DUNCANS TEA LTD,KOLKATA vs. A.C.I.T.,CIRCLE - 4(1), KOLKATA, KOLKATA

The assessee’s former substantive ground challenges correctness of both the lower authorities’ action disallowing handling & warehouse collection charges of ₹14,40,861/- incurred for warehouse and freight movement. Both the lower authorities Assessment Year 2011-12 Duncans Tea. Ltd. Vs ACIT, Cir-4(1) Kol. Page 2 case is that the assessee ought to have deducted the TDS u/s. 194C of the Act and its failure to this effect renders the entire amount not allowable.

After giving our thoughtful consideration to rival contentions against and in support of the impugned handling and warehouse collection charges freight disallowance, we find that this issue is no more res integra. The assessee had filed in assessment year 2012-13 challenging the lower authorities’ identical action. Learned co-ordinate bench’s order dated 31.07.2018 has deleted the same as under:- “7. Having heard the rival submissions and perused the material available on record. We note that the assessee has reimbursed the collection charges and pick up charges to the various transporters, and this fact can be verified from the copies of freight bills and ledger account of warehousing collection charges (pb.23). The reimbursement of expenses for and on behalf of assessee is not covered under the provisions of section 194C of the Act. Therefore, these expenses are not liable to TDS as the term 'contract' is absent. These reimbursement of expenses were not made by the assessee towards any services rendered by the agent, but has been made to set off the expenses incurred by the agent on behalf of the assessee. We note that there is no element of 'income' in these transactions, it is just reimbursement of expenses incurred by the agent for and on behalf of assessee. Therefore, the assessee was not obliged to deduct tax at source. We note that it is not a direct payment for freight to the transporter. Therefore, we are of the view that there is no TDS obligation on the assessee on the alleged amount of Rs.18,16,096/-. For that we rely on the judgment of the Co- ordinate Bench of ITA T Kolkata in the case of Satyendra Jhunjhunwalla Vs. ITO, W-46(4), Kolkata, ITA No.1988/Kol/2009, for the A.Y 2005-06, wherein it was held as follows:- “4. At the outset, the Ld. Counsel for the assessee stated in respect of octroi charges that freight is less than Rs.12,622/- and it does not attract TDS in any case. For this he referred to assessee’s paper book wherein details of octroi charges and other charges paid to M/s Inland Transport Pvt. Ltd. are detailed out as under: Date Freight Ch. Oct.Ch OS Ch Del.Ch Miasc. Ch incl E Cess Total unloading chgs 23/7/2004 523.00 597.00 30.00 5.00 30.00 -- 1,185.00 6/8/2004 573.00 1,265.00 67.00 5.00 1,537.00 -- 3,447.00 19/8/2004 978.00 2,705.00 137.00 5.00 1,538.00 -- 5,363.00 20/8/2004 388.00 806.00 41.00 5.00 2,030.00 -- 3,270.00 20/8/2008 1,285.00 3,300.00 165.00 5.00 30.00 -- 4,785.00 1/10/2004 812.00 2,640.00 133.00 5.00 2,823.00 -- 6,413.00 10/11/2004 523.00 1,518.00 74.00 5.00 30.00 -- 2,150.00 2/12/2004 1,078.00 2,200.00 112.00 5.00 30.00 -- 3,425.00 25/12/2004 1,111.00 2,846.00 143.00 5.00 3,030.00 -- 7,135.00 2/2/2005 843.00 2,200.00 112.00 5.00 30.00 25.00 3,215.00 15/2/2005 599.00 1,595.00 83.00 5.00 30.00 18.00 2,330.00 24/2/2005 1,111.00 2,035.00 102.00 5.00 30.00 31.80 3,314.80 31/03/2005 -- -- 1,254.00 60.00 2,315.00 123.00 3,752.00 31/03/2005 -- -- 641.00 29.00 2,168.00 62.00 2,900.50 28/3/2005 1,361.00 2,640.00 135.00 5.00 30.00 39.00 4,210.00 11/1/2005 1,437.00 3,685.00 191.00 5.00 30.00 42.40 5,390.40 12,622.00 30,032.00 3.420.00 159.00 15,711.00 341.70 62,285.70 Assessment Year 2011-12 Duncans Tea. Ltd. Vs ACIT, Cir-4(1) Kol. Page 3 Similarly, Ld. Counsel for the assessee stated that service charges paid to J.S. Clearing Services includes custom duty, port charges, stamp duty charges, bondage charges, oct. Charges apart from payment of rent and removal documentation fee and document processing fee. Ld. Counsel for the assessee stated that this can be verified from copes of bills of freight charges and copies of bills of clearing services 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 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 assessee has deducted tax amounting to Rs.2,094 at source, and the said payment has not been disallowed by the AO. 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.’ 8. We note that provision of section 194C of the Act is applicable, where payments is made to a contractor/sub-contractor, where contract is either a work contract or a contract for supply of labour. In the case of before us, we observe that the assessee has reimbursed the expenses to its agent and it was not a direct payment for freight by the assessee to the transporter. Besides, the Hon'ble Delhi High Court in the case of CIT Vs. Industrial Engg. Projects P. Ltd. (202 ITR 1014), held that it is a settled proposition of law 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) of the Act. We find that the issue of reimbursement of charges which are incurred by agents on behalf of assessee cannot be subject matter of TDS in view of above cited case laws. Therefore, considering the factual position discussed above, we are of the view that the amount paid to transporters on account of handling warehousing collection charges is not liable to TDS, as the handling and warehouse collection charges paid to transporters were having valid PAN number and, in assessee's case under consideration no income element is there and it is just reimbursement of expenses and moreover, there is no contract between the assessee and the payee, hence, TDS obligation is not applicable to the assessee. Therefore, the addition made by the AO and confirmed by the CIT-A needs to be deleted. Accordingly, we delete the addition. The grounds raised by the assessee are allowed.” Learned departmental representative is fair enough in not pin-pointing any distinction on facts or law. We therefore accept assessee’s instant former grievance and direct the Assessing Officer to delete the impugned disallowance. Necessary computation to follow as per law.