TaxTMI 
TaxTMI 
2011 (11) TMI 682
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5. During the course of assessment proceedings, it was noticed by the AO that the assessee had declared gross receipts of Rs. 3,33,44,575/- against which the direct expenses were claimed at Rs. 3,08,91,654/. The direct expenses include the freight paid to the various parties. The AO required the assessee to furnish the details of freight paid, and reconciliation for the expenses shown under the head "purchases and services" and tax deducted thereupon. The assessee submitted the details as required. From the details of freight, it was noticed by the AO that assessee has not deducted the tax at source as required u/s 194C of the Act, though the payment made to the parties were more than the prescribed limit of Rs. 50,000/-. The name of the parties to whom the payments were made and on which no tax was deducted at source were tabulated by the AO in the assessment order as under: - S.No. Particulars Amount TDS Deducted 1. Maersk Logistics, Mum. 50,23,655/- 0 2. Atlas Shipping Services 13,59,551/- 0 3. UPS Mumbai 3,09,805/- 0 4. Zeus Air Services 6,65,750/- 0 5. Jeena & Co., Delhi 7,44,187/- 0 6. ULA+....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, the payments made by the assessee could not be allowed as deduction u/s 40(a)(ia) of the Act. The AO's finding in this respect is reproduced as under: - "The submission of the assessee is not correct because it is not necessary the contract from the service provider and service recipient may be in writing, the contract may be oral or by issue of bills and receiving the payment against the raised bills. Here the assessee has received the bill from the shipping companies though in the name of the client whose goods have to be exported or imported and raised the consolidate bills to the client including charges of the assessee of different natures. The assessee received the payment against the bills from the clients and made further payments to the parties responsible for dispatching the goods through shipping lines. This issue has been clarified by the CBDT vide circular No. 715 dated 08/08/1995 that sec. 194C referred to any sum [paid, obviously, reimbursement of actual expenses cannot be deducted out of the bills amount for the purpose of Tax Deduction at Source. Therefore, the contention of the assessee is not correct it was supposed to deduct the tax from the paym....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at it has made payment in pursuance of contracts entered between payers (appellant's clients) and the service providers then the payment made by the appellant fall in purview of the provisions of sec. 40(a)(ia) of the Act as these payments made by the assessee are under contractual obligations. Thus, the AO's action is held justified. Further, the appellant failed to explain and establish the business purposes of the appellant got served by making the payments of Rs. 2,04,72,855/-. Thus, alternatively also, the payments are not allowable u/s 37 of the Act. It cannot be ruled out that the payments made by the appellant are not punishable offence in the nature, especially when the payers (appellant's clients) have also made direct payments to the service providers. The AO's action disallowing Rs. 2,04,72,855/- is thus sustained." 9. Being aggrieved with the ld. CIT(A)'s order, the assessee is in appeal before us. 10. The ld. Counsel for the assessee has submitted that the assessee is engaged in the business of Logistics i.e. clearing and forwarding, and in the course of carrying on such business of clearing and forwarding, the assessee made payments to shipping companies for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isallowance u/s 40(a)(ia) is called for. In this connection, the ld. Counsel for the assessee has relied upon the decision of Hon'ble High Court of Delhi in the case of Commissioner of Income Tax vs. Cargo Linkers (2009) 179 Taxman 151 = (2008) 218 CTR (Del.) 695, where it was held by the Hon'ble High Court that the assessee C&F Agent is only an intermediary, who is not a person responsible for deduction of tax at source in terms of sec. 194C of the Act. 12. The ld. Departmental Representative on the other hand, supported the orders of the authorities below and submitted that as per the provisions of sec. 194C of the Act, the assessee was required to deduct tax at source even if the expenses incurred by the assessee were reimbursed by the assessee's client. 13. The rival contentions of both the parties have been considered and orders of the authorities below have been perused. We have also gone through the various papers and documents containing 77 pages placed in the paper book filed by the assessee. 14. It is not in dispute that the assessee firm is engaged in the business of clearing and forwarding agent. The goods of assessee's client, who are exporter or importer, wer....