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Income Tax Appellate Tribunal, “J”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A), Mumbai, dated 22-12-2010, for the assessment year 2006-2007.
Rival contentions have been heard and record perused. Facts in brief are that assessee is engaged in the business of export and import. The return of the assessment year 2006-07 was filed on 31-10-2006, declaring income at Rs.38,11,051/-. The case was selected for scrutiny. The AO had accordingly completed the assessment by making following additions :- i) Clearing charges : Rs.10,41,693/- ii) Freight Charges : Rs. 6,76,606/- iii) Salary Payments : Rs. 3,00,000/- iv) interest expenses: Rs. 5,77,389/- 2
By the impugned order the CIT(A) restored the matter with regard to disallowance of salary to the file of AO for verifying the tax paid on salary and to decide the issue of allowability of salary expenses. The assessee is in appeal before us with regard to disallowance made on clearing charges, freight charges, interest payment on the plea that tax has not been deducted at source u/s.40(a)(ia) of the Act.
Ld. AR place on record details of clearing charges paid by the assessee which comprises custom duty, octroi, postal and airfreight charges and other charges. As per ld. AR on the custom duty paid and octroi paid to the Government, no TDS is required to be deducted at source. Even with regard to postal airfreight charges, the contention of ld. AR was that no tax is required to be deducted at source in view of the decision of Hon’ble Delhi High Court in the case of Opera Global (P) Ltd., 109 DTR 121. Ld. AR further contended that assessee has just reimbursed the expenditure and the relation between the assessee and the agent. The assessee is an agent, therefore, assessee is not required to deduct tax on such reimbursement. Even with regard to freight charges, it was contended that the payment was made by the agent of the assessee and the assessee has just reimbursed the same, therefore, not required to deduct tax. For this purpose, reliance was placed on the decision of Hon’ble Gujarat High Court in the case of Gujarat Narmada Valley Fertilizers Co. Ltd., 361 ITR 192 (Guj.), wherein it was held that expenses incurred by the agent on behalf of the assessee for transportation and other charges, which had been spelt out in the bill itself 3 including the commission to the agent, the obligation to deduct tax at sources from the payment of transport charges and other charges was complied by the agent, held that assessee was not required to deduct tax at source with respect of the reimbursement. 5. ld. AR relied on the orders of the authorities below.
We have considered rival contentions, carefully gone through the orders of the authorities below and found that payment made for clearing charges, payment towards custom duty, octroi, postal charges etc., which is not allowable to deduction at source. It appears that while deciding the issue the revenue authorities have not considered break up of clearing charges, which also comprise of certain payments, not liable to deduction at source, was not eligible for disallowance. Accordingly, we restore the disallowance of clearing charges to the file of the AO for deciding afresh after verifying the precise nature of charges paid by the assessee. We direct accordingly.
With regard to the freight charges, the contention of ld. AR was that freight charges was paid to various shipping companies and foreign countries and the TDS provisions which are not applicable. For this purpose, reliance was placed on the decision of Hon’ble Bombay High Court in the case of Information Architects, 322 ITR 1.
We have considered rival contentions and did not found any merit in the assessee’s contention for not deducting tax at source. The detailed finding recorded by the lower authorities has not been controverted by the 4 ld. AR by brining any positive material on record. Accordingly, we confirm the disallowance of freight charges of Rs.6,76,606/-.
The AO has also disallowed interest of Rs.5,77,389/- on the plea that interest bearing funds have been diverted for advancing loan to the husband of the assessee amounting to Rs.73.06 lakhs.
The contention of ld. AR was that husband of the assessee has given his godown to the assessee for use in her business. The amount of loan was given as security and no interest was to be charged on loan. It was also the contention of ld. AR that entire funds was borrowed for the purpose of business and advance given to the husband was given for the purpose of business from who assessee has taken godown for the use in her business. It appears that this aspect has not been examined by the AO while disallowing assessee’s claim that interest paid on the borrowings taken for the purpose of business which is not in dispute. The AO is, therefore, directed to examine the terms at which assessee has taken godown from her husband so as to find out whether the advance was given as a condition for giving the godown to the assessee. The AO is to decide the matter afresh after giving due opportunity to the assessee.
In the result, appeal of the assessee is allowed in part for statistical purposes. Order pronounced in the open court on this 28/10/2015. Sd/- Sd/- (SANDEEP GOSAIN) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 28/10/2015 प्र.कु.मभ/pkm, नन.स/ PS 5 ITA No.1969/2011 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. गार्ा पाईर / Guard file. 6. आदेशाि सार/ BY ORDER, सत्मावऩत प्रनत //True Copy//