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TMI Blog2014 (3) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,746/- ii) M/s Victory Timbers - Rs. 9,32,541/- The AO conducted enquiries with regard to these purchases and found out the following: a) The bills relating to purchases did not give any details of delivery note and also details of transportation of material. b) Upon enquiry made by the Inspector of Income Tax, Circle 2(1), Kannur, it was found that the addresses of the above two said concerns could not be located. c) Enquiries with the Chirakkal Panchayat revealed that the above said concerns did not get licenses from the Village authorities. d) On enquiry made with the banker of the assessee, it was noticed that the cheques issued to the above said concerns were found en-cashed through Punjab National Bank, Pala, Kottayam Dist. Hence, the AO asked the assessee to clarify the above points. 3.1 In this regard, a person named Mr. Zaheer, representative of M/s Indian Timbers and M/s Victory Timbers submitted the following documents:- (a) Copies of VAT registration certificate relating to Indian Timber and National Timber; (b) Copies of delivery note ('Self' addressed) showing transportation of goods from Tuticorin harbour to Puthiyatheruru, Kannur. (c) Copies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO noticed that the assessee did not deduct tax at source from the above said payments. On being questioned, the assessee submitted that the major part of the payments made to the above said parties consisted of reimbursement of expenses incurred (a) on payment of government taxes and duties and (b) Other expenses incurred on behalf of the assessee. 4.1 Accordingly, the assessee submitted that the C & F agents have incurred expenses on its behalf and hence there is no requirement of deduction of tax at source on such kind of reimbursements. The AO did not accept the said submissions made by the assessee. Instead, the AO placed reliance on the circulars no. 715 dated 8th Aug 1995 issued by the CBDT wherein the CBDT has clarified as under: "Q No. 7 Whether a Travel Agency/Clearing and Forwarding Agent would be required to deduct tax at source from the sum payable by the agent to an airliner or other carrier of goods of passengers. A No. 7 The Travel Agents issuing tickets on behalf of the airlines for travel of individual passengers would not be required to deduct tax at source as he acts on behalf of the airlines. The position of Clearing and Forwarding Agent is different. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be examined independently by the assessing officer. Hence, in our view, the AO was not justified in rejecting these documents and in that process in doubting the genuineness of the two concerns cited above. 5.1 However, in our view, the question that needs examination is - Whether the assessee has purchased the timbers from the above said two concerns or not, since the assessee has claimed the same as deduction in computing the total income. We notice that the AO has doubted the claim of purchases, since (a) there was no delivery challan for delivery of goods to the assessee (b) there was no stock register to verify the receipt of goods at the premises of the assessee. Further the AO has noticed that the cheques issued by the assessee to the above said two concerns have been encashed through Punjab National Bank, Pala in Kottayam District, where as the above said two concerns have claimed to have office at Kannur, a faraway place. Further the AO has also noticed that the purchase invoices have been dated prior to the entry of goods to the border of Kerala. 5.2 We have already noticed that the assessing officer has disallowed the purchases amount for two reasons viz., (a) genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding and transportation should be subject to disallowance u/s 40(a)(ia). Sec. 194C speaks of payment of any sum to a contractor, there is a liability to deduct tax at the rates in force. There is no exemption provided in the section for non-deduction of tax on a specific payment made by them. In respect of a contract, which is that of clearing and forwarding, the agent undertakes to remove the goods which have arrived in a ship to a designated location in the premises of the assessee or elsewhere on the payment of a price. The services rendered may include payment of government duties, port charges etc. which may be payable to the government but the person as clearly verified gives a single bill wherein the various payments may be specified, but the bill remains the same single bill on which the assessee is duty bound to deduct the tax as specified u/s 194C." 6.1 Before Ld CIT(A), the assessee placed reliance on the Circular No. 4/2008 dated 28.04.2008 issued by the CBDT (300 ITR (St.) 92) in respect of deduction required to be made from Rent payments u/s 194I of the Act. In the said Circular, the CBDT had stated that there is no requirement of deducting tax at source on the "Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m/2010)(ITAT-Mumbai) (c) ITO Dr. Weilmar Schwabe India (P) Ltd (2005)(95 TTJ (Del) 53). 8. We have gone through the case laws relied upon by the assessee. In the case of Bayer Material Science (P) Ltd (supra), the issue was related to deduction of TDS on "Cost sharing expenses", i.e., the payment made by the assessee in respect of its share in the common expenses incurred by a Group concern. We notice that the Ld CIT(A) has distinguished the facts prevailing in that case and accordingly held that the said decision is not applicable to the facts of the instant case. We agree with the view expressed by ld CIT(A) in this regard. 8.1 In the case of Minpro Industries (supra), it was agreed by both the parties that the provisions of sec. 172 of the Act is applicable to the facts prevailing in that case. It was further noticed that the Circular No.723 dated 19-09-199 issued by the CBDT has specifically stated that the TDS provisions of sec. 194C and sec. 195 shall not apply in the cases where the provisions of sec. 172 is applicable. Further, the Tribunal noticed that the C & F agent has deducted tax at source on many payments. Under these set of facts, the Tribunal has granted relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e's appeal." We notice that the Delhi bench of Tribunal has taken the view that the CBDT Circular No.715 (supra) is applicable only in the cases where bills are raised for the gross amount inclusive of professional fees as well as reimbursement of actual expenses. In the instant case, we notice that the item wise details, i.e., the nature of each payment such as Customs duty, port charges, transportation charges etc were available in the consolidated bill raised by C & F agents. However, the AO has taken the view that the provisions of sec. 194C shall be applicable since the C & F agents have raised a single bill for all items. 8.3 This bench of Tribunal had an occasion to consider about the requirement of deduction of TDS on expenses incurred by the franchisee lorry booking agents in the case of T.T. Kuruvilla in ITA No.278/Coch/2011 and 253 & 254/Coch/2013. The assessee therein was a lorry booking agent and he had franchisees all over India. He paid commission and also the expenses incurred by them. This bench of Tribunal, vide its order dated 25.10.2013, has held as under:- "Under TDS proceedings, it is necessary to identify the payments on which there is a liability to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the above said expenses is made on behalf of the assessee. The C & F agent is quoting his charges at Rs.935.22 per ton. Upon the agreeing the said terms, in our view, the assessee is authorizing the C & F agent to incur the expenses on its behalf. Hence, in our view, the break up details given in the single consolidated bill raised by the C & F agents should be considered as separate bills relating to (a) reimbursement of expenses and (b) charges for clearing quoted by the Agent. Accordingly, in our view, the applicability of TDS provisions on "reimbursement of expenses" should be considered separately in respect of each of the item and it cannot be clubbed with the charges levied by the C & F agent. 8.4 We notice that the assessing officer did not examine the break-up details of the bills raised by the C & F agents. The Ld CIT(A) also did not examine the same. Accordingly, we are of the view that the applicability of TDS provisions on the charges paid to C & F agents and also on the expenses reimbursed to them needs to be examined afresh at the end of the assessing officer in the light of discussions made supra. Accordingly we set aside the order of Ld CIT(A) on this issue and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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