TMI Blog2018 (6) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... icial Member These two Revenue s appeals for assessment years 2010-11 and 2012- 13 are directed the Commissioner of Income Tax (Appeals)-Burdwan s separate orders dated 29.02.2016 and 29.04.2016 in case No.146/CIT(A)/Asl/W-1(2)/Bwn/2013-14 and 28/CIT/Asl/W-1(2)/Bwn/2015-16; respectively involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. 2. We come to the former assessment year 2010-11 involving ITA 1056/Kol/2016. The Revenue s first substantive ground seeks to revive the Assessing Officer s action deleting the amount in question of C F transportation charges of ₹ 64,84,134/- declined for non-deduction of TDS u/s. 40(a)(ia) in the course of assessment(s) as deleted in lower appellate proceedings vide following discussion:- I have carefully examined the Assessing Officer' order, the remand report, the rebuttal of the appellant and other material on record and that produced by the appellant during appeal proceedings. The undisputed facts relevant to this ground are summarized as bellow: That the appellant is a C F Agent of Ultrratech Cement Ltd - henceforth called the principal company, which is a man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO held that they, on account of the implied contractual agreement, fell within the ambit of section 194C of the Act. He, on this premise, preceded to make the impugned disallowance by holding that while making these payments which came within the ambit of section 194C of the Act. TDS had to be deducted and since it admittedly was not, the mischief of section 40(a)(ia) was attracted. During the appeal proceedings, the appellant has submitted that the AO failed to fully appreciate the facts of the case. As regards labour charges, the appellant stated that the payments were made to the labour sardars to facilitate the payment to the respective labourers as it was not possible for the assessee to disburse the labour payments on their own and to the truck drivers to move the bags from the railway rake point to the godown. The appellant further submitted that the labour sardars were nothing but the leaders of the local labour union and they themselves were also nothing but labourers - and for this last capacity that they received their payments in the form of regular wages. That the actual labour wages paid and the acknowledgement from the labour un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant by drawing my attention to point A2 of the page 3 of the agreement where it is categorically mentioned that all reimbursements will be on actual basis as per rates fixed as mentioned in the annexure and further under point C2 of page 6 under the subtitle remuneration/commission further that the agent will get a prefixed commission- which in this case was ₹ 12/- per MT. 3. As regards the rake firing ratio brought up by the remand report, where the appellant needs to transport a minimum quantity of cement to the dealers directly from the rake point, the appellant has stated that point ABC1 of page 8 of the agreement says that rake firing ratio has to be conducted subject to the availability of orders before hand - thus there was a condition precedent on it. Since the agreement is for the handling and transportation of cement, whatever may be the condition, the only activity is of transporting and handling of cement and for which the appellant is reimbursed by the principals. 4. That the observations of the AO that the principals could have paid directly to the dealers and that no prudent businessman would pay to an intermediary are irrelevant and would c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is pertinent to note in this context that the remand report has unequivocally also observed that the principals have paid to the appellant after due deduction of TDS - which sets at rest the AO's apprehension that there might be loss of revenue, since for the said work tax has been deducted by the principals. Thereafter, it is just a matter of reimbursing the expenses incurred b the appellant - which is a matter of record. Therefore I cannot find merit in the view taken by the AD that TDS had to be deducted on CF Transportation Charges and the said disallowance therefore is not upheld. 3. For that on the fact and circumstances of the case, it is begged before your honour to note that the Ld. A.D has erred in disallowing ₹ 95,05,125.00 on account of secondary transport and assessee firm handles cement from the railway rake point until it reaches to the dealer' point, as per the direction of the company, for which assessee firm gets commission from the company . Now the Ld. AO has made the addition U/s 40(a)(ia) of the Income Tax Act, 1961 on account of secondary transport and freight charges, which is nothing but the caring cost of reimburses the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted and therefore it should apply only if the amount is payable but once the amount has already been payable' cannot be paid as well as payable because in the case of CIT-Vs-TVS Lean logistics Ltd. (2007) 293 ITR 432 (Mad) the Madras High Court held that where the words of a statute are absolutely clear and unambiguous, then rule of literal construction has to be followed and the court cannot enlarge the scope of legislation when the language of the provision is plain and unambiguous. For the sake of argument, even if it is assumed that the term payable means paid and payable , still the assessee must get relief because the Apex Court in the case of CIT-Vs-vegetable Products Ltd. (1973) 88 ITR 192 (SC) held that if the court finds that the language of taxing statute is ambiguous or capable of more meanings then one, then the court has to adopt the interpretation which favours the assessee, more particularly so where the provision relates to imposition of Tax. Thus the Ld. A.O has acted vindictively and added ₹ 95,05,125.00 for reasons to him only and by any stretch of mind, it cannot be said to be a lawful act. The facts for the sake of ground -wise compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee firm acts as a C F agent. That the assessee is a C F agent of Ultratech Cement Ltd who is manufacturer of cement. The assessee handles the cement from the railway rake point till it reaches the dealer's godown. The assessee arranges delivery of the cement bags from the godown to the various dealers point by truck and the expense incurred for it is called the Secondary Freight and this amount is reimbursed by the company as well and all such reimbursements are made in actual basis as per the prefixed rates. In the case of Secondary Freight Charges, the dealers pay to the truck drivers and then raