AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (7) TMI 515
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....ed in the gross receipts as per TDS certificates, detailed as under :- S.No. Head of Expenses Amount (Rs.) 1. Custom duty & taxes 71,01,264/- 2. Godown rent 4,58,44,891/- 3. Freight; rail/sea/air 12,84,980/- 4. Transport 93,38,228/- 5. Delivery order fee 3,70,16,864/- 6. Other clearing expenses 1,51,56,044/- Total 11,57,42,271/- 3. The assessee claimed that the above sum of Rs. 11.57 crore was in the nature of expenses paid by it in the first instance during the year on behalf of its clients which were later on reimbursed by the respective clients as such, without any mark- up. That is how the assessee claimed that this amount of Rs. 11.57 crore was not chargeable to tax despite its forming part of gross receipts as per TDS certificates issued by the clients. Unconvinced with the assessee's submissions, the AO treated this amount as containing profit element. By considering certain other material and relying on the net profit rate for the earlier years, the AO held that the assessee earned 8% net profit on these gross receipts of Rs. 11.57 crore. This resulted into an addition of Rs. 92,59,381/-. In the first appeal, the ld. CIT(A) came to hold t....
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....60/- which was incurred by the assessee on behalf of its client, namely, M/s Aksh Optifibre Ltd. This amount was stated to have been reimbursed by this client under the head 'Other clearing expenses.' It was stated that complete details of such expenses were furnished before the AO. This contention has remained uncontroverted on behalf of the Revenue before us. 5. In order to decide as to whether some profit rate can be applied on the amount received by the assessee under the head 'Other clearing expenses' to form part of total income, as has been held by the authorities below, it is of paramount importance to first ascertain if it includes any mark-up or is a reimbursement simplicitor. In this endeavour, we have examined copies of contracts between the assessee and some of its client, which are available in the paper book. A copy of such contract for customs clearance with M/s Aksh Optifibre Ltd. is available at page 41 of the paper book. From this Contract, it can be seen that the assessee is entitled to a fixed percentage and also fixed amount in respect of certain specified services to be rendered by it in the process of the gets the imported goods cleared from....
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....ts listed in invoice on page 47 raised on Aksh Optifibre Ltd. represent the reimbursement of expenses without any profit element. Page 48 of the paper book is a copy of invoice raised by the assessee on Aksh Optifibre Ltd. amounting to Rs. 23,570/ towards its remuneration for rendering services to Aksh Optifibre for this transaction. The amount of such remuneration has been credited by the assessee to its Profit & Loss Account. As against that, the amount as per invoice on page 47 of the paper book totaling Rs. 1,51,821/- is reimbursement of expenses claimed by the assessee from Aksh Optifibre Ltd. Since there is no element of income in the reimbursement of expenses, this amount was neither claimed as deduction nor offered as income. As the total sum of Rs. 11.57 crore, inter alia, including 'Other clearing expenses' of Rs. 1.51 crore is in the nature of expenses incurred by the assessee in getting the goods cleared from customs in the first go, which were paid by the clients as such in terms of the agreements as discussed above, naturally there is no element of income requiring inclusion of this amount as such or in part thereof, in the total income. In view of the fact th....
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....ified in sub-section (1) of section 139, then the amount of such interest, commission or brokerage or rent etc., which is otherwise deductible under sections 30 to 38, shall not be allowed as deduction. This manifests that in order to fall within the ambit of section 40(a)(ia) of the Act, it is sine qua non that the assessee should have been otherwise eligible for deduction of the sum which is sought to be disallowed by invoking the provisions of section 40 of the Act. 8. At this juncture, it is worthwhile to note that the AO treated inter alia the amount of Godown rent as having income element and that is how he brought to tax income at the rate of 8% of this amount. When the assessee assailed such finding in the first appeal by contending that there was no income element in it, the assessee's contention came to be upheld by the ld. first appellate authority. However, in order to buttress his view of the applicability of section 40(a)(ia) of the Act, the ld. CIT(A) held that the there is income as well as expenditure of the godown rent and since the assessee failed to deduct tax at source, the expenditure part was disallowable by keeping the taxability of the income part inta....
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....is of custom clearing agent. In that view of the matter, the remuneration allowed by its customers as per the terms of the contracts, is its income. Similarly, expenditure incurred by the assessee for earning such income in his own right and without any obligation or instruction from the clients, is his expenditure. These income and expenses find place on the credit and debit sides of its Profit and loss account. These items of income and expenditure earned/incurred by the assessee in his own capacity, are either includible in the total income or qualfy for deduction as per law. On the other hand, other expenses, including customs duty, freight paid and godown rent etc. incurred for the customers can by no stretch of imagination be construed as the expenses incurred by the assessee for his business so as to make them eligible for deduction. Here is a case in which the assessee did not claim any deduction for godown rent of Rs. 4.53 crore which was paid by it on behalf of its customers and got reimbursement as such. Neither any expenditure was claimed towards payment of godown rent nor any income was offered on this account. The transaction of actually paying godown rent was for and....