TaxTMI 
TaxTMI 
2023 (3) TMI 1308
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....penses incurred on behalf of the assessee to various shipping companies and others for which there is no liability to deduct tax at source. 4. The learned CIT (Appeals) erred in holding that the assessee was liable to deduct tax at source in respect of all the payments to the clearing and forwarding agents including the reimbursement charges. 5. Without prejudice to the above, the learned CIT(Appeals) ought to have restricted the disallowance to 30% as the amendment in section 40(a)(ia) will have retrospective effect. 6. The appellant craves leave to add, alter or amend or modify any or all the grounds before or at the time of hearing." 3. The brief facts of the case are that, the assessee is engaged in the business of scrap sales and running a proprietorship concern in the name of M/s. V.V. Exim. The assessee had filed its return of income for the assessment year 2013-14, declaring total income of Rs. 9,23,891/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed clearing and forwarding expense of Rs. 43,05,854/-. The AO, further noted that on verification it was found that the as....
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....g the course of appellate proceedings, the poor compliance/non compliance has been discussed above, the appellant was granted sufficient opportunity of being heard which has been availed by the appellant. The appellant has failed to produce any documentary evidence to counter the findings made by the Assessing Officer in his assessment order. Admittedly, in this case the composite payment on account of clearing and forwarding has been made to two parties Mis Surya Logistics (Rs.6,43,294) and Mis SK Logistics (Rs.31,56,804). Customarily, a written or oral contract exists between the principle and the clearing and forwarding agent for providing composite services consisting of clearing and forwarding charges, container liner charges, customs and other charges, lorry loading charges, etc. In course of hearing before the Assessing Officer, the appellant has not denied that there was no contract between the appellant and the clearing and forwarding agents. In view of the clarifications contained in CBDT Circular No.715 of 1995, the appellant has committed a default by not deducing TDS on the composite payment made to clearing and forwarding agent. Accordingly, the action of the Assessin....
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....re incurred by the assessee is not incurred wholly and exclusively for the purpose of business of the assessee. Further, it is not a case of the AO that the assessee could not produce necessary bills and vouchers for entire expenditure debited into profit and loss account. In fact, the assessee could able to furnish necessary details along with bills and vouchers for majority of expenses. Therefore, we are of the considered view that the AO is erred in disallowing part of expenditure for non-furnishing of vouchers for clearing and forwarding expenses and thus, we direct the AO to delete addition made towards disallowance of Rs. 5,05,756/- towards clearing and forwarding expenses. 8. In so far as disallowance of sum of Rs. 38,00,098/- u/s. 40(a)(ia) of the Act, for non-deduction of TDS u/s. 194C of the Act, we find that as per section 194C(1), any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earli....
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.... reason that payment made by the assessee to shipping companies/CFS Agents is not a reimbursement of expenses, but first hand payment between principal to principal on the bill raised by the shipping companies and CFS. No doubt, the assessee has made payment on behalf of their clients for bills raised by shipping companies/CFS Agents and further, the services rendered by the shipping companies/CFS Agents is for their clients. But, what is important is who made payments to service providers and what law say about TDS provisions. The concept of TDS provisions was introduced to withhold tax on income of service providers. As per provisions of section 194C of the Act, it is abundantly clear that any person responsible for paying any sum to any resident for any work. That means while making payment, the person responsible for making payment shall deduct TDS as per law. Generally, the service receiver shall deduct TDS on payments made to service providers. In this case, the assessee acts an intermediary between service provider and service receiver. The assessee has availed services from shipping companies/CFS Agents for their clients and made payments directly to shipping companies/CFS ....
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.... charges on payment to shipping companies/CFS Agents and debited in their books of accounts. Similarly, the assessee has received charges from its clients including amount paid to shipping companies/CFS Agents and the same has been credited to its P&L a/c when it had received payments from its clients. Therefore, we are of the considered view that payments made by the assessee to shipping companies/CFS Agents is not a reimbursement of expenses, but first hand payment between principal to principal on the bill raised by the service providers. Since, the assessee has made payment on behalf of their customers; the assessee ought to have deducted TDS on such payments while making payments. Since, the assessee has failed to deduct TDS, on such payments the AO is right in disallowing such payments u/s. 40(a)(ia) of the Act. Hence, we confirm additions made by the AO. 11. As regards alternative plea of the assessee that it has made payment to reputed shipping companies and all service providers has filed their return of income u/s. 139 of the Act and included payments made by the assessee in the return of income and thus, the assessee cannot be held as an assessee in default in terms o....