TMI Blog2016 (5) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2010 11. 2. The Department has filed this appeal being aggrieved by the order passed by the learned Commissioner (Appeals) in deleting the addition of Rs. 3,28,88,794, made by the Assessing Officer under section 40(a)(ia) of the Income Tax Act, 1961 (for short the Act ) alleging non deduction of tax at source (TDS) on payments made to various parties. 3. Brief facts are, the assessee a partnership firm is engaged in the business of providing logistic service relating to export/import viz. transportation, warehousing, packaging, custom clearance, organizing of container with the shipping lines, arrangement of labour for upholding unloading cargo, etc. The major area of activity of the assessee is custom clearance which involved clearing of goods from docks/airports. As stated, major clearing work is conducted from the Jawaharlal Nehru Port Trust and Bombay Port Trust and payments were made to Port Authorities/Port Trust Authorities, Airport Authorities and Container Freight Station (CFS) on behalf of its principal. For the service rendered the assessee earns agency commission which is offered as income. For the assessment year under consideration, the assessee filed its re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made for non deduction of tax at source under section 194C. In response to the show cause notice issued by the Assessing Officer, it was submitted by the assessee, as the payment made is for/on behalf of its clients, which was subsequently reimbursed by the client to the assessee, it cannot be treated as the expenditure relating to assessee s business or payment made by the assessee for its business so as to attract the provisions of section 194C. The Assessing Officer, however, was not convinced with the reply of the assessee. He was of the view that since the assessee has made payment to CFS, it was the obligation of the assessee to deduct tax at source while making such payment. He also rejected the contention of the assessee that CFS/ICD being Government and Semi Government bodies there is no requirement of deduction of tax at source. Thus, on the aforesaid reasoning, the Assessing Officer disallowed an amount of ₹ 3,28,88,794 by invoking the provisions of section 40(a)(ia). Being aggrieved of such disallowance, assessee preferred appeal before the learned Commissioner (Appeals). 4. Learned Commissioner (Appeals) after examining the submissions of the assessee in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Profit Loss account disallowance under section 40(a)(ia) has to be made on non deduction of tax at source. 6. Learned Authorised Representative strongly supporting the order of the learned Commissioner (Appeals) submitted, in the course of assessment proceedings, assessee has submitted all necessary and relevant information to prove the fact that payments made by the assessee to CFS/ICD are on behalf of the importer of goods for whom the assessee was working as custom clearing agent. Learned Authorised Representative submitted, before the Assessing Officer not only the assessee has produced each and every bills and vouchers in support of the payments made but has also furnished all relevant details to co relate each item of expenditure/payment made to CFS/ICD to the imports made by the clients. In this context, he drew our attention to the information submitted before the Assessing Officer in the course of assessment proceedings, indicating the name of importers, details of imports, duty payment, container name, details of storage in CSF/ICD, etc. He submitted, the Assessing Officer has not found anything adverse in the documents submitted by the assessee and in fact accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payments made by the custom house agent on behalf of importer/exporter is merely on actual basis, another arm of the Government i.e., Income tax Department cannot treat the same as payments made by the assessee. Thus, the learned Authorised Representative submitted, there is no reason to interfere with the order of the learned Commissioner (Appeals). 8. We have considered the submissions of the parties and perused the material available on record. On a perusal of the assessment order, it is very much clear that in the course of assessment proceedings, the assessee has furnished every necessary details in respect of payment of ₹ 3,28,88,794 made to CFS/ICD operating under JNPT/BPT. On a perusal of the relevant details / documentary evidences, it is found that before the Assessing Officer, the assessee has not only produced the bills raised by the CFS/ICD on the assessee but also the bills raised by the assessee on the importers towards expenditure incurred on behalf of them. It is also noticed, in the final invoice drawn by the CFS/ICD submitted before the Assessing Officer all particulars of transactions were noted such as importer s address, liner code, vessels parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise also, if the entire issue is looked at rationally and dispassionately it is to be noticed that during the relevant previous year, assessee has earned gross commission income of ₹ 83,47,952, which has been shown in the Profit Loss account and the Assessing Officer has also not disputed the income shown by the assessee. Therefore, for earning such income of ₹ 83,47,952, neither the assessee can be expected to have incurred expenditure of more than ₹ 3 crore nor the disallowance can be made of that amount. In fact, the Tribunal, Mumbai Bench, in DCIT v/s Rank Shipping Agency Pvt. Ltd., ITA no.5946/Mum./2008 dated 21st November 2012, while deciding identical issue of applicability of TDS provisions to payments made by a custom house agent on behalf of importers held as under: 9. We have considered submissions of ld representatives of parties and orders of authorities below. 10. During the course of hearing, ld D.R. has not disputed the fact that assessee received the said payment aggregating to ₹ 18,79,38,741 on account of reimbursement of expenses from its clients apart from agency commission and the agency commission has been considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs Cargo Linkers (218 CTR 295), where in the Hon ble Court held that the assessee being a C F agent, is an intermediary, who booked cargo for and on behalf of importers and exporters and facilitated the contract for carrying goods, therefore not liable to withhold tax u/s 194C from payments made towards air freight on behalf of its customers, decided in favour of the assessee. We are in agreement with the conclusion drawn by the ld. Commissioner of Income tax (Appeals) because such person who acts as an agent has no liability to deduct tax at source because he is acting merely as an intermediary between the airlines/shipping lines as also custodians of goods on one hand and the importers/exporters on the other. The contract is between the parties and not with the agent. The invoices and other shipping documents are in the names of importer/exporter and the assessee merely receives funds and disburses to the airline/shipping lines till clearance by the customs. The statutory warehousing charges is also the sole liability of the clients and the assessee merely defrays the expenses on behalf of the clients, thus, the assessee/agents are not liable to deduct tax u/s 194C of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porter and shipping lines and the assessee was merely working as intermediary/agent, therefore, he is not a person responsible to deduct tax in terms of section 194 C of the Act. In view of these facts, we find no infirmity in conclusion drawn by the ld. Commissioner of Income tax (Appeals). 2.6. So far as, survey fee is concerned, it is paid to the persons or agencies appointed by CCSP s who conduct inspection of the goods. Inspection of cargo is integral step for custom clearance. Likewise seal wire charges are paid to local labour operating within the customs notified premises to seal/unseal the cargo/container, thus, such payments are paid on behalf of the client and the assessee is merely acting as intermediator for the smooth clearance on behalf of the clients. Identical is the situation for crane/fork lift charges. Reliance can be placed upon the decision in ACIT vs Accenture Services (P) Ltd. (Mumbai Bench of the Tribunal) and GIRDCO Ltd. vs ACIT (Cuttack Bench of the Tribunal). Respectfully following the decisions discussed hereinabove and also discussed in the impugned order, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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