TMI Blog2014 (9) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... ple of privity of contract, mere reimbursement of charges would not require deduction of taxes at source - the parties had raised separate bills, which were reimbursed, as it was paid to the airlines for export of goods - the factual findings of the Tribunal are correct and the plea and stand taken by the Revenue is incorrect and wrong – the order of the Tribunal is upheld – Decided against revenue. - ITA 359/2012, ITA 511/2012 - - - Dated:- 25-8-2014 - Sanjiv Khanna And V. Kameswar Rao,JJ. For the Appellant : Ms. Suruchi Aggarwal, Sr. Standing Counsel For the Respondent : Mr. Ved Jain and Mr. Pranjal Srivastava, Advocates. ORDER Sanjiv Khanna, J. (Oral) These two appeals by the Revenue pertain to assessment years 2006-07 and 2008-09, and impugn orders dated 13th January, 2012 and 30th September, 2011, passed by the Income Tax Appellate Tribunal ( Tribunal , for short). The appeals relate to disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 ( Act for short) in respect of charges paid to clearing and forwarding agents. The amount involved in the assessment year 2006-07 is ₹ 14,57,703/- and ₹ 77,69,537/- and in the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transport contractor before Explanation III was added to the said Section w.e.f. 1st July, 1995. Further, Explanation III was not retrospective. 7. As Explanation III is applicable to the assessment years in question, we deem it appropriate to reproduce the said Explanation along with relevant portion of Section 194C of the Act, as on 1st April, 2008:- 194C:- Payments to contractors and sub-contractors.--(1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and- (a) the Central Government or any State Government ; or (b) any local authority ; or (c) any corporation established by or under a Central, State or Provincial Act ; or (d) any company ; or (e) any co-operative society ; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both ; or (g) any society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2), the expression contractor shall also include a contractor who is carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government of a foreign State or a Foreign enterprise or any association or body established outside India. x x x x x Explanation III.--For the purposes of this section, the expression work shall also include (a) Advertising; (b) Broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods and passengers by any mode of transport other than by railways ; (d)catering. (3) No deduction shall be made under sub-section(1) or sub-section (2) from (i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees : Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicate that payment made to a travel agent or airline for purchase of the air ticket for travel was not required to be subjected to deduction of tax at source. However, in case of a chartered flight or bus etc., provisions of Section 194C would be attracted. Payment made to clearing and forwarding agents for carriage of goods would be subjected to tax at source under Section 194C of the Act. A perusal of answer to question No.7 clarifies that travel agents issuing tickets on behalf of airlines for travel of individual persons would not be required to deduct tax at source, but in case of clearing and forwarding agents, who act as independent contractors, payment made to them would be liable for deduction of tax at source. 11. The Tribunal in the orders has held that the bills, subject matter of the dispute were for reimbursement of the air freight charges paid to airlines. Air freight charges would not include commission, handling or other charges, which were payable for the services rendered by the clearing and forwarding agents. For the said services, separate bills were issued and tax at source was deducted under Section 194C. It is not the case of the Revenue that TDS had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant are returned to be filed along with affidavit. The Commissioner will also state whether the invoices with regard to ₹ 1240288/- were on record and filed before the assessing officer and it will be stated whether the invoices of freight charges and clearing and forwarding agents were issued by the same party. 13. It is clear from the said order that the Assessing Officer in paragraph 9 of the assessment order for the assessment year 2008-09 had accepted that on ₹ 12,40,288/- paid to clearing and forwarding agents, tax at source was deducted and paid, but on payment of ₹ 48,61,509/-, no tax at source was deducted. The Tribunal had accepted that this amount was towards reimbursement of air freight charges paid to airlines and did not include work/service charges paid to the clearing and forwarding agents, which were to the tune of ₹ 12,40,288/- on which TDS had been deducted. 14. Commissioner of Income Tax has filed affidavit dated 21st December, 2013, in which he has accepted that 14 out of 15 parties mentioned in paragraph 8 of the assessment order also find mention in paragraph 9. Paragraph 9 refers to of 31 parties and relates to payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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