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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri Aby T. Varkey
order : February 19th, 2020 ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the revenue is directed against the order of the Learned Commissioner of Income Tax (Appeals) – 5, Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 14/05/2018, for the Assessment Year 2013-14.
The assessee is a domestic company and is engaged in the business of providing services of clearing and forwarding agents to various companies. The Assessing Officer completed the assessment u/s 143(3) of the Act on 31/03/2016 determining the total income at Rs.1,85,27,916/- interalia making an addition of Rs.1,85,27,916/-, being the difference of turnover disclosed by the assessee and the turnover calculated by the Assessing Officer as per the Service Tax Return (ITS) i.e. the actual gross value of services as per Service Tax Return. On appeal, the ld. First Appellate Authority, deleted the same.
Aggrieved, the revenue is in appeal before us.
After hearing rival contentions, we find that the ld. CIT(A) has considered the explanation of the assessee before the Income Tax Authorities as follows:- “I have considered the submission of the appellant and perused the relevant assessment records. The main issue in the appeal is the discrepancy between the turnover and as per Form 26AS and as per the I T Return of the appellant. The AO had Assessment Year: 2013-14 M/s. Sangkaj Logysys Private Limited M/s. Sangkaj Logysys Private Limited added back the discrepancy of RsJ,85,27,916/ iscrepancy of RsJ,85,27,916/-. The A/R of the appellant in his detailed . The A/R of the appellant in his detailed submission had submitted that the discrepancies occurred because of the following submission had submitted that the discrepancies occurred because of the following submission had submitted that the discrepancies occurred because of the following reasons: (i) Service tax Rs.82,18,216.99 (i) Service tax Rs.82,18,216.99 (ii) Income of previous F.Y. i.e. 2012 (ii) Income of previous F.Y. i.e. 2012-13of Rs.19,11,409/- (iii) Income of F.Y. i.e. 2013 (iii) Income of F.Y. i.e. 2013-14 of Rs.5,80,052/- (iv) TDS deducted on reimbursement received of Rs.1,17,33,857/ (iv) TDS deducted on reimbursement received of Rs.1,17,33,857/- On verification from the assessment records and documents submitted during On verification from the assessment records and documents submitted during On verification from the assessment records and documents submitted during appeal proceedings, there is merit in the submission of the appe appeal proceedings, there is merit in the submission of the appellant. The appellant llant. The appellant had shown total turnover of Rs.66,494,375.19 in its balance sheet. This amount is had shown total turnover of Rs.66,494,375.19 in its balance sheet. This amount is had shown total turnover of Rs.66,494,375.19 in its balance sheet. This amount is minus service tax of Rs.82,18,216.34. However, TDS has been deducted on the gross minus service tax of Rs.82,18,216.34. However, TDS has been deducted on the gross minus service tax of Rs.82,18,216.34. However, TDS has been deducted on the gross amount of Rs.74,712,591.53 by the deductors. As per agreement of the ap amount of Rs.74,712,591.53 by the deductors. As per agreement of the ap amount of Rs.74,712,591.53 by the deductors. As per agreement of the appellant with the principals service tax, all service tax will be reimbursed by the company but C&F the principals service tax, all service tax will be reimbursed by the company but C&F the principals service tax, all service tax will be reimbursed by the company but C&F agent will produce the proper challans/receipt of the service tax deposited. The agent will produce the proper challans/receipt of the service tax deposited. The agent will produce the proper challans/receipt of the service tax deposited. The appellant is uniformly accounting for purchase and sales minus service tax i appellant is uniformly accounting for purchase and sales minus service tax i appellant is uniformly accounting for purchase and sales minus service tax in the previous years and has not debited service tax paid in the P&L account. The appellant previous years and has not debited service tax paid in the P&L account. The appellant previous years and has not debited service tax paid in the P&L account. The appellant as per books is reflecting service tax separately. The jurisdictional ITAT in the case of as per books is reflecting service tax separately. The jurisdictional ITAT in the case of as per books is reflecting service tax separately. The jurisdictional ITAT in the case of ITO Wd 37(2) vs. M/s. Sarad Industrial Products ITO Wd 37(2) vs. M/s. Sarad Industrial Products I.T.A No. 19171Kol/2012 ITO Wd 37(2) vs. M/s. Sarad Industrial Products I.T.A No. 19171Kol/2012 - ITAT Kolkata has held that V AT should not be part of sales and purchases. has held that V AT should not be part of sales and purchases. As regards income amounting to Rs. 19,11,409/ As regards income amounting to Rs. 19,11,409/- on which TDS amounting to on which TDS amounting to Rs.1,11,679/- had been deducted and reported in Form 26AS, on verification of the had been deducted and reported in Form 26AS, on verification of the had been deducted and reported in Form 26AS, on verification of the record, it is found that record, it is found that bills amounting to Rs.17,99,7301- was raised by the appellant was raised by the appellant on M/s Kuehne + Nagle Pvt. Ltd and Rs.1,11.,679/ on M/s Kuehne + Nagle Pvt. Ltd and Rs.1,11.,679/- was raised by the appellant on M/s was raised by the appellant on M/s Lupin Ltd. Both the bills were raised on 31.03.2012. The appellant in his submission Lupin Ltd. Both the bills were raised on 31.03.2012. The appellant in his submission Lupin Ltd. Both the bills were raised on 31.03.2012. The appellant in his submission submitted that these amo submitted that these amounts have been reflected in AY. 2012-13. On verification from 13. On verification from the records, it is found that the amount has been accounted by the appellant in AY. the records, it is found that the amount has been accounted by the appellant in AY. the records, it is found that the amount has been accounted by the appellant in AY. 2013-14. The bills have been raised by the appellant on 31.03.2012. However, both M/s 14. The bills have been raised by the appellant on 31.03.2012. However, both M/s 14. The bills have been raised by the appellant on 31.03.2012. However, both M/s Kuehne + Nagle Pvt Ltd a Kuehne + Nagle Pvt Ltd and M/s Lupin Ltd made the payments in the AY 2013 nd M/s Lupin Ltd made the payments in the AY 2013-14 and deduct TDS @ 10%.
The A/R of the appellant had submitted that TDS on income amounting to The A/R of the appellant had submitted that TDS on income amounting to The A/R of the appellant had submitted that TDS on income amounting to Rs.5,80,052/- has not been deducted by M/s Kuehne + Nagle Pvt. Ltd which relates to has not been deducted by M/s Kuehne + Nagle Pvt. Ltd which relates to has not been deducted by M/s Kuehne + Nagle Pvt. Ltd which relates to AY . 2013-14. The amount 14. The amount has been reflected by the appellant on accrual basis in their has been reflected by the appellant on accrual basis in their return. However, M/s Kuehne + Nagle Pvt Ltd has accounted in the same in the AY. return. However, M/s Kuehne + Nagle Pvt Ltd has accounted in the same in the AY. return. However, M/s Kuehne + Nagle Pvt Ltd has accounted in the same in the AY. 2014-15 as reflected in form 26AS. On verification of the records, it is found that this 15 as reflected in form 26AS. On verification of the records, it is found that this 15 as reflected in form 26AS. On verification of the records, it is found that this submission of the appel submission of the appellant has merit. The appellant had reflected the above amount lant has merit. The appellant had reflected the above amount of Rs.5,80,052/- in Assessment Year 2013 in Assessment Year 2013-14. The customer M/s Kuehne + Nagle Pvt 14. The customer M/s Kuehne + Nagle Pvt Ltd has paid the amount in AY. 2014 Ltd has paid the amount in AY. 2014-15 and deducted the TDS. The A/R of the appellant submitted that the total am The A/R of the appellant submitted that the total amount of Rs.1,17,33,857/ ount of Rs.1,17,33,857/- was paid as reimbursement of various expenses by their customers M/s Lupin Ltd and was paid as reimbursement of various expenses by their customers M/s Lupin Ltd and was paid as reimbursement of various expenses by their customers M/s Lupin Ltd and M/s Kuehne + Nagle Pvt Ltd. The customers had deducted TDS on the M/s Kuehne + Nagle Pvt Ltd. The customers had deducted TDS on the reimbursement. The A/R of the appellant had submitted that this amount is not part The A/R of the appellant had submitted that this amount is not part of the income and of the income and is purely reimbursement of expenses payment made various people incurred on behalf is purely reimbursement of expenses payment made various people incurred on behalf is purely reimbursement of expenses payment made various people incurred on behalf of our principle. The payments have be nullified with relevant reimbursement received. of our principle. The payments have be nullified with relevant reimbursement received. of our principle. The payments have be nullified with relevant reimbursement received.
