JT CIT RG 24(2), MUMBAI vs. SHAZAD RUSTUMJI, MUMBAI

The present appeal has been preferred by the Revenue against the order dated 12.11.2010 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2007-08.

The various grounds raised

The issue raised in ground No.1 is against the deletion of addition of Rs.9,62,846/- by Ld. CIT(A) as made by the AO on account of non deduction of TDS and clearing and forwarding charges and held to be not allowable under section 40(a)(ia) of the Act.

None attended on behalf of the assessee. We proceed to decide the appeal on merit.

The facts in brief are that during the assessment proceedings the AO called for the details of TDS deducted in respect of clearing and forwarding charges of Rs.9,62,846/- and transportation charges of Rs.33,81,658/- and found that no TDS has been deducted and accordingly issued a show cause notice on the assessee as to why the said expenses should not be disallowed in terms of provision of section 40(a)(ia) of the Act.

In the appellate proceedings, the Ld. CIT(A), after considering the contentions and arguments of the assessee, allowed the appeal by observing and holding as under: “2.3 I have gone through the contents of the impugned assessment order as well as arguments & submissions of the Ld. Authorized Representative of the appellant along with material available on record. I find that the appellant is not disputing the Rs.68,129/- of traveling charges and Rs.1,07,160/- of security charges respectively on account of non- deduction of tax at source (Non-TDS). Hence, the addition on account of Non-TDS w.r.t. security charges and traveling charges is 3 Shri Shazad Rustomji upheld. As far as the addition of Rs.9,62,846/- on account of non TDS w.r.t. clearing and forwarding charges is concerned, I find that this addition is not justified in the facts and circumstances of this instant case as these expenses are in the form of reimbursement of actual payments done by the clearing agents, namely M/s NT Company Clearing & Forwarding Pvt. Ltd. having PAN No. AAACN1613P on behalf of the appellant to the parties and the clearing agent had already done TDS thereon. Accordingly, the impugned addition of Rs.9,62,846/- is deleted. Similarly, I find force in the arguments and submissions of Ld. Authorized Representative w.r.t. the additions of Rs.24,43.801/- on account of non TDS on transport charges, transportation. export / import Rs.4,53,357/- and transport charges related to Manesar unit 4.84,500!- would tantamount to be double taxation as the recipients have deducted TDS on the payments made by the appellant w.r.t. Rs.4,53,357/- and rest of the transport charges are paid to the transporters taken on hire from the open market as and when required and no written or oral contract is made with any of such transporters or vendors. Thus, the expenses under the head transport charges are not attracted by the provisions of section 194C of the I.T. Act. I find that the Assessing Officer has not brought any adverse material on record to suggest that any of the party to whom the transport charges are paid, is a regular party doing the transportation for the appellant regularly and exclusively, even though there is no written contract with it. Thus, I find that in the facts and circumstances of the instant case as discussed above, the TDS provisions are not attracted for the transport charges as these payments are not made for carrying out any work in pursuance of the contract between the contractor and any specified person (appellant) within the meaning of 194C of the I.T. Act, 1961. Hence, in view of the above the impugned addition of Rs.53,357/- as well as Rs.24.43,801/- and Rs.4,84,500/- are deleted.”

After hearing the Ld. D.R. and perusing the material on record, we find that the clearing and forwarding charges of Rs.9,62,846/- were incurred in the form of reimbursement of actual payments done by clearing agents namely M/s. NT Company Clearing & Forwarding Pvt. Ltd. with PAN No.AAACN1613P on behalf of the assessee to various parties and clearing agents have already deducted the TDSs and deposited the same accordingly. Therefore, we are in agreement with the findings of the Ld. CIT(A) on this issue and accordingly uphold the order of Ld. CIT(A) on this issue. Resultantly, the ground raised by the Revenue is dismissed.

The facts of the case and the finding of the Ld. CIT(A) allowing the relief of this amount stand given hereinabove while dealing with the ground No.1. Therefore, the same are not reiterated here to avoid repetition.

The Ld. D.R. submitted before the bench that the Ld. CIT(A) wrongly allowed the relief to the tune of Rs.33,81,658/- by holding that the said charges paid to the transporter in the open market as and when the vehicle was hired and therefore there is no written or oral contract between the assessee and the transporter and thus the provisions of section 194C of the Act are not applicable. The Ld. D.R. placed a series of decisions and circular namely; i. Durgesh Shukla, Indore vs. DIT in A.Y. 2007-08 ii. ITO vs. Rajesh A. Boricha (2013) 38 taxmann.com 435 (Rajkokt – Triib.) iii. Circular No.681 dated 08.03.1994

Since there is no material before us to support the finding of the Ld. CIT(A) on this issue, whereas the Department has brought on record the decisions and circular in which it has been held/provided that TDS is liable to be deducted on the transportation charges, we, keeping in view of the fact that there is none to represent before us, restore this issue to the file of the AO with a direction to decide the

In the result appeal of the Revenue is partly allowed.