TaxTMI 
TaxTMI 
2019 (2) TMI 153
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.... absence of written agreement to this effect. In case of Fresh Fruits business, verbal agreements are a usual trade practice among parties and absence of written agreement and changes in terms of business during the year between the parties should not lead to adverse inferences about the conduct of the business. 3. That the expenses incurred by the appellant on behalf of M/s Unifruitti India (P) Ltd stand recorded in the books of account of the appellant under the head titled as "Unifruitti Reimbursement A/c" and genuineness of expenses stand established on the grounds: a) The books of accounts have been maintained in the regular course of business which have been audited u/s 44AB of the Income Tax Act and relied upon by the Department. Nature of expenses has been mentioned in the Unifrutti Reimbursement a/c itself against most of the entries. b) The expenses have been verified, confirmed and reimbursed by M/s Unifrutti India (P) Ltd. on whose behalf the expenses were incurred, confirmation available on record. c) TDS of Rs. 55,012/- has been deducted on expenses of Rs. 24,27,721/- and do not form part of Revenue Receipts of the assessee Firm. No....
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....5,012/- was deducted by M/s Unifruitti India (P) Ltd., Sun City, Gurgaon and that Rs. 3,80,666/- on which no TDS was deducted, was also received from the same party. He also observed that the assessee had shown commission income of Rs. 25,92,444/- in its profit and loss account, on which TDS of Rs. 2,63,832/- was deducted. 5. The AO asked the assessee to explain as to why the receipt of Rs. 24,27,721/- was not shown as receipt in the profit and loss account. The assessee submitted that the said amount was on account of reimbursement of expenses incurred on behalf of M/s Unifruitti India (P) Ltd., which had been accounted for in the separate ledger account, "Uni Fruiti Reimbursement" (General Ledger), copy of the same was filed. The assessee also filed a certificate issued by M/s Unifruitti India (P) Ltd., in which it was certified as under: "It is further certified that the said firm rendered various services on our behalf for bringing the goods to the place of sale and incurred expenses thereon such as payment of freight, cartage, conveyance, telephone etc, which have been reimbursed. Our company has deducted TDS of Rs. 55,012/- on expenses being in the nature of payme....
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....ment of Rs. 24,27,721/- to be reimbursement, just because the certificate happen to be undated and M/s Unifruitti India (P) Ltd. did not respond to the Notice u/s 133(6) of the Income Tax Act, 1961 within the time allowed by the assessing officer for again clarifying the matter. 2. The assessee is selling goods of M/s Unifruitti India (P) Ltd. on consignment basis for which a total commission of Rs. 25,92,444/- was earned and M/s Unifruitti India (P) Ltd. deducted TDS amounting to Rs. 2,63,832/- on the commission payments. For selling consignment goods, assessee firm also incurred various expenses on behalf of M/s Unifruitti India (P) Ltd. and the expenses so incurred were reimbursed by the said company on which a further TDS of Rs. 55,012/- was deducted by the company u/s 194C of the Income Tax Act. Since the TDS was deducted u/s 194C of the Income Tax Act. Nature of payment was mentioned as 'Payment to Contractor' on the TDS certificate issued by the company in respect of reimbursed expenses of Rs. 24,27,721/-. This has also been reiterated in the certificate received, from M's Unifruitti India (P) Ltd. which states that M/s Harshna International was....
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....ssee firm are in the nature of reimbursement of expenses made in r/o freight, cartage, conveyance, etc. on which tax has been deducted u/s 194C of the Income Tax Act. And when M/s Unifruitti has already clarified on the matter by way of the said certificate, delay in responding to notice ids 133(6) by the company should not be made a ground to penalize the assessee firm by making addition to the tune of Rs. 24,27,721/-. M/s Unifruitti has claimed to have replied to notice of the Assessing Officer on 27/12/2011 which could not be considered by the Assessing Officer as the assessment order had already been passed by that date. In the reply dated 27/12/2011, M/s Unifruitti has once again confirmed that the assessee firm incurred expenses on their behalf which has been reimbursed by them after deducting TDS u/s 194C just to be on safer side. It is prayed that the submissions made above be considered and relief asked for be allowed." 8. The observations of the ld. CIT(A), on the submissions of the assessee, in paras 8.3 & 8.3.1 of the impugned order were as under: "8.3 The Assessee Firm in its submissions dated 02.11.12 filed in response to the above queries claimed that Sh.....
