TEESTA VALLEY EXPORTS LTD.,KOLKATA vs. DCIT, CIRCLE - 4(2), KOLKATA, KOLKATA

आदेश /O R D E R PER S.S.Godara, Judicial Member:- This assessee’s appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-2, Kolkata’s order dated 24.04.2018 passed in case No.11320 & 1372/CIT(A)-2/15-16, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused. 2. The assessee ‘s first substantive grievance raised in the instant appeal challenges correctness of both the lower authorities’ action disallowing its warehousing charges of ₹14,06,503/- u/s 40(a)(ia) of the Act on account of failure in deducting TDS thereupon. Case file suggests that the very issue had come up for hearing in subsequent assessment year 2013-14 as well wherein

ITA No.1242/Kol/2018 A.Y.2012-13 Teesta Valley Exports Ltd. V. DCIT, Cir-4(2), Kol. Page 2 the tribunal’s co-ordinate bench’s decision rejected the assessee’s explanation as follows:- “2. We come to the first issue of warehousing charges disallowance amounting to ₹10,38,944/- on account of non-deduction of TDS under section 40(a)(ia) of the Act. The assessee claimed to have paid two individuals namely Proloy Neogy and ITA No.399/Kol/2017 A.Y. 2013-14 Teesta Valley Exports Ltd. Vs. DCIT, Circle 4(2), Kolkata Page 2 Bannya Neogy for having incurred the impugned warehousing charges on its behalf ultimately paid to third party payees. The Assessing Officer disallowed the same on account of its failure in deducting TDS thereupon under section 40(a)(ia) of the Act. The CIT(A) upholds the Assessing Officer’s action as follows: “Under the Accounting head 'Other Misc. Expenses' there were "Warehousing charges" aggregating to Rs.11,96,869. On being asked by the Assessing Officer, the appellant submitted the details of "Warehousing Charges" which included two payments of Rs.9,07,209 to Proloy Neogi and Rs.1,31,735 to Bannya Neoqi, aggregating to Rs.10,38,944. It was explained by the appellant that blending of tea was used to be made at the appellant's premises as well as through one outside contractor, viz; Tara Tea Blending Co. (TTBC) The said TTBC were also rendering other incidental services in relation to the export of Tea by the appellant. During the year the appellant paid an aggregate amount of Rs.27,45,455 to TTBC for Blending Charges, Sampling Charges, Packing Charges, Tea Shipment expenses and also towards Warehousing Chargers. The abovementioned aggregate amount of Rs.27,45,455 included Rs.49,952 paid towards Warehousing Charges. Some portion of the appellant's tea was being kept at TTBC’s warehouse for which Rs.49,952 was paid to TTBC as Warehousing Charges. Besides TTBC's warehouse the appellant had to store some portion of Tea in different other Warehouses and the said storing was used to be made through two persons, viz., Proloy Neogi and Bannya Neogi who had been acting on behalf of TTBC. The appellant did not have any Contract or Agreement with the above-named Proloy Neogi and Bannya Neogi. On the basis of the arrangements for storage of tea made at various Warehouses by Proloy Neogi and Bannya Neogi, the appellant used to reimburse those two persons towards the warehousing charges of various warehouses. No work used to be performed by either Proloy Neogi or Bannya Neogi for the appellant other than making arrangement for Warehouses. So, there did not arise any liability on part of the appellant to deduct any Tax at Source u/s 194C in relation to the reimbursements of Rs.9,07,209 paid to Proloy Neogi and Rs.1,31,735 paid to Bannya Neogi. Though this matter had duly been explained by the appellant to the Assessing Officer and it was clarified that there had not been any requirement of TDS u/s 194C,yet the Assessing Officer assumed such payments to have allegedly been attracting TDS u/s 194C and he disallowed the said two amounts of Rs.9,07,209 and Rs.1,31,735 aggregating to Rs.10,38,944 u/s 40(a)(ia) from composite payments to Tara Tea Blending Co., the assessee was also liable to deduct tax at source u/s.194Cfrom reimbursements to the said two parties, and on the basis of such misconceived allegations he further erred in disallowing Warehousing Charges of RS.1 0,38,944/- u/s.40(a)(ia)." – The appellant submits that since there had not occurred any case of payment in pursuance of any contract requiring TDS vis 194C, the Assessing Officer's

ITA No.1242/Kol/2018 A.Y.2012-13 Teesta Valley Exports Ltd. V. DCIT, Cir-4(2), Kol. Page 3 action 3 in making disallowance u/s 40(a)(ia) should be held to be unjustified and such disallowance of Rs.1 0,38,944 may kindly be deleted. " I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The AR has stated that liability did not arises on part of the appellant to deduct any Tax at Source u/s 194C in relation to the reimbursements of Rs.9,07,209 paid to Proly Neogi and Rs.1,31,735 paid to Bannya N eogi. It clearly indicated that these two persons made payments on behalf on the assessee. In case this amount was directly paid by the assessee than he was liable to deduct the TDS. So the liability of TDS arises on the nature of payment. The assessee has avoided the TDS liability by making payment through middleman credited by him. The only ground as taken by the assessee is that the amount was paid to these two persons were reimbursed. In view of above, the order of the AO is upheld and this ground of appeal is dismissed. 3. Learned Authorised Representative vehemently contends during the course of hearing that section 40(a)(ia) of the Act does not apply in case of mere reimbursement of warehousing expenditure. He terms the two payees S/Shri Proloy Neogi and Bannya Neogi to be assessee’s agents only who had been reimbursed the relevant warehousing charges incurred on its behalf. We find no substance in assessee’s instant argument. The instant taxpayer appears to have adopted an indirect method of involving the two individuals payees for the purpose of incurring the impugned warehousing charges. There is no evidence on record indicating the relevant factual backdrop as to how the two payees assumed its agent’s role in this entire scheme of payment. We, therefore, see no reasons to interfere with the lower appellate findings just because the assessee has made its warehousing charges payment through the so-called two individuals payees in absence of any such agreement or contract on record. This warehousing charges disallowance of ₹10,38,944/- is accordingly confirmed.” 3. Learned counsel seeks to indicate distinction on facts that the assessee can very well prove the corresponding reimbursement agreement with the payee herein. We see no substance in assessee’s plea seeking to adopt a different approach in the impugned assessment year since the tribunal’s co- ordinate bench has already applied its mind on the vey issue. We thus affirm both the lower authorities’ action disallowing the assessee’s warehousing charges payments by adopting judicial consistency on account of non- deduction of TDS. This assessee’s first substantive grievance is rejected.

ITA No.1242/Kol/2018 A.Y.2012-13 Teesta Valley Exports Ltd. V. DCIT, Cir-4(2), Kol. Page 4 assessee’s interest free funds are of ₹566,91,868 & ₹604,37,914/- as against the investments of ₹39,29,975//- as on 31.03.2012. We notice in this backdrop that the tribunal’s earlier decision (supra) take into consideration hon'ble jurisdictional high court’s decision in PCIT vs. Rasoi Ltd. GA No.633 of 2016 ITAT No. 109 of 2016 dated 15.02.2017 that the necessary presumption in such a case is of utilization of interest free funds only for the purpose of deriving exempt income. We thus decline Revenue’s arguments supporting the impugned disallowance. The same stands deleted. Necessary consequential computation to follow as per law.