2014 (9) TMI 1020 - AT - Income Tax

TDS u/s 194J - disallowance u/s 40(a)(ia) - payment for consumption testing fees w/o deduction of tds - Held that - It is well settled principles of law that once the assessee admitted for disallowance before the assessing officer on facts the same cannot be reagitated before the appellate authorities. If it is not admitted then it is open to the assessee to file an affidavit before the appellate forum explaining the circumstances and on that basis the appellate forum may call for explanation from the concerned officer as to how he recorded a finding that the assessee admitted for disallowance. In this case no such affidavit is filed. The ld.representative for the assessee also has a doubt whether such admission was made or not? In the absence of any details and the affidavit from the assessee this Tribunal do not find any infirmity in the order of lower authority. Accordingly the same is confirmed. - Decided against assessee. Disallowance u/s 40A(3) - Held that - Admittedly the assessee purchased fish by paying cash exceeding Rs. 20, 000.The assessee now claims that the payment was made to a headman / tharakan. A tharakan is commonly known as a broker or a middleman who facilitate finalization of the price between the seller and purchaser. A tharakan also known as Agent who would act either on behalf of seller or purchaser as the case may be. However headman of fishermen is part of fishermen who will sort the fish catch and sell the fish on behalf of fishermen. Therefore it is necessary to find out the exact role played by the person to whom the payment was made by cash. Merely because the assessee has paid Rs. 1, 66, 59, 325 by cheque to the very same person that cannot alone be a reason to disallow the claim of the assessee. When the assessee claims that the payment was made to a headman who sorts the fish catch the assessing officer shall find out the exact role played by the person who received payment by cash. When the very same person received huge payment by cheque it may not be difficult for the assessing officer to summon them and examine the actual role played by him. Had the assessee claimed that the fish or fish products are purchased from fisherman or producers the matter would stand on different footing. Since the fish was admittedly purchased from a person other than fisherman or producers the exact role of that middleman has to be examined in view of the circular issued by CBDT. Issue is remanded back to the file of the assessing officer to bring on record the exact role played by the person who received the payment in cash. Non deduction of tds on shipping charges - disallowance u/s 40(a)(ia) - only contention of the assessee is that the amount has already been paid and that provisions of section 40(a)(ia) is applicable only in respect of the amount remains to be paid - Held that - By following the judgments of the Calcutta High Court in Crescent Exports Syndicate and another 2013 (5) TMI 510 - CALCUTTA HIGH COURT and Commissioner of Income Tax v. Sikandadarkhan N Tunvar 2013 (5) TMI 457 - GUJARAT HIGH COURT this Tribunal is of the considered opinion that the decision of the Special Bench of this Tribunal in the case of M/s Merilyn Shipping & Transports 2012 (4) TMI 290 - ITAT VISAKHAPATNAM and the judgment of Vector Shipping Services (P) Ltd 2013 (7) TMI 622 - ALLAHABAD HIGH COURT are not applicable to the facts of the case under consideration whereas the judgments of the Calcutta High Court in Crescent Export Syndicate (2013 (5) TMI 510 - CALCUTTA HIGH COURT) and the Gujarat High Court in Sikandarkhan N Tunvar (supra) are squarely applicable to the facts of the case. The dismissal of SLP by Apex Court is not a declaration of law under Article 141 of the Constitution of India. Therefore mere dismissal of SLP by Apex Court does not mean that the Apex Court declared any law on the subject. - Decided against assessee

Summary

Issues Involved:
1. Disallowance under Section 40(a)(ia) of the Income Tax Act for Rs. 1,42,772.
2. Disallowance under Section 40A(3) of the Income Tax Act for Rs. 17,01,500.
3. Disallowance under Section 40(a)(ia) of the Income Tax Act for Rs. 3,02,754 towards shipping charges.

Issue-wise Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for Rs. 1,42,772:
The first ground of appeal pertains to the disallowance of Rs. 1,42,772 under Section 40(a)(ia) of the Income Tax Act. The assessee's representative argued that the disallowance was based on the assessee's failure to deduct tax under Section 194J for payment towards consumption testing fees. The CIT(A) upheld the disallowance on the ground that the assessee admitted to it during the assessment proceedings. The Tribunal noted that the assessee did not file an affidavit to contest the admission of disallowance, and the representative was unsure if such an admission was made. Consequently, the Tribunal found no infirmity in the CIT(A)'s order and confirmed the disallowance.

2. Disallowance under Section 40A(3) for Rs. 17,01,500:
The second issue involves the disallowance of Rs. 17,01,500 under Section 40A(3) for cash purchases exceeding Rs. 20,000. The assessee argued that the purchases were made from fishermen due to exceptional demand and referenced CBDT Circular No. 10/2008, which allows payments to headmen of fishermen to be treated as payments to fishermen. The assessing officer disallowed the claim, noting that the assessee failed to produce the fishermen for examination and purchased fish from middlemen (Tharakans). The Tribunal emphasized that the role of the person receiving the payment must be examined to determine if they were indeed headmen of fishermen or middlemen. The Tribunal set aside the lower authorities' orders and remanded the issue back to the assessing officer for re-examination in light of the CBDT circular and relevant High Court judgment.

3. Disallowance under Section 40(a)(ia) for Rs. 3,02,754 towards shipping charges:
The third issue concerns the disallowance of Rs. 3,02,754 under Section 40(a)(ia) for shipping charges. The assessee contended that since the entire amount was paid before the end of the financial year, Section 40(a)(ia) was not applicable, relying on the Special Bench decision in Merlyn Shipping & Transports vs. Addl CIT and the Allahabad High Court judgment in CIT vs. M/s Vector Shipping Services (P) Ltd. The Tribunal, however, noted that the Gujarat High Court in CIT vs. Sikandarkhan N Tunvar and the Calcutta High Court in Crescent Exports Syndicate & Another had disagreed with the Merlyn Shipping decision. The Tribunal preferred the reasoning of the Gujarat and Calcutta High Courts, which held that Section 40(a)(ia) applies to amounts payable at any time during the year, not just those remaining unpaid at the year-end. Consequently, the Tribunal found no infirmity in the lower authorities' orders and confirmed the disallowance.

Conclusion:
The appeal was partly allowed, with the Tribunal confirming the disallowances under Sections 40(a)(ia) and 40A(3) while remanding the issue of cash purchases back to the assessing officer for further examination. The Tribunal's decision emphasized the importance of examining the exact role of the person receiving the payment and adhered to the interpretations of higher courts regarding the applicability of Section 40(a)(ia).