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2015 (12) TMI 506 - ITAT DELHI

2015 (12) TMI 506 - ITAT DELHI - TMI - TDS u/s 194C - non-deduction of TDS on air freight charges - addition u/s 40(a)(ia) - CIT(A) deleted the addition - Held that:- The assessee made the payment on account of reimbursement of the air freight expenses and nothing was payable at the year end. Therefore, the disallowance made by the AO was rightly deleted by the ld. CIT(A). Similarly the disallowance on account of sea freight was wrongly made by the AO by invoking the provisions of Section 194C o .....

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A No. 5063/Del/2012 - Dated:- 4-12-2015 - Sh. N. K. Saini, AM And Sh. Kuldip Singh, JM For the Petitioner : Sh. O. P. Sapra, Adv. For the Respondent : Sh. K. K. Jaiswal, DR ORDER PER N. K. Saini, AM: This is an appeal by the department against the order dated 06.07.2012 of ld. ld. CIT(A), Meerut. 2. Following grounds have been raised in this appeal: 1. Whether in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in facts and law in deleting the addit .....

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, the Ld. Commissioner of Income Tax (Appeals) has erred in facts and law in deleting the addition of ₹ 1,87,912/- made by the AO u/s 40(a)(ia) of the IT Act, 1961 for non making of TDS on sea freight which he was required to deduct as per provisions of section 194C of the IT Act, 1961 and payment made by the assessee squarely fell under the ambit of section 40(a)(ia) of the IT Act, 1961. Reliance is again placed on the judicial pronouncement/circulars as mentioned in ground no. 1. 3. That .....

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the income from export of garments and running of hostel. He filed his return of income on 30.09.2009 declaring an income of ₹ 3,18,480/-. Later on, the case was selected for scrutiny. During the course of assessment proceedings the AO noticed that the assessee had debited air freight of ₹ 12,44,115/- and sea freight of ₹ 1,87,912/- totaling to ₹ 14,32,027/- in the trading account but no TDS was deducted on the said amounts. The AO asked the assessee to show cause as to w .....

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nies. And for air freight is paid as reimbursement of expenses to the cargo and TDS is not to be deducted on reimbursement of expenses as per Circular No. 715 dated 08.08.1995. Regarding this I am enclosing herewith a copy of bill of the party and cargo bill. In this bill cargo agent also charged service tax on the amount of their service charges and not on the whole bill amount i.e. Air freight plus service charges because it is reimbursement of expenses. So the TDS provision is applicable only .....

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e and copy of bills are enclosed herewith. Regarding your query the non-deduction of TDS on Air Freight it is submitted that this expenses is of the nature of Reimbursement of expenses and TDS is not applicable on Reimbursement of expenses. Refer ITA No. 1335/Ahd/2010. Copy of case and copy of bills are enclosed herewith. It was also submitted as under: Regarding non deduction of TDS on Air freight and Ship freight the assessee has explained that as per the provisions of Sec. 197(2) of the Incom .....

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d. CIT(A) and submitted as under: In this connection, respectful submissions of the appellant are as under:- 1. Provisions of section 194C were not applicable to air freight of R. 12,44,115/- and shipping charges (Sea Freight) of ₹ 1,87,912/-. This issue is covered by the order dated 10.03.2011 of ITAT Ahmadabad C Bench in the case of DCIT Vs Shri Hasmukh J. Patel, Prop. Jayshree Industries, Ankleshwar reported in 10 Taxman.com 229. Copy of this judgment is placed on record & relevant .....

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ed that the amount in question is nothing but reimbursement of freight charges which was paid to the shipping agents for carrying materials for sale. Thus, the assessee made the payment to the shipping of non-resident through shipping agent. A special procedure is provided u/s 172 of the IT Act for payment of taxes in case of any ship belonging to or chartered by a non-resident which carries passenger, livestock, material or goods shipped at a port in India. It has nothing to do with the activit .....

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out any case that the assessee has paid any amount to the residents. Therefore, provisions of the section 194C of the IT Act have been wrongly applied in the case of the assessee. Copy of the above judgment was duly filed before the learned AO along with letters dated 28.11.2011 & 16.12.2011 including other judgments placed on record as also considered by him in para 1 at page 2 of assessment order. The learned AO is factually incorrect in making the following observation at page 5 para 1:- .....

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charging of Service Tax is entirely a different issue. Merely not charging of Service Tax by agent on freight does not prove that the freight was in the nature of reimbursement because there is no such clear mentioning in freight invoice. Your kind attention is drawn to the following documents filed as under:- a) Bills issued by Movers International Pvt., Canin Express Logistics Pvt. Ltd., Nex Logistics India, online courier service New Delhi at page 38-107. b) Freight bills issued by Oman Air, .....

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see gives relief only in a such situation where freight was actually paid as reimbursement & separate bills for freight & service charges were issued by the agents. It is respectful submission of the appellant that the documentary evidence referred above placed at page 23-37 clearly proved that the payment made by the assessee was of reimbursement of freight. It is not necessary that separate bills for freight & service charges were to be make the disallowance u/s 40(a)(ia) of the IT .....

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poration of India 326 ITR 106 (P&H) CIT Vs Bhagwati Steels 326 ITR 108 (P&H) Merilyn Shipping & Transports Vs ACIT, Range Visakhapatnam (2012) 136 ITD 23 (SB) 8. The ld. CIT(A) after considering the submissions of the assessee deleted the addition by observing that the payments made on account of air freight were actually reimbursement of expenses and that the assessee had filed plethora of material on record including the ledger of air freight reimbursement along with the copies of .....

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erefore, the provisions of Section 194C of the Act were not applicable. Accordingly, the addition of ₹ 1,87,912/- was also deleted. 9. Now the department is in appeal. The ld. DR strongly supported the order of the AO and further submitted that the assessee was required to deduct the TDS u/s 194C of the Act on the payment made for the air freight. As regards to the payment for sea freight, it was stated that the deduction was to be made on the composite payment and not on the individual pa .....

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that the Circular No. 10/DV of 2013 dated 16.12.2013 issued by the CBDT and reported in 360 ITR 36 (St) explained that the provisions of Section 40(a)(ia) of the Act would not be applicable to the amount payable in State of Uttar Pradesh due to the judgment of the Hon ble Allahabad High Court. It was also contended that the issue is squarely covered by the decision of this Bench of the Tribunal in ITA No. 18/Del/2013 for the assessment year 2008-09 in the case of ITO, Ward- 27(1), New Delhi Vs S .....

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