/on behalf of the assessee. These reimbursement expenses were not made towards any services rendered by the agent, but have been made to set off of the expenses incurred by the agent while clearing the imported goods from the customs for/on behalf of the assessee. Since no element of income is embedded in reimbursement of expenses incurred by agency for/on behalf of the assessee, the assessee was not obliged to deduct tax at source, and, therefore, the CIT(A) has rightly deleted the addition.” He also relied on in the case of ITAT, Kolkata “B” Bench in DCIT Vs. M/s. M. B. Ispat Corporation Ltd. Assessment Year 2005-06 dated 03.04.2009, wherein it has been held as under: “We have carefully considered the submissions of the Ld. Representatives of both the parties and the orders of the authorities below. We have also perused the copy of consignment of sale agreement entered into by the assessee and M/s. Beharilal & Co. It is a fact that if the assessee reimbursed the expenses towards freight incurred on its behalf under an agreement for which separate bill is raised, and to such payments the provision of section 194 of the I. T. Act is not attracted. The above issue has been considered by the ITAT Delhi Bench in the case of Willmar Schwabe India (P) Ltd. (supra), wherein it has been held that if there is reimbursement of expenses on account of bills raised, no TDS is to be deducted therefrom. Section 194C of the Act is applicable, where payments is made to a contractor/sub- contractor, where contract is either a work contract of a contract for supply of labour for works contract. In the case before us, we observe that the assessee has reimbursed the expenses to its consignment agent and it was not a direct payment for freight by the assessee to the transporter. Therefore, we are of the considered view that there is no infirmity in the order of the Ld. CIT(A). Accordingly, we uphold the order of the Ld. CIT(a) and reject the grounds of appeal taken by the Department.” He also relied on the decision of ITAT, Mumbai “F” Bench in the case of M/s. Utility Powertech Ltd. Vs. ACIT, ITA No.2561/Mum/2009, A.Y. 2005-06 dated 19.04.2010, wherein the Tribunal vide para 5 has held as under: “5) We have considered the rival contentions and perused the record. The jurisdictional High Court in the case of CIT Vs. Seimens Aktiongesellschaft (supra) has held that reimbursement of expenses cannot be regarded as revenue in the hands of the payee. While deciding the issue, the Hon’ble High Court has followed the decision of Hon’ble Delhi High Court in the case of CIT Vs. Industrial Engg. Projects P. Ltd. (202 ITR 1014). It is a settled proposition of law from the various decisions of High Courts and particularly the decision of Hon’ble jurisdictional High Court (supra) that when there is no element of income and the payment is only as a reimbursement of expenses incurred by the payee, then no disallowance can be made u/s. 40(a)(ia). In the case in hand, the A.O. has not given a finding that the expenses were for office upkeeping as revenue receipt in the hands of Reliance Energy Ltd. and not a pure reimbursement of expenses. Respectfully following the decision of the Hon’ble jurisdictional High Court (supra), we decide this issue in favour of the assessee and against the Revenue.” We find that the issue of reimbursement of customs duty charges and other charges which are incurred by agents on behalf of assessee cannot be subject matter of TDS in view
Rheabari Tea Company Pvt. Ltd. AY: 2013-14 of above cited case laws. Respectfully following these case laws, we allow the claim of assessee. This ground of assessee’s appeal is allowed.”
Coming to the facts of this case which are discernible from AO’s order which have been discussed in page 2, it is noted that the assessee pursuant to the AO’s query has categorically stated that the payment to the tune of Rs.26,99,918/- was in fact reimbursement since the same was paid by the agents on behalf of the assessee, and the assessee had in turn reimbursed the same to the agents and booked the same as expenses in its book. It is noted that the AO failed to contradict the explanation given by the assessee that the payments (freight charges) were paid by the agents on behalf of the assessee and that the assessee has only reimbursed the same to the agents. Since this fact could not be contradicted even during the hearing also before me, I am inclined to allow this ground of appeal of the assessee by relying on the ratio of the decision given by the Tribunal in Satyendra Jhunjhunwala (supra).
4. Coming to ground No. 2 raised by the assessee it is noted that the assessee is aggrieved by the Ld. CIT(A)’s action of confirming the addition of Rs.23,14,859/- (as profits arising out of sale and purchase of tea), Rs.41,93,950/- (profits arising out of tea manufacture out of bought leave) and Rs.26,83,015/- (profit arising out tea manufacture out of home grown leaves). According to the Ld. AR, the assessee derives income from the three sources i.e. (i) trade/sale and purchase tea, (ii) manufacture of tea out of bought leave and (iii) tea manufacture out of home grown leave. According to the Ld. AR, the assessee has undergone scrutiny assessment for decades and the assessee has been following the same method of estimating/computing the profits which has not been disturbed in any of the earlier years/subsequent years that too in scrutiny proceedings. Therefore, the Ld. AR relying on the decision of the Hon’ble Supreme Court in the case of Radhasoami Satsang Vs CIT (193 ITR 321), wherein the Hon’ble Supreme Court has held that if the facts permeating in the earlier years are the same and the department has accepted the computation of income in the earlier years, then in such a case the assessment on the issues which has been accepted by the department should not be disturbed unless there is any change in facts or law, which is not the case of Revenue before me. The Hon’ble Supreme court in Radhasoami Satsang (supra) has observed as under:
Rheabari Tea Company Pvt. Ltd. AY: 2013-14 “where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.”
In the light of the aforesaid decision of the Hon’ble Supreme Court in Radhasoami Satsang (supra), I find force in the submission of the Ld. AR that since for decades assessee has been computing its profits from the aforesaid three sources which has been accepted even in several scrutiny proceedings and according to the Ld. AR, there is no change in facts and law and that the department had accepted the estimated income of the assessee from the three sources. In such a scenario, according to him, the AO ought not to have disturbed the estimation of income made by the assessee without the AO pointing out the deviation or changes if any in the facts or law. According to this Tribunal if the facts permeating in the earlier years are identical/same and the department has accepted the same in the earlier years even in scrutiny proceedings, then the AO ought not to have disturbed the estimation made in this assessment year without pointing out changes/deviation in the facts or law while computing the income of the assessee from all the three sources. With this observation, I set aside the order of the Ld. CIT(A) and remand the issue back to the file of AO to de novo pass the order on this issue based on the observation (supra) and as per the Hon’ble Supreme Court in Radhasoami Satsang (supra).
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order is pronounced in the open court on 18th February, 2022.