ABG KANDLA CONTAINER TERMINHAL LTD,MUMBAI vs. ACIT 5(1), MUMBAI

The grounds of appeal raised by the assessee company before Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-

The only issue involved in this appeal is regarding mismatch of amounts credited in TDS certificates and amounts credited in the P&L account of the assessee company drawn from the books of the accounts of the assessee-company.

The Brief facts of the case are that the assessee company is engaged in the business of development, operation, management and maintenance of berth No. 11 & 12 in Kandla Port Trust as container terminal on build, operate and transfer “BOT” basis and derives income by providing berthing facilities to vessels. For the year under consideration the assessee company has declared receipt from terminal handling charges at Rs. 39.47 crores and has shown loss before tax at Rs. 9.20 crores.

The assessee company has claimed TDS to the tune of Rs. 1,37,15,168/-. On perusal of the TDS certificates , it was observed by the AO that there is a mismatch between the income found credited in the TDS certificates and the ITA 6268/Mum/2012 3 income credited in the P&L account by the assesseee company prepared from Books of Accounts of the assessee company . The summary of the afore- stated mismatches in amounts as per the chart prepared by the AO in the assessment orders dated 24-12-2010 , page 2 are as under:-

Aggrieved by the assessment orders dated 24.12.2010 passed by the A.O. u/s 143(3) of the Act, the assessee company filed its first appeal before the learned CIT(A).

Before the learned CIT(A), the assessee company submitted that the A.O. erred in not verifying TDS certificates in the right perspective, and even advance payments received by the assessee company from its customers against which services were not rendered before the end of the previous year ITA 6268/Mum/2012 4 as also service tax component on the gross payments received have been included in the income of the assessee company despite the fact that the assessee company is following mercantile system of accounting and revenue on these advance payments received from customers could be recognized only on rendering of services and not at the stage of receiving of advances from customers.It was also submitted that service tax is merely collected from customers on behalf of the Government which is deposited with Government and there is no income component on the service tax amount collected by the assessee company.

Aggrieved by the appellate orders dated 19-07-2012 passed by the learned CIT(A) the assessee company is in second appeal before the Tribunal.

The learned Counsel for the assessee company submitted that there is a difference between the income shown in the TDS certificate and the income credited in the P&L account to the tune of Rs.7,99,62,893/- . The assessee company is engaged in the business of development, operation, management and maintenance of berth No. 11 & 12 in Kandla Port Trust as container terminal on build, operate and transfer “BOT” basis and derives income by providing berthing facilities to vessels. He submitted that the A.O. has not given sufficient opportunity to the assessee company and simply taken the total income from the TDS certificate and total revenue of the assessee company as shown in the Profit and Loss Account , and the difference amount between the two were added to the income of the assessee company. Before the learned CIT(A) new evidences were produced and the same were forwarded to the AO for his remand report. The remand report is placed at paper book filed before the Tribunal at page 8-13. The ld. Counsel submitted that assessments were completed u/s 143(3) of the Act for the assessment year 2009-10 and 2010-11 and no addition has been made on this account. The assessment orders for assessment year 2009-10 and 2010-11 have been placed in the paper book filed before the Tribunal at page 74-86 , whereby it could be seen that no additions have been made on account of this difference between the income as reflected in TDS certificate and books of accounts . He submitted that the difference is mainly on account of service tax included in gross amount while deducting TDS while the same is merely collected by the assessee company to be paid to the Government and there is no income component in the service tax collected by the assessee company on behalf of the Governmeent, advances were received from the customers against which services were not rendered prior to the end of previous year and also there are errors in the amount of income which has been reported by the customers in ITA 6268/Mum/2012 6 TDS returns filed with the Revenue. He submitted that the A.O. has not given proper and sufficient opportunity to clarify and reconcile the difference of Rs.7,99,62,893/- and if an opportunity is granted the assessee company will reconcile the difference . It was also submitted that the detail submissions were made before the authorities below to reconcile the differences in the income of Rs. 7,99,62,893/- which were simply brushed aside without any application of mind, such detailed submissions made before the authorities below are placed in paper book filed with the Tribunal at pages 1-73.

The ld. D.R., on the other hand, relied on the order of the learned CIT(A).

We have heard the rival contentions and also perused the material placed on record. We have observed that there is difference between the income shown in the TDS certificate and the income reported in the P&L account prepared from books of accounts to the tune of Rs.7,99,62,893/-. The assessee company had stated that there were advances received from customers on which TDS was deducted by the customers but the assessee company has not rendered any services against such advances prior to the close of the previous year and the assessee company is following mercantile system of accounting. Similarly , services tax component on which the customers deducted tax at source under provisions of Chapter XVII-B of the Act is also added to the income of the assessee company while the service tax is collected merely on behalf of the Government which is deposited with the Government. It was also stated that some of the customers erred in reporting income while filing TDS returns with the Government authorities. The assessee company had also stated that detailed replies were submitted which are placed in paper book filed before the Tribunal at page 1-73 but the said replies were conveniently and simply brushed aside by the Revenue authorities below and there is a complete non-application of mind by the ITA 6268/Mum/2012 7 authorities below which has caused great prejudice to the assessee company. The subsequent years assessments have been framed u/s 143(3) of the Act for the assessment year 2009-10 and 2010-11, whereby no such additions have been made by the revenue in the assessment framed u/s 143(3) of the Act. It is also submitted before us that inclusion of advances from customers as income of the impugned assessment year will lead to double addition of the same income as the assessee company has duly offered for taxation the said income in the year in which services were rendered and same cannot be brought to tax as income in the year of receipt as the assessee company is following mercantile system of accounting. It is also submitted before us that this has led to double taxation of the same income which is not permissible as per Scheme of the Act . In our considered view, the matter of reconciliation of income between the TDS certificates and books of accounts of the assessee company needs verification by the authorities below and in the best interest of justice, the orders of the learned CIT(A) is set aside and the matter is restored back to the file of the A.O. for de- novo determination of the issue on merits after considering the clarifications, evidences and replies submitted by the assessee company in its defense to substantiate its contentions , and decide the matter afresh in accordance with law. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee company in accordance with principles of natural justice in accordance with law before framing de-novo assessment on merits in set aside proceedings . We order accordingly.

In the result, the appeal filed by the assessee company in ITA N0. 6268/Mum/2012 for the assessment year 2008-09 is allowed for statistical purposes.