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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER and SHRI JASON P.BOAZ, ACCOUNTANT MEMBER
ITA No.36/Bang/2015 (Assessment years: 2011-12) and ITA No.37/Bang/2015 (Assessment year: 2011-12)
Asst. Commissioner of Income-tax, Circle 2(1), Mangalore. … Appellant Vs. 1. M/s.Bola Surendra Kamath & Sons, 4-155, Kedinje, Karkala-574110. PAN: AAFFB8784R 2. M/s.Bola Raghavendra Kamath & Sons, D.No.3-245, Kukkundur, Karakala-576117. … Respondent PAN:AABFB3560H Revenue by: Shri P.Dhivahar, JCIT(DR). Assessees by: Shri V.Srinivasan, CA. Date of hearing : 19/05/2015 Date of pronouncement: 08/06/2015 O R D E R Per Smt.P.MADHAVI DEVI, JM:
Both these appeals are filed by the revenue for the assessment year 2011-12. We find that though the assessees are different in the above appeals, the issues are common. Therefore, these appeals are taken up for hearing and are disposed of by this common and consolidated order.
ITA Nos.36 & 37/Bang/2015 M/s. Bola Surendra Kamath & Sons & Page 2 of 5 2. Brief facts of the case are that the assessee-firms are engaged in the business of manufacture and trading in cashew, Coffee and Palmolein. They filed the returns of income for the relevant assessment year. During the assessment proceedings u/s 143(3) of the of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] the Assessing Officer (AO) observed that the assessees have deducted tax at source u/s 194C of the Act. The AO was of the opinion that the assessees were required to deduct tax at source at 10% as mandated u/s 194H of the Act. Therefore, he asked the assessees to explain the nature of the transaction and the rate of tax at which tax was supposed to be deducted. The assessees explained that the assessee has made payments of (a) import clearing charges, (b) shipping charges and (c) C&F charges and as the payment fell under the ambit of section 194C, TDS was made at 2%. The AO was however not convinced with the contentions of the assessee and observing that the assessee, has short deducted tax at source at 2%, he disallowed the balance of the expenditure for non-deduction of tax u/s 40(a)(ia) of the Act.
Aggrieved, assessee preferred an appeal before the CIT(A), who allowed the same and the assessee is in appeal before us.
Learned Departmental Representative supported the orders of the AO while the learned counsel for the assessee
ITA Nos.36 & 37/Bang/2015 M/s. Bola Surendra Kamath & Sons & Page 3 of 5 placed reliance upon the order of the CIT(A) and the CBDT circular No.715 and also the decision of the Hon’ble Calcutta High Court in the case of Poddar Sons Ex.L (P) Ltd. vs. CIT (2014) 44 Taxmann.com 8 (Calcutta) in support of his contention.
Having regard to the rival contentions and the material on record, we find that the only dispute is the nature of the transaction and the rate at which the tax is to be deducted at source for the payments made by the assessee to residents. The assessee has deducted TDS u/s 194C while according to the AO, 194H is applicable. For ready reference, the provisions of 194C and 194H are reproduced hereunder:
“194C (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to - (i)………………….. (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. ”
“194H Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of
ITA Nos.36 & 37/Bang/2015 M/s. Bola Surendra Kamath & Sons & Page 4 of 5 such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten percent”
From a literal reading of the above provisions, it is clear that the provisions of sec.194C are applicable where the payment is made for carrying out any work in pursuance of a contract between the contractor and specified person while the provisions of sec.194H would be applicable where the payment is towards commission or brokerage. In the case before us, as explained by the assessee and which is reproduced by the AO in para 4.2 of his order, clearing and forwarding charges include both commission as well as the payments made by the payee directly to agencies like Central Excise, Customs and Port authorities, which does not attract TDS provisions u/s 194H of the Act. As regards shipping charges and import clearing charges also, it is stated that the nature of activities conducted by the shipping agent is not in the nature of activity conducted by the commission agent. The assessee had also placed reliance upon the CBDT circular No.715 dated 8/8/1995 wherein the question No.6 was whether payment under a contract for carriage of goods or passengers by any mode of transport would include payment made to a travel agent for purchase of a ticket or payment made to clearing and forwarding agent for carriage of goods? In answer to the above question, it was answered that as regards payment made to clearing and forwarding agent for
ITA Nos.36 & 37/Bang/2015 M/s. Bola Surendra Kamath & Sons & Page 5 of 5 carriage of goods, the same shall be subjected to tax deduction at source u/s 194C of the Act. From the above, it is clear that payments made by the assessee to the clearing and forwarding agents and shipping agents is not a payment of commission or brokerage but is more in the nature of payment for carrying out the work on behalf of the assessee. Therefore as rightly held by the CIT(A), the provisions of sec.194C are attracted and the assessee has rightly deducted tax at the rate of 2% from the payment made to the residents. Therefore, we see no reason to interfere with the order of the CIT(A) in both the cases.
In the result, ITA Nos.36 & 37/Bang/2015 are dismissed.
Pronounced in the open court on 8th June, 2015.
sd/- sd/- (Jason P Boaz) (Smt. P.Madhavi Devi) ACCOUNTANT MEMBER JUDICIAL MEMBER eksrinivasulu Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order
Assistant Registrar Income-tax Appellate Tribunal Bangalore