TaxTMI 
TaxTMI 
2020 (10) TMI 370
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....t in law in holding that the Appellant is liable to deduct tax at source under Section 194C of IT Act on the payments made to C & F agents which is outright reimbursement of freight charges having no element of profit ? (ii) Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal was right in law in upholding the disallowance under Section 40(a)(ia) of IT Act when said section cannot be applied in the instant case ? 4. The learned counsel for the parties agree that there is yet another substantial question of law relating to deduction under Section 80IB of the Income Tax Act, 1961 (IT Act) which arises in Tax Appeal Nos.47 of 2015, 49 of 2015 and 9 of 2016. However, they also agree that this question will be required to be answered only if the substantial question of law (ii) above is answered in favour of the Revenue and against the Assessee. This means that only if we hold that the disallowance under Section 40(a)(ia) of the IT Act was valid in the facts and circumstances of the present case, the occasion will arise to consider the third substantial question of law relating to the deduction under Section 80IB of the IT Act. 5. Mr. Vaidya....
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....the Circular No.715 and submits that such Circular is quite clear and binding upon the Authorities under the IT Act. She submits that the view taken by the ITAT is entirely consistent with what is set out in Circular No.715. In particular, she makes reference to answers to Question Nos.7 and 30 in Circular No.715 and submits that since the view taken by the ITAT is entirely consistent with the answers in Circular No.715, there is no case made out to interfere with the impugned orders or to answer the substantial questions of law as raised in favour of the Assessees and against the Revenue, in all these appeals. She therefore submits that all these appeals may be dismissed. 10. The rival contentions now fall for our determination. 11. In order to appreciate the rival contentions, reference is necessary to the provisions in Section 4 and Section 190 of the IT Act which explain the basis of charge of income tax and the TDS regime respectively. 12. Section 4(1) provides that where any Central Act enacts that income tax shall be charged for any assessment year at any rate or rates, the income tax at that rate or those rates shall be charged for that year in accordance with, and....
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.... element " in it and not otherwise. This is because the regime of TDS was enacted for the purpose of easy collection of income tax or to prevent the tax evasion. From bare reading of text of Section 190 and other provisions to be found in Chapter XVII, it deals with "collection and recovery of tax". It is clear that the TDS regime is nothing but an alternate mode of recovery or collection of income tax. 17. In all these appeals, there is no dispute or in any case, there is overwhelming material on record which establishes the following position :- (i) The C & F agents have raised two separate sets of bills :- (a) first towards the services rendered by the C & F agents; and (b) second towards the reimbursement of freight charges paid to the carriers. (ii) These are not cases where any composite bills were raised by the C & F agents without indicating the service charge components and reimbursement components separately; (iii) There are ample evidences in the form of ledger entries, bills, payment vouchers etc., placed on record to establish that separate sets of bills were invariably made towards the service charge components and reimb....
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....td. (supra) was considered by the Hon'ble Supreme Court in GE India Technology Centre (P) Ltd. Vs CIT (327 ITR 456), in which, it was held that the provisions for deduction of TAS which are to be found in Chapter XVII dealing with collection of taxes and the charging provisions of the IT Act form one single integral, inseparable code and therefore, the provisions relating to TDS apply only to those sums which are chargeable to tax under the IT Act. 22. Based upon legal position as explained in the aforesaid decisions of the Hon'ble Supreme Court and our High Court, the Assessees' contention that there was no liability to deduct tax at source upon payments made towards reimbursement of amounts to the C & F agents, will have to be accepted. 23. The ITAT, in its impugned order dated 16/01/2015, indeed appears to have misread the bills issued by Jet Air Freighters and proceeded to incorrectly style "Jet Air Freighters" as "carriers" and not as the C & F agents. These very bills as well as other material on record very clearly establishes that Jet Air Freighters were indeed the C & F agents and it is "Jet Airways" which was the carrier in these cases. The reasoning of ....