2018 (12) TMI 1054

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....12.2011 & 30.11.2012 respectively passed by the ACIT/DCIT, Circle-10, Ahmedabad. 2. Since both these appeals pertain to same assessee and the issue involved is identical, the same are being disposed of by a common order for the sake of convenience. ITA No.2266/Ahd/2013 - AY 2009-10 3. The moot point involved in this particular case is as to whether the Ld. CIT(A) has erred in confirming disallowance of Rs. 14,41,159/- under section 40(a)(ia) of the Act in the facts and circumstances of the case. 4. The assessee is engaged in the international cargo handling business filed the return of income on 28.01.2010 declaring total income of Rs. 39,25,300/-. Upon scrutiny, notice under section 143(2) was issued on 30.08.2011 followed by another n....

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....aid to two parties who provided no TDS Certificate from their respective AOs. Hence, no TDS was statutorily required to be made by the assessee as held by the Ld.CIT(A). He, however, confirmed the addition of the balance amount of Rs. 14,41,159/- against which the assessee has come up in appeal before us. 6. At the time of hearing of the instant appeal, the Ld. AR submitted before us that the authorities below have failed to appreciate the business module of the assessee. According to the Ld. AR the payments made to the C&F Agents do not fall within the ambit of the provisions of section 194C of the Act for "work" as defined in the Explanation-III of section 194C as applicable during the year under consideration and therefore no disallowan....

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....gency charges and the other is the reimbursement of direct expenses. The assessee makes payments to such agents and the transaction thereby is completed. The sample bills received from Mangala Impex Agency as annexed at page Ns.19 & 20 of the paper-book reveals the amount of reimbursement has separately been mentioned along with its break-up. It is a settled principle of law that the reimbursement of expenses to C&F Agents does not constitute income in the hands of the concerned C&F Agents and therefore TDS is not required to be deducted at source on the component of "reimbursement" of C&F Agents. The case is also covered by the number of judgments passed by the different Benches including Co-ordinate Bench of this Ld.Tribunal and the Juris....

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....low and the Board circular no.715 dated 8-81975. Our attention was drawn to question no.30 in the Circular where it was answered that reimbursement cannot be deducted out of the bill amount for the purpose of TDS. 7. We have considered rival submissions and perused the material on record and gone through the orders of the authorities below and the judgment cited by the learned counsel for the assessee. We have also considered Board circular dated 8-8-1975, copy of which has been submitted by the learned DR of the Revenue. In the present case, it has been submitted before us by the learned AR that the commission agent has raised separate bills for reimbursement of the expenses. With all these facts, when we consider the Board Circular NO.7....

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....(ia) is not applicable to such payments. Therefore, disallowance made by the Assessing Officer is to be deleted. 8. In result, assessee's appeal is allowed." (ii). Judgement of Hon'ble Jurisdictional High Court in the case of CIT-III vs. Gujarat Narmada Valley Fertilizers Co.Ltd. in Tax Appeal No.315 of 2013 order dated 25/06/2013. "It appears that the assessee claimed deduction under Section 40(a)(ia) of Rs. 6,93,372/- towards reimbursement of CHA charges paid to C & F agent and Rs. 76,00,509/- towards reimbursement of expenses towards consignment agents. The aforesaid expenses were disallowed by the Assessing Officer solely on the ground that the assessee has not deducted the TDS on the aforesaid accounts. In an appeal by the asse....

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....ed tribunal also observed that so far as the obligation to deduct tax at source from the payment of transport charges and other charges is concerned, the same was complied with by the agent, who had made payment on it's behalf. On the aforesaid facts the learned tribunal also observed that the circular relied upon by the revenue that it is the liability of the assessee as principal agent to deduct the TDS will not be applicable and the said circular would be applicable for payment made to principal to principal. Considering the aforesaid facts and circumstances of the case, when the learned tribunal has confirmed the order passed by the CIT(A) quashing and setting aside the order passed by the Assessing Officer in deleting the disallowa....