TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1074
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....e u/s 40(a)(ia) of the I.T. Act." 4. Facts of the case in brief are that the assessee derived the income from export of marble blocks and slabs. During the course of assessment proceedings, the Assessing Officer noticed that the assessee claimed expenses of Rs. 41,01,878/- under the head clearing and forwarding on account of export of marble blocks and slabs. The Assessing Officer also noticed that the assessee failed to deduct tax at source from the above payments u/s 194-C of the I.T. Act, 1961 (hereinafter to be referred as the Act) as required by the Circular No. 715 dated 08/8/1995 issued by the CBDT. The Assessing Officer held that the clearing and forwarding agent (in brief CFA) had been assigned the contract for providing various services by the assessee for transportation of its goods and in the books of the assessee, CFA had been credited against the provisions of such services. Therefore, the Assessing Officer disallowed a sum of Rs. 41,01,878/- u/s 40 (a)(ia) of the Act, for which the assessee was stated to have been agreed. In the first appeal, the assessee submitted bifurcation of the amount claimed under the head clearing and forwarding expenses and the Ld. CIT(A) b....
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....profit and loss account, payments made to the clearing and forwarding agents hence all payments made to these persons were liable to TDS. 4. Copy of the ledger account of the assessee has also obtained from the assessee. In the ledger account of the assessee received from M/s. Krishna Clearing Agency. Gandhi Dham Kuchh, for the F.Y. 2004- 2005 it is seen that M/s. Krishna Clearing Agency had debited the assessee and credit the agency commission account for the total amount. In this regard, it is submitted that the issue may kindly be decided by your honour on merits in view of facts submitted above." 7. The Ld. CIT(A) confronted the aforesaid remand report of the Assessing Officer to the assessee who made the submissions, which have been incorporated in para 2.3 of the impugned order and read as under:- "01. That the Id. AO in the first para of his said remand report mentioned that the additional evidences may not be accepted because the assessee was given sufficient opportunity and there is acceptance to such disallowance by the assessee. In this connection, it is humbly & respectfully submitted as under: (i) The extract from the order passed by the then AO cannot lead to th....
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....ed conditionally on law point that if any tax was deductible u/s 194C on payments made to the C&F agents and he failed to do so, then disallowance of expenses may be made. It is submitted that this confession is of a legal position which does not bind the assessee. It is stated that admissions or confessions based on material cannot be said to be correct and binding. (ii) That even at the time of appeal before the then CIT(A), the appellant-assessee had made every reservation about the concession so made. (iii) That the issue involved in the present case is not mere question of fact but is question of law as well in that whether provisions of Section 194C are applicable to the assessee's case. The rights of the assessee need to be determined on a true interpretation of the provisions of law and merely because the assessee offers the income, the same cannot be held to be rightly assessed, if there is no authority in law to assess the same. (iv) It is a settled law that no tax can be imposed or collected without authority of law and merely because the assessee admits or concedes before the AO that particular amount is taxable in law, it cannot be brought to tax. If still the AO h....
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....to C&F activity in one common account head by the assessee is in accordance with the accepted accounting practice and does not change character of the transactions. Hence, the standtaken by the Id. AO is not justified. 04. As to the fourth para, though copy of the said account is not provided to us, it is submitted that the Id. AO himself in para no. 3 of his remand report stated that he has received copies of separate debit notes and bills from M/s Krishna Clearing Agency and as such, there is no point in raising the issue that the same have been debited to one single account by the said party. As a matter of fact, the said party has made available to the AO, a copy of ledger account of the appellantassessee, which naturally will have all transactions with the appellant in a single account only and there is no perversity in the same, especially when the party has already furnished individual debit notes and bills to the Id. AO., which are not in dispute. Again, it is always a practice that in respect of one party, only a single account is opened and maintained." 8. The Ld. CIT(A) after considering the submissions of the assessee and the remand report of the Assessing Officer, su....
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.... above concession was given by appellant conditionally about application of provisions of section 194C to the payment made by the appellant. If the payments are covered under section 194C, then only above addition could be made. The A.O. held that above payments are liable to tax deduction under section 194C while appeal has been filed stating that section 194C does not apply to above payments and it is point of law to be decided in facts and circumstances of the case. In view of above discussion, it is apparent that appeal is admissible as it was only a conditional agreement for addition provided section 194C applies to the payments, which is appealable point of law. (ii) The second issue is regarding as how the gross amount of sum payable is not liable to deduction of tax at source without establishing that these were the reimbursement of expenses. The third connected issue is the principle settled by the Honourable Supreme court in the case of Associated cement Company Ltd -201-ITR 435 as mentioned in the order of the Honourable IT AT. In this regard it has been explained that provisions of section 194C are not attracted on the payments made to C&F agents as the C&F agents hav....