Assessment Year: 2013-14 M/s. Sangkaj Logysys Private Limited M/s. Sangkaj Logysys Private Limited The submission of the appellant was examined. As per agreement rend The submission of the appellant was examined. As per agreement rend The submission of the appellant was examined. As per agreement rendered by M/s Sangkaj Logisys Pvt Ltd with M/s Lupin India, the following charges would be Sangkaj Logisys Pvt Ltd with M/s Lupin India, the following charges would be Sangkaj Logisys Pvt Ltd with M/s Lupin India, the following charges would be reimbursed under C & F A: reimbursed under C & F A: Transit/storage insurance Transit/storage insurance Non Recoverable surcharge/Tot (if any) Non Recoverable surcharge/Tot (if any) Freight, Hamali & Octroi on incoming consignments Freight, Hamali & Octroi on incoming consignments Postage and courier to send documents/report to head office, other depots and field send documents/report to head office, other depots and field send documents/report to head office, other depots and field Telephone/Fax/Email to head office, other depots and field stocks/receivables follow Telephone/Fax/Email to head office, other depots and field stocks/receivables follow Telephone/Fax/Email to head office, other depots and field stocks/receivables follow- up Telephone expenses of company field staff (officials) Telephone expenses of company field staff (officials) Local clearing Hamali & secondary freight for des Local clearing Hamali & secondary freight for despatching samples, stationery & patching samples, stationery & promo materials to field promo materials to field Hamali & freight on inter depot despatches (finished goods and samples) Hamali & freight on inter depot despatches (finished goods and samples) Hamali & freight on inter depot despatches (finished goods and samples) Freight on expiry, breakage returns Freight on expiry, breakage returns Return freight on saleable returns (if not due to C&F agent Fault). Return freight on saleable returns (if not due to C&F agent Fault). Stationery consumption for sending reports to field. on for sending reports to field. All printed stationer Repacking material (corrugated boxes & bum tape) Repacking material (corrugated boxes & bum tape) The total reimbursement made by M/s Lupin Ltd in A. The total reimbursement made by M/s Lupin Ltd in A.Y. 2013-14 amounting 14 amounting Rs. 94,72,949/-. As per the agreement with M/s Kuehne+Nagle Pvt As per the agreement with M/s Kuehne+Nagle Pvt Ltd, the company wou Ltd, the company would reimbursement expenses of warehousing, manpower, securities, utilities a reimbursement expenses of warehousing, manpower, securities, utilities a reimbursement expenses of warehousing, manpower, securities, utilities and measurement fees. The total reimbursement made by M/s Kuehne + Nagle P measurement fees. The total reimbursement made by M/s Kuehne + Nagle P measurement fees. The total reimbursement made by M/s Kuehne + Nagle Pvt. Ltd in the A.Y. 2013-14 amounting to Rs.22,60,908/ 14 amounting to Rs.22,60,908/-. It may be noted that at service tax has been paid by the principle on these reimbursement. been paid by the principle on these reimbursement. These expenses amounting to Rs. 1,17,33,857/ These expenses amounting to Rs. 1,17,33,857/- have been incurred by t have been incurred by the appellant on behalf of the principle which subsequently was reimbursed. The appellant on behalf of the principle which subsequently was reimbursed. The appellant on behalf of the principle which subsequently was reimbursed. The reimbursements are reflected in the books of acco reimbursements are reflected in the books of accounts. It appears that even previous unts. It appears that even previous years, the principal would reimbu years, the principal would reimburse the appellant for expenditure rse the appellant for expenditure incurred on its behalf These reimbursement behalf These reimbursements under no stretch of imagination can be considered to be can be considered to be income at the hands of the appellant. The deduction T income at the hands of the appellant. The deduction TDS on expenditure reimbursed DS on expenditure reimbursed would not change the nature of the payments. The addition has been made by the A.O. would not change the nature of the payments. The addition has been made by the A.O. would not change the nature of the payments. The addition has been made by the A.O. without application mind, solely on mind, solely on the basis of difference between turnover as per the basis of difference between turnover as per Form 26AS and as per return income. There are a number of j and as per return income. There are a number of judicial decisions which udicial decisions which have held the reimbursement of expenditure does not constitute income assessable to have held the reimbursement of expenditure does not constitute income assessable to have held the reimbursement of expenditure does not constitute income assessable to tax. The decisions are as follows: tax. The decisions are as follows:- (i) CIT vs. Dunlop Rubber Company Ltd. (1983) 142 ITR 493 (Cal) CIT vs. Dunlop Rubber Company Ltd. (1983) 142 ITR 493 (Cal) CIT vs. Dunlop Rubber Company Ltd. (1983) 142 ITR 493 (Cal)
Assessment Year: 2013-14 M/s. Sangkaj Logysys Private Limited M/s. Sangkaj Logysys Private Limited (ii) CIT vs. Expeditors International (India) (P) Ltd. (2 CIT vs. Expeditors International (India) (P) Ltd. (2 CIT vs. Expeditors International (India) (P) Ltd. (2012) 24 Taxmann.com 76 (Del) Taxmann.com 76 (Del) After careful consideration of the submission of the appellant and perusal of After careful consideration of the submission of the appellant and perusal of After careful consideration of the submission of the appellant and perusal of the relevant assessment records and decisions of the Hon’ble High Courts, the addition the relevant assessment records and decisions of the Hon’ble High Courts, the addition the relevant assessment records and decisions of the Hon’ble High Courts, the addition of Rs.1,85,27,916/- 5. The ld. D/R could not controvert these The ld. D/R could not controvert these factual findings of the ld. CIT(A). Hence factual findings of the ld. CIT(A). Hence we uphold the same and dismiss this appeal of the revenue. we uphold the same and dismiss this appeal of the revenue.
In the result, appeal of the revenue is dismissed. In the result, appeal of the revenue is dismissed.
Kolkata, the Kolkata, the 19th day of February, 2020 20. Sd/- Sd/- [Aby T. Varkey] [J. Sudhakar Reddy J. Sudhakar Reddy] Judicial Member Accountant Member Accountant Member Dated : 19.02.2020 {SC SPS} Copy of the order forwarded to:
1. 1. M/s. Sangkaj Logysys Private Limited M/s. Sangkaj Logysys Private Limited 20, Tara Chand Dutta Street Burra Bazar Kolkata – 700 073 2. Income Tax Officer, Ward-13(4), Kolkata 13(4), Kolkata 3.CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.