ACIT - 24(1), MUMBAI vs. LATE SHRI FRANCIS JOSEPH THEKNATH, MUMBAI

This is an appeal by the Revenue against order dated 27th July 2016, passed by the learned Commissioner (Appeals)–36, Mumbai, for the assessment year 2011–12.

disallowance made of ` 1,09,14,920 under section 40(a)(ia) of the Act.

3 Late Shri Francis Joseph Theknath and it was the customers who have paid the freight charges after deduction of tax at source, therefore, there is no liability on the assessee to deduct tax at source under section 194C of the Act. The Assessing Officer, however, was not convinced with the explanation of the assessee and held that the assessee was liable to deduct tax at source under section 194C of the Act on the payment debited to the Profit & Loss Account. The assessee according to the Assessing Officer having not deducted tax at source he disallowed the amount of ` 1,09,14,920 under section 40(a)(ia) of the Act. The assessee challenged the disallowance before the first appellate authority.

4 Late Shri Francis Joseph Theknath formalities relating to custom clearance and loading of the cargo in the airline. Thus, assessee’s services are rendered when the cargo is handed over to the airlines. The assessee receives a special rate from the airlines based on its relationship and on the quantum of business offered to the airlines. After adding its own margin to special price received from the airlines the assessee quotes the same to the customers. Assessee gets 30 days credit from the airlines for payment and in turn the assessee also gives 30 days credit facility to its customers. Since, the assessee has to pay to the airlines strictly on 30th day but the customers do not pay their dues to the assessee on 30th day a mismatch between the time of receipt and payment arises. Therefore, in order to make the customers pay on time within 30 days, assessee allow certain discount which is shown as discount in the debit side of the Profit & Loss Account over the years. Thus, from these facts, the learned Commissioner (Appeals) found that it is not the assessee who has made the payment to attract the provisions of section 194C. Rather, the customers are making payment to the assessee after deducting tax at source and the discount shown in the Profit & Loss Account has been adjusted while receiving such payment. Thus, the learned Commissioner (Appeals) concluded that there was no liability on the assessee to deduct tax at source in terms of section 194C of the Act. Further, learned Commissioner (Appeals) took note of 5 Late Shri Francis Joseph Theknath the fact that though the assessee is following same method of accounting no disallowance was made in assessment year 2012–13 even in scrutiny assessment made under section 143(3) of the Act. Accordingly, he deleted the disallowance.

6 Late Shri Francis Joseph Theknath verifying the facts and material on record, it is the assessee’s customers who have made the payment towards freight charges to the airlines through the assessee and assessee on its part has received some amount towards its margin. Thus, the facts on record clearly indicate that nothing has been done by the assessee to attract the provisions of section 194C of the Act. The learned Departmental Representative has not brought any material before us to controvert the factual finding of the learned Commissioner (Appeals). Further, it is relevant to note that in no other assessment year similar disallowance has been made by the Assessing Officer, though, the assessee follows the same accounting method and facts are identical. In view of the aforesaid, we uphold the order fo the learned Commissioner (Appeals) on this issue by dismissing the ground raised.