ADDL CIT 17(2), MUMBAI vs. MELARCODE K. NANDKUMAR, MUMBAI

आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 27/07/2012 of the Ld. First Appellate Authority, Mumbai, challenging in holding that reimbursement of expenditure was not in the nature of payment liable for deduction of tax at source u/s 194C of the Income Tax Act, 1961 (hereinafter the Act) and consequently deleting the addition of Rs.8,31,89,029/-, relating to payment of clearing and forwarding charges of Rs.31,91,771/- and freight & forwarding charges of Rs.7,99,97,258/- made by Assessing Officer u/s 40(a)(ia) of the Act placing reliance upon the decision in Nathpa Jhakari Joint Venture vs ACIT 5 ITR (Trib.) 0075. 2. During hearing of this appeal, none was present for the assessee, in spite of the fact that the registered AD notices were sent to the assessee. Under the circumstances, we have no option but to proceed ex-parte, qua the assessee and tend to dispose off this appeal on the basis of material available on record. On the other hand, Smt. Rama Priya Raghvan, ld. DR, defended the addition made in the Assessing Officer by advancing arguments which is identical to the ground raised. It was pleaded that there is violation of Rule-46A of the rules as no opportunity was provided to the Assessing Officer. 2.1. We have considered the submissions of ld. DR and perused the material available on record. The facts, in brief, are that the assessee declared income of Rs.45,80,920/- on 30/09/2008, which was processed u/s 143(1) of the Act. The case of the assessee was selected for scrutiny, therefore, requisite notices were issued to the assessee. In response, the assessee attended the proceedings and filed the necessary details. On verification of the details, filed by the assessee, it was noticed by the ld. Assessing Officer that assessee had no deducted tax at source on the payments amounting to Rs.8,64,21,429/-, which includes clearing and forwarding expenses amounting to Rs.31,91,771/-, freight and forwarding expenses, amounting to Rs.7,99,97,258/-, project labour charges Rs.6,25,660/-, transportation charges Rs.8,52,250/-, interest paid amounting to Rs.11,33,126/- and legal and professional fee amounting to Rs.6,21,364/-. The assessee was asked as to why disallowance may not be made u/s 40(a)(ia) of the Act. The stand of the ld. Assessing Officer was that no TDS was deducted on the payments made for such expenses, therefore, such expenses were disallowed and added back to the income of the assessee. 2.2. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the factual matrix was considered and finally the addition made by the Assessing Officer was deleted. The Revenue is aggrieved and is in appeal before this Tribunal. 2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that before deleting the addition, the Ld. Commissioner of Income Tax (Appeal) sought a remand report from the Assessing Officer and thereafter reached to a conclusion, therefore, the contention of ld. DR that there is violation of Rule-46A of the Income Tax Rules is not substantiated. Even otherwise, no such ground has been raised by the Revenue for such violations. It is also noted that the Ld. Commissioner of Income Tax (Appeal) has separately dealt with the payment claimed to be made under various heads and disallowed by the Assessing Officer vis-à-vis application of the provision of TDS with respect to the impugned payments. The grievance of the Revenue is that no TDS was deducted on the payments, thus, there is a failure on the part of the assessee, thereby, the provision of section 40(a)(ia) of the Act was invoked. It is also noticed, as mentioned in para 1.2(page-2) of the impugned order that the assessment proceedings were initiated at the fag and of the year and sufficient time was not provided to the assessee to explain the expenditure, thereby, additional evidence was filed before the Ld. Commissioner of Income Tax (Appeal). It is also noted that so far as, clearing and forwarding charges are concerned, the entire bills, issued by, L. N. Traders, were produced before the Assessing Officer, which were issued against each consignment given for exports of goods. The Ld. Commissioner of Income Tax (Appeal) found that there are 23 consignment in which the TDS provision are applicable, wherein the amount is subject to TDS works out to Rs.2,80,707/- wherein the assessee has failed to deduct tax at source u/s 40(a)(ia) of the Act, which amount was confirmed as disallowance by the Ld. Commissioner of Income Tax (Appeal) in its impugned order dated 27/07/2012 while relief was granted for the balance amount of Rs.29,11,064/-. We have also observed that assessee has produced bills for less than Rs.10,000/- on which included agency charges of Rs.275 each and the rest of the amount comprise the reimbursements of handling the consignments in the nature of IAAI Custom duty, documentation, loading etc. In our considered view, apart from the disallowance confirmed by the Ld. Commissioner of Income Tax (Appeal) to the tune of Rs.2,80,707/-, the agency charges on the small bills paid to L. N. Trader is also subject to TDS for which no TDS was deducted by the assessee and hence we are directing the Assessing Officer to identify and compute the agency charges components only on the small bills, which are not taken cognizance by Ld. Commissioner of Income Tax (Appeal) for making disallowance. With respect to the second grievance of the Revenue with respect to non- deduction of tax at source on freight and forwarding expenses, it has been observed by the Ld. Commissioner of Income Tax (Appeal) that the payments are made towards reimbursement of freight charges on various bills submitted by Royal Logistics Ltd., which reimbursement also included Rupees 309/- towards agency charges commission, in our considered view, the reimbursement of freight expenses cannot be subjected to TDS provisions and only the disallowance shall be restricted to agency commission paid to Royal Logistics Pvt. Ltd., etc., which is included in the bills submitted by the said concerns, thus, the disallowance shall be restricted only agency commission charges paid by the assessee on which no taxes has been deducted at source, the Assessing Officer is directed to work out the disallowance, keeping in view the provisions of the Act relating to the agency commission paid by the assessee only no TDS was deducted at source after excluding the reimbursement of freight charges. The value of the commission was paid Rs.309/-, therefore, the provision of section 194C was held to be non-applicable. Various invoices were examined along with air-way bills as is oozing out from pages 4 onwards of the impugned orders. The remand report, sought from the Assessing Officer, was duly considered and there is finding that each consignment was a separate contact and the agents commission was ranging between 300 to 400 for each consignment, thus, we are in agreement with the finding of the Ld. Commissioner of Income Tax (Appeal) that TDS provision are not attracted. The ratio laid down in the case of ACIT vs Grant Pricx Pvt. Ltd. 34 DTR (Del. Trib.) 248 supports of view. Identical ratio was laid down in Mahindra & Mahindra Ltd. vs DCIT (2009) 313 ITR (AT) 263 (Mum.)(SB).

Considering the totality of material facts, we find that the Ld. Commissioner of Income Tax (Appeal) has disposed off this appeal in a justifiable manner except as pointed out by us in this order, resulting into partly allowed of appeal of the Revenue. Finally, the appeal of the Revenue is partly allowed. This Order was pronounced in the open court in the presence of ld. DR at the conclusion of the hearing on 26/12/2016. Sd/- Sd/- (Ramit Kochar) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 27/12/2016 f{x~{tÜ? P.S //.�न.स.