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....ely Rs. 7.1 crores received from M/s Unifruitti India (P) Ltd. on consignment basis and that in addition to Commission, a total sum of Rs. 26,12,437.22 was debited to Unifruitti reimbursement account for expenses incurred and other payments made on behalf of Unifruitti. It was claimed that the expenses were incurred mostly on Freight & Cartage for supply of goods to the customers and Special Packing expenses for certain sales and Misc. office expenses for Unifruitti staff stationed at the Assessee's premises were also incurred. However, the exact details regarding these claimed expenses and payments were not given. It is also noteworthy that the Assessee Firm claims that the Unifruitti staff was stationed at the Assessee premises. This shows a level of business much higher than that of just Purchase and Sale or just consignment sale and a much closer Nexus between these two concerns." 9. The assessee also submitted that there was only change in the presentation of the profit and loss account and that in the preceding year i.e. assessment year 2008-09, a total of Rs. 2,52,73,629.34 worth of goods of M/s Unifruitti India (P) Ltd. were accounted for in the purchase as well as sales....
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....31/3/2009 wherein expenses on consignment business were reimbursed by the Consignor. The third period being referred by you actually relates to the preceding year i.e. A.Y. 2008-09 wherein also the expenses on Consignment business were reimbursed by the Consignor. Comparison with the period when no expenses were reimbursed and the period when the same were reimbursed is not possible as it is difficult to ascertain as to what additional expenses were incurred over & above the usual normal business expenses during such period i.e. Apr 2008 to May 2008 so as to compare the same with the other period. The comparison is also not relevant in the light of the issue involved in the present case." 13. The ld. CIT(A), however, was not satisfied and sustained the addition of Rs. 24,27,721/- by observing in paras 8.8 to 8.11 of the impugned order as under: "8.8 It is seen that the Assessee Firm has not given any reason why there were different business terms for different periods or even the exact business terms & conditions for even any of the periods, with M/s Unifruitti India (P) Ltd. The Appellant had been required to give the complete comparative details including the differen....
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.... M/s Unifruitti India (P) Ltd. As already pointed out above there were three different periods in which it has been claimed that the mode of business was different. No reason for change in the mode of business nor any evidence in its support have been given. If the version of the Assessee is to be believed then during the months of April to May 2008 it was incurring expenditure on behalf of M/s Unifruitti India (P) Ltd. but was not entitled to and did not claim reimbursement for the same. It is further seen that the Assessee Firm claims that the person who verbally negotiated the business terms with M/s Unifruitti India (P) Ltd. was Sh. Naresh Kohli, one of the three partners of the Firm and the actual business was conducted by the all three partners of the Firm. However, the Assessee Firm has still not specified the exact terms and conditions with M/s Unifruitti India (P) Ltd. Further, the Assessee Firm does not even have the details or even the item- wise segregation for the claimed expenses on which reimbursement is claimed, and it does not even have the bills for the expenditure for which it is claimed that reimbursement has been received. From the earlier discussion in the ord....
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....bills and documents and proper details and even the terms and conditions of the business. It is held that the receipts of Rs. 24,27,721/- from M/s Unifruitti India (P) Ltd. are in the nature of income of the Assessee Firm and are to be added to the disclosed income of the Assessee Firm. Accordingly the addition of Rs. 24,27,721/- to the income of the Assessee is hereby confirmed." 14. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the amount in question was the reimbursement of expenses which is evident from page nos. 5 to 38 of the assessee's paper book. It was submitted that on the commission income, the TDS was deducted which was claimed by the assessee in the return of income and on reimbursement of expenses although no TDS was required to be deducted but on the safer side TDS u/s 194C of the Act was deducted by M/s Unifruitti India (P) Ltd. It was stated that the said amount of Rs. 24,27,721/- was reimbursement of expenses which was also certified by the said company. Therefore, the AO was not justified in treating the reimbursement of expenses as income of the assessee ....