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....ng plant No.l and 30 paisa cement handled in packing plant No.2 for each tone as per clause 12 of the contract. Clause 13 contains a recital that 'the rate of loading in cl.12 had been worked out on the basis of D.A. H.R.A. per day per worker stipulated certain additional payment on account of difference in D.A, as per the second wage Board recommendation. The assessee claimed that he was not liable for deduction of tax under section 194C on the sum paid to the contractor as per clause 13 of the contract. In this regard it was held that as per provisions of section 194C(1), there is nothing which permits exclusion of an amount paid on behalf of the organization to the contractor according to C1.13 of the terms and condition of the contract in reimbursement of the amount paid by him to workers from the sum envisaged therein. In this regard, it has been argued that by the appellant that the above decision is applicable if there is a composite bill which does not differentiate between the reimbursement and other sum. While in the present case, there is no composite bill. There are separate bills raised for reimbursement of expenses and agency charges and in the decision subsequent to ....
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....o M/s. Krishna Clearing Agency was below Rs.20,000/- (Rs.5956+4085+3427+ 2772+5354+service tax thereon 9153). Similar is position regarding M/s. A.K. Biswas (6000+15,000+ 17000+ service tax 3040). Only the amount of Rs. 77,760/- to M/s, Ashirwad Clearing Agency which is more than Rs. 50,000/- is disallowable u/s. 40(a)(ia). (iv) The next issue is whether the payments are covered under section 172(8) of the Act and circular No. 723 of the Act or not. It is seen that for the payments made to the shipping business of the non resident u/s. 172 , provisions of section 194( c ) and 195 are not applicable and circular No.723 specifies that shipping agents of non resident ship owner, steps into the shoes of the principal . So, for the payments made to the shipping agent of non resident shipping owner, provisions of section 194C and 195 do not apply. Further, section 172(8) specifies the amount of such payments which include the amount paid or payable by way of demurrage charges or handling charges or any other amount of similar nature. In the assessee's case, various payments as per 1st order of the CIT(A) are as under- Documentation charges Rs. 190 Concor charges Rs. 12,65,185 (wrong....
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....have been discussed by Id. CIT (A) in his order. They were on account of sea freight transport which were at Rs. 1,16,11,550 CCI charges, steamer freight charges, REPO container charges. Remaining expenses reimbursed by the assessee were on account of transportation charges at rs.20,31,226 and on this amount the Agent has deducted TDS before making payment to the Principal. Similarly, TDS has been deducted on shipping bill of Rs.2,18,718 . Agency charges of Rs.3,61,550 paid by the assessee on which TDS has been deducted by the assessee. There were other small payment of Rs.9816 on account of other expenses on which TDS was not applicable. In this way, the entire addition of Rs.1,60,41,692 was deleted by Id. CIT (A). The Id. CIT(A) has discussed each item in detail and then only it has been held that assessee was not liable to make deduction of TDS on reimbursement expenses. Various Benches of the Tribunal are taking a consistent view that if the payments are made on account reimbursement, then no TDS is liable to be deducted on behalf of the payer i.e. assessee." (v) As regarding the evidence placed for the time before CIT (A) which were considered in contravention of rule 46A of ....
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....angement for the same has been made. In this regard, it has been explained that section 172 casts responsibility on of preparing and furnishing return on its non resident shipping line or its agent and .not on the appellant. In this context, it has been held by the Honourable ITAT. Ahmadabad in the case of Hashmuk J.Pael Prop. Jasyshree Industries ITA No.208/Ahd/2009 where CIT (A) had directed the A.O. to allow relief subject to verification of the proof of tax paid by the Shipping company, as under: "The A.O. invoked the provisions of section 40(a)(ia) of the IT. Act for non deduction of TDS as required under section 194C of the IT Act. However, the above provision is application for the amounts payable to the residents or the amounts payable to contractors or sub- contractors being resident. Similarly, the provisions of section 194C of the IT Act apply to the area of operation of TDS which is confined to payments made to any residents. The assessee in his reply specifically pleaded that the amount in question is nothing but reimbursement of freight charges which was paid to the shipping agents for carrying materials for sale. Thus, the assessee made the payment to the shipping b....