ROHINI SILKS,MUMBAI vs. ITO 17(1)(4), MUMBAI

This appeal filed by the assessee on 15.2.2016 is against the order of the CIT (A)-32, Mumbai dated 8.1.2016 for the assessment year 2010-2011.

The only issue raised in this appeal relates to the disallowance of Rs. 4,93,300/- u/s 40 (a)(ia) of the Act on the ground of assessee‟s failure to make TDS on the handling charged. 3. At the outset, Ld Counsel for the assessee, brought my notice the decision of the Coordinate Bench in the case of Ramu S. Deora vs. DCIT in (AY 2008-2009), dated 17.4.2014, which is relevant for the proposition that no addition can be made u/s 40(a)(ia) of the Act when the relationship between the payee and the payer is „principal to principal‟ and not the „principal to agent‟. He also submitted that in case of application of provisions of section 172 of the Act, the provisions of section 194C and 195 will not apply. He also brought my notice the CBDT Circular No.723 dated 19.9.2995 and read out the contents of para 5 of the said Circular. Bringing my attention to para 4 of the said Tribunal‟s order (supra), Ld Counsel for the assessee mentioned that the issue under consideration is squarely covered by the said order of the Tribunal. 4. After hearing both the parties and on perusal of the said order of the Tribunal (supra) dated 17.4.2014, I find, para 4 of the Tribunal‟s order is relevant in this regard and the same is extracted, for the sake of convenience and completeness of this order, as follows:- “4. We have carefully perused the orders of the lower authorities and the Circular of the Board No.723 dated 19.9.1995. The Circular relates to tax deduction at source for payment made to foreign shipping companies and at point No.5 the CBDT has clarified that since the agent acts on behalf of the non-resident shop-owner or character, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those of section 194C and 195 will not apply. A similar addition was deleted by the Tribunal in ITA No.105/M/2013 dated 28.3.2014 wherein the Tribunal has followed the CBDT Circular No.723 dated 19.9.1995. As the payment is covered by the CBDT Circular, we therefore, set aside the order of the CIT (A) and direct the AO to delete the addition of Rs. 10,78,418/-.” 5. Considering the above, I am of the opinion that the legal issue raised in Ground no.1 is required to be dismissed as academic and the addition made by the AO u/s 40(a)(ia) of the Act stands deleted in view of the covered nature of the issue by the above referred decision of the Tribunal (supra) dated 17.4.2014. Accordingly I order. 6. The other grounds raised