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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI SANJAY ARORA
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) -1, Madurai, dated 20.04.2017. The assessee has filed cross-objection against the same order of the CIT(Appeals). Therefore, we heard both the appeal and the cross-objection together and disposing of the same by this common order.
Shri N. Madhavan, the Ld. Departmental Representative, submitted that for the assessment year 2014-15, the assessee claimed `60,55,980/- as payment said to be made to C&F charges.
According to the Ld. D.R., the Assessing Officer found that the assessee has not deducted tax while making payment towards C&F charges, therefore, he disallowed the same under Section 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. D.R., the assessee claimed before the CIT(Appeals) that C&F expenses are in the nature of reimbursement of the expenditure incurred by the C&F agents on behalf of the assessee. The CIT(Appeals) without verifying the invoices, allowed the claim of the assessee. According to the Ld. D.R., the expenditure incurred by the assessee by making payment to C&F agents is liable for TDS, therefore, the CIT(Appeals) is not justified in allowing the claim of the assessee.
On the contrary, Sh. N. Devanathan, the Ld.counsel for the assessee, submitted that admittedly the payment was made by the assessee to C&F agents. According to the Ld. counsel, the main object of the Assessing Officer was that there was no separate invoice for Clearing and Forwarding charges and reimbursable expenses. The assessee produced sample bills before the Assessing Officer as well as the CIT(Appeals). The sample bills produced before the Assessing Officer were not considered by him.
However, according to the Ld. counsel, the CIT(Appeals), after considering the sample bills produced by the assessee, found that the reimbursable items were shown separately. After considering the bills and break-up of details furnished by the assessee, according to the Ld. counsel, the CIT(Appeals) found that an amount of `2,16,147/- was paid to C&F agents towards service charges. The balance amount was only reimbursable expenditure. Accordingly, out of total disallowance of `59,55,139/-, he restricted the disallowance to `2,16,147/-.
We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer disallowed `59,55,139/- for non-deduction of tax at source under Section 40(a)(ia) of the Act. The Assessing Officer, after examining the bills and invoices produced by the assessee, found that the C&F agents raised invoice for the entire expenses inclusive of service charges claimed by them. In the absence of any separate invoices for C&F charges and service charges as claimed, the Assessing Officer rejected the claim of the assessee. The CIT(Appeals) found that a sum of `2,16,147/- relates to service charges and the balance amount was only reimbursement of expenditure. It is not in dispute that the service charges are only to the extent of `2,16,147/-. When the Revenue has not disputed the bifurcation made by the CIT(Appeals) with regard to service charges and reimbursable expenditure, this Tribunal is of the considered opinion that reimbursable expenditure cannot be disallowed under Section 40(a)(ia) of the Act. In other words, the expenditure incurred by the C&F agents on behalf of the assessee was reimbursed by the assessee. Therefore, there is no question of any deduction of tax at source, hence, there cannot be any disallowance. This Tribunal is of the considered opinion that the CIT(Appeals) has rightly restricted the disallowance to `2,16,147/- out of total disallowance of `59,55,139/- made by the Assessing Officer. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Now coming to C.O. No.134/Mds/2017, the assessee has filed cross-objection only to support the order of the CIT(Appeals). Therefore, the cross-objection becomes infructuous.
In the result, both the appeal of the Revenue and the cross- objection of the assessee stand dismissed.
Order pronounced on 16th October, 2017 at Chennai.