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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: Shri Joginder Singh & Shri G Manjunatha
O R D E R Per G Manjunatha, AM : These two appeals filed by the assessee are directed against the order of the CIT(A)-36, Mumbai dated 02-09-2016 for the assessment year 2007-08 & 2008-09. Since facts are identical and issues are common, these appeals were heard together and are disposed of by this common order, for the sake of convenience. The assessee has raised common grounds of appeal for both the assessment years. For the sake of brevity, grounds of appeal for AY 2007-08 are extracted below:-
2 ITAs 7394 & 7395/Mum/2016 “1. On the facts and in the circumstances of the case without appreciating that the said payments were made towards the bills for reimbursement of actual j m expenses incurred by the Clearing and Forwarding Agents which is not covered ' by section 194C and hence there cannot be any disallowance U/s 40a(ia).
2. The learned Commissioner of Income-tax (Appeals) erred in confirming disallowance of Rs. 12,29,7477- u/s. 40a(ia), without appreciating that the said payments were made towards the bills for reimbursement of actual expenses incurred by the Clearing and Forwarding Agents and therefore, were directly covered by the judgement rendered in case of Dr. Willmar Schwabe India Pvt. Ltd. 95 TTJ 53 (Del).
3. The learned commissioner of Income Tax (Appeals) erred in disallowing total amount when the bills were already paid during the financial year and hence the maximum disallowance if any should be restricted to the extent of amounts outstanding as at 31-3-2007”
The brief facts of the case are that the assessee is a partnership firm engaged in the business of export of trading goods, filed its return of income for AY 2007-08 on 30-10-2007 declaring total income of Rs.1,87,37,321. The assessment was completed u/s 143(3) on 10-12- 2009 determining total income at Rs.2,15,40,120 making addition towards disallowance of reimbursement of clearing & forwarding charges u/s 40(a)(ia) for failure to deduct tax at source u/s 194C of the Income- tax Act, 1961. The assessee carried the matter in appeal before the CIT(A). The CIT(A), vide its order dated 04-08-2010 partly allowed appeal filed by the assessee. The assessee carried the matter in further appeal before ITAT. The ITAT, vide order in dated 28-08-2013 set aside the issue to the file of the CIT(A) with a direction to re-examine the claim of the assessee in the light of sample invoice furnished to prove that the amount paid is reimbursement of 3 ITAs 7394 & 7395/Mum/2016 actual expenses incurred on which the provisions of TDS has no application.
Consequent to the directions of ITAT, the Ld.CIT(A) has taken up fresh proceedings. The assessee has submitted sample copies of invoices raised to reimburse the clearing & forwarding charges to argue that the payments made to clearing & forwarding agents does not fall within the ambit of section 194C, thereby disallowance u/s 40(a)(ia) is not applicable. The assessee also relied upon the decision of ITAT, Mumbai in the case of ACIT vs PP Overseas in ITA No.733/Mum/2010.
The Ld.CIT(A), after considering relevant submissions of the assessee and also relying upon the decision of ITAT, Mumbai in the case of PP Overseas (supra) observed that when separate bills are raised by clearing & forwarding agents for its charges and reimbursement of actual expenses incurred, then TDS provisions are not applicable. But, the CIT(A) has allowed partial relief to the assessee on the basis of sample copies of invoices submitted, as per which he has determined an amount of Rs, 3,00,403, out of total disallowance of Rs.15,30,150 and accordingly allowed relief to the extent of Rs.3,00,403 and balance amount of Rs.12,29,747 was confirmed. The CIT(A) has allowed partial relief on the basis of sample copies of invoices submitted by the assessee and confirmed balance amount. The relevant portion of the 4 ITAs 7394 & 7395/Mum/2016 order of CIT(A) is extracted below:-
“13. The issue is identical and similar to the issue involved in the appellant's case for A.Y. 2007-08. The grounds of appeal raised before the Tribunal are also identical except for the amount involved. Since, all the conditions, the grounds of appeal and the comments of the Hon'ble Tribunal are also identical the issue is being decided as per the comments and arguments placed in the para no. 7 above. Accordingly, respectfully relying on the judicial pronouncements in the matter the appeal is being decided by excluding the reimbursement of expenses paid by the appellant to the C&F agent. 13.1. The appellant in his paper book has submitted invoices where separate bills are raised for reimbursement of the expenses as directed by the Hon'ble Tribunal which works out to be Rs.3,67,104/- paid to Monarch Shipping, however, in the case of M/s Mahendra Shipping Agency no separate bills for reimbursement of expenses has been submitted by the appellant. Accordingly, the AO is directed to give relief to the appellant for Rs.3,67,104/- out of total disallowance of Rs.8,01,154/-. Thereby, the addition of Rs.4,34,050/- is confirmed. The grounds of appeal raised by the appellant is partly allowed.”
Further aggrieved, the assessee is in appeal before us.
The Ld.AR for the assessee submitted that the Ld.CIT(A) was erred in confirming balance amount without appreciating the fact that the said payments were made towards reimbursement of actual expenses incurred by the clearing & forwarding agents which is not covered by section 194C and hence, there cannot be any disallowance. The Ld.AR further submitted that before the CIT(A), the assessee has filed sample copies of invoices to prove that the said payments are in fact reimbursement of expenses; however, the total payment disallowed by the AO is towards reimbursement of actual expenses incurred by clearing & forwarding agents and accordingly outside the purview of section 194C and section 40(a)(ia). Therefore, the issue may be set
5 ITAs 7394 & 7395/Mum/2016 aside to the AO to verify the facts and allow relief accordingly.
On the other hand, the Ld.DR fairly accepted that the issue may be set aside to the file of the AO to verify the facts with reference to the bills submitted by the assessee.
We have heard both the parties and perused the material available on record. The Ld. CIT(A) has given a finding that the amounts paid by the assessee to clearing & forwarding agents are reimbursements of actual expenses incurred by them which are outside the purview of provisions of section 194C and hence, no disallowance can be made u/s 40(a)(ia); however, the Ld.CIT(A) has allowed partial relief to the assessee only on the basis of copies of invoices submitted by the assessee and quantified the amount and allowed relief accordingly. It is the claim of the assessee that it has furnished only sample copies of invoices before the Ld.CIT(A) to prove that these are all reimbursements of actual expenses. However, total expenses disallowed by the AO is towards reimbursement of expenses for which it has necessary proof in the form of bills and vouchers. We find that the assessee has filed a paper book containing details of bills and vouchers in respect of amount paid to clearing & forwarding agents. Therefore, we are of the considered view that the issue needs to be re-examined by the AO in the light of evidence filed by the assessee to prove that the amounts paid to 6 ITAs 7394 & 7395/Mum/2016 clearing & forwarding agents are re-imbursement of actual expenses. If the AO found that the amount paid to clearing & forwarding agents are re-imbursement of actual expenses, then the AO is directed to delete addition made u/s 40(a)(ia) of the Act.
In the result, appeals filed by the assessee are allowed, for statistical purpose.
Order pronounced in the open court on 13th June, 2018.