Tribunal upholds disallowance of TDS on shipping payments & Keyman Insurance Premium.

The Tribunal confirmed the disallowance under Section 40(a)(ia) for non-deduction of TDS on payments made to shipping companies and CFS Agents. Additionally, the Tribunal upheld the disallowance under Section 36(1)(ib) for Keyman Insurance Premium. The appeal by the assessee was dismissed, and the disallowances made by the Assessing Officer were upheld.

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Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS on payments made to shipping companies/CFS Agents.
2. Disallowance under Section 36(1)(ib) for Keyman Insurance Premium.

Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS:

Background:
The assessee, a Clearing Agent, filed its return of income for the assessment year 2013-14, declaring nil total income. The assessee raised bills in two parts: one for service charges and another for reimbursement of charges paid on behalf of clients. The assessee did not deduct TDS under Section 194C on payments made to shipping companies and CFS Agents, claiming these were reimbursements without profit element.

AO's Findings:
The AO disallowed Rs. 60,02,756 under Section 40(a)(ia) for failure to deduct TDS, arguing the payments were made on a principal-to-principal basis and could include profit elements. The AO also rejected the alternative plea based on the second proviso to Section 40(a)(ia), as the assessee failed to furnish Form 26A for verification.

CIT(A)'s Findings:
The CIT(A) upheld the AO's decision, noting that the transactions were recorded in the assessee's books as income and expenditure, indicating they were not mere reimbursements.

Tribunal's Findings:
The Tribunal concurred with the AO and CIT(A), stating that the payments were not reimbursements but direct payments on behalf of clients. The Tribunal emphasized that the TDS provisions aim to withhold tax on the income of service providers. Since the assessee made payments directly to service providers, it was responsible for deducting TDS. The Tribunal rejected the assessee's argument that the clients should deduct TDS, noting that the payment was directly made by the assessee. The Tribunal also dismissed the alternative plea, as the assessee failed to furnish Form 26A or other evidence to show that recipients included the payments in their income tax returns.

Conclusion:
The Tribunal confirmed the disallowance under Section 40(a)(ia) for non-deduction of TDS on payments made to shipping companies and CFS Agents.

2. Disallowance under Section 36(1)(ib) for Keyman Insurance Premium:

Background:
The AO disallowed Rs. 70,682 under Section 36(1)(ib) for Keyman Insurance Premium, as the assessee failed to provide supporting evidence.

CIT(A)'s Findings:
The CIT(A) upheld the AO's disallowance, noting the lack of evidence from the assessee.

Tribunal's Findings:
The Tribunal agreed with the AO and CIT(A), stating that the assessee neither provided evidence nor justified the payment of the insurance premium.

Conclusion:
The Tribunal confirmed the disallowance under Section 36(1)(ib) for Keyman Insurance Premium.

Final Order:
The appeal filed by the assessee was dismissed, and the disallowances made by the AO were upheld.

Order Pronouncement:
The order was pronounced in the court on 20th October 2021 at Chennai.

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