TaxTMI 
TaxTMI 
2018 (6) TMI 752
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.... proceedings vide following discussion:- "I have carefully examined the Assessing Officer' order, the remand report, the rebuttal of the appellant and other material on record and that produced by the appellant during appeal proceedings. The undisputed facts relevant to this ground are summarized as bellow: That the appellant is a C&F Agent of Ultrratech Cement Ltd - henceforth called the principal company, which is a manufacturer of cement. For the activity relevant to this round, the appellant handles the cement from the railway rake point till it reaches the dealer's godown. The appellant, therefore, unloads the. Cement from the railway siding and loads it on to trucks, forwarding it by truck to thee godown, where he unloads these bags into the godown. The expenses incurred on this activity are called CF & Transportation Charges and such amounts are reimbursed by the principal company to the appellant. The appellant, thereafter, arranges delivery of the cement bags from the godown to the various dealers points by truck with the expense incurred for this activity being called Secondary Freight Charges being reimbursed by the principal company as well. All re....
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.... payments on their own and to the truck drivers to move the bags from the railway rake point to the godown. * The appellant further submitted that the labour sardars were nothing but the leaders of the local labour union and they themselves were also nothing but labourers - and for this last capacity that they received their payments in the form of regular wages. * That the actual labour wages paid and the acknowledgement from the labour union also corroborated the fact that the labour sardars were in reality nothing but a part of the labour union and that they were not contractors or sub contractors. * That the agreement between the appellant and the principal company suggested that the appellant's job was to facilitate the payments that were actually made and all the expenses were reimbursed by the principal company on actual basis. * That the above fact had also been accepted by the ITO Ward -1 (2), Burdwan in his remand report. * The appellant has further submitted that the AO also could not establish any contract between the appellant and the labour sardars and/or the truck drivers. During appellate proceedings, the mat....
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....o the availability of orders before hand - thus there was a condition precedent on it. Since the agreement is for the handling and transportation of cement, whatever may be the condition, the only activity is of transporting and handling of cement and for which the appellant is reimbursed by the principals. 4. That the observations of the AO that the principals could have paid directly to the dealers and that no prudent businessman would pay to an intermediary are irrelevant and would constitute interference on the running of the business of the principal company. That this in any case has nothing to do with the appellant's case. 5. The appellant has also rebutted the applicability of section 194C by reiterating his stated stand on the matter. 6. He also states that the ITO had contradicted, himself in his report by saying on the one hand "The principals were under contractual agreement to pay to the C&F agent handling, transportation and other charges as well as C&F margin at the agreed rates .... " while on the other had he avers that "There was no such clause in the agreement of contract between the cement companies and the C&F agent which provides....
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....ged before your honour to note that the Ld. A.D has erred in disallowing Rs. 95,05,125.00 on account of secondary transport and assessee firm handles cement from the railway rake point until it reaches to the dealer' point, as per the direction of the company, for which assessee firm gets commission from the company . Now the Ld. AO has made the addition U/s 40(a)(ia) of the Income Tax Act, 1961 on account of secondary transport and freight charges, which is nothing but the caring cost of reimburses the money to the dealers of the company after getting the money from the company and in the first instance the dealers pay for the secondary transportation and freight charges. Which include the truck hire charges that are at a fixed rate per kilometer and calculated as per distance covered. Here the assessee firm does not pay the money to any transport contractor but actually the money is paid to the dealers as reimbursements to their truck hire charges and other associated costs. Thus the ultimate beneficiaries to the payment are the truck owners and not the dealers and therefore the onus of deducting T.D.S u/s 194C of the Income Tax Act, 1961 does not fall upon the assessee firm.....
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.... Ltd. (1973) 88 ITR 192 (SC) held that if the court finds that the language of taxing statute is ambiguous or capable of more meanings then one, then the court has to adopt the interpretation which favours the assessee, more particularly so where the provision relates to imposition of Tax. Thus the Ld. A.O has acted vindictively and added Rs. 95,05,125.00 for reasons to him only and by any stretch of mind, it cannot be said to be a lawful act. The facts for the sake of ground -wise completion are being briefly stated again: 1) The appellant is a C&F Agent of the agent of Ultratech Cement Ltd who is manufacturer of cement. The assessee handles the cement from the railway rake point till it reaches the dealer's godown. So the assessee unloads the cement from the railway siding and forward the same by truck to the godown and the expense incurred for this activity is called the Primary Transportation and/ or Freight and such amount is reimbursed by the principal company. Then the assessee arranges delivery of the cement bags from the godown to the various dealers point by truck and the expense incurred for it is called the Secondary Freight Charges and this amount....
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....ual basis on behalf of the company as the principal company pays such reimbursement and the job of the assessee is only to facilitate such payment. * The assessee also placed reliance on the ratio of the assessee's own case before the CIT(Appeals) - XXXII, Kolkata and ITAT, Kolkata C Bench for the A/Y 2008-09, where the assessee got relief based on the facts that liability to deduct tax at source u/s 194C would only arise when the payment is made under a contract, which is not true in this instant case as there is no finding by the AO that the impugned payments were made to a contractor or sub-contractor under some contract. Rather the facts of the case suggest that the impugned payments are made to the dealers of the company and not to any transporters. * There is nothing on record to suggest the existence of any contract between the assessee and the recipient of the impugned payment and such is denied by the assessee as well. I have carefully examined the issues at hand as well all the relevant material as listed above. The issue has been discussed at length in the preceding paragraphs. The fact is that it has been established that the appellant was....
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.... the godown and the expense incurred for this activity is called the Primary Transportation and/ or Freight and such amount is reimbursed by the principal company. Then the assessee arranges delivery of the cement bags from the godown to the various dealers point by truck and the expense incurred for it is called the Secondary Freight Charges and this amount is reimbursed by the company as well and all such reimbursements are made in actual basis as per the prefixed rates. In the case of Secondary Freight Charges, the dealers pay to the truck drivers and then raise the bill and the assessee reimburses such money to the dealers on actual basis on behalf of the company as the principal company pays such reimbursement and the job of the assessee is only to facilitate such payment. * During the assessment proceedings, the AO observed that the appellant claimed Secondary Freight Charges in the profit a loss account amounting to 95,05,125.00 and during the hearing stage the assessee was asked to provide explanation as to why the claim of expenditure should not be disallowed to which the assessee responded vide letter dated 11/03/2013 contending that the said expenditure is reimb....
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.... of any contract between the assessee and the recipient of the impugned payment and such is denied by the assessee as well. I have carefully examined the issues at hand as well all the relevant material as listed above. The issue has been discussed at length in the preceding paragraphs. The fact is that it has been established that the appellant was under contractual obligation with the principal company to ensure the handling and delivery of cement to the dealers and the principals would reimburse the entire expenses on actual terms to the C&F agent - the appellant. The secondary freight and transport charges which were incurred were similarly reimbursed by the principals on actuals. In fact these figures have appeared in the P&L account of the appellant and not contested by the AD. The payments have been reimbursed by the principals as is evident from the Profit & Loss Account for the year under consideration, where the appellant has paid Rs. 95,0:5.125.74 whereas it has received Rs. 95,04,703.55. The fact that at first the dealers paid for the freight and had it reimbursed by the appellant in turn to be reimbursed by the principals makes no difference to the fact that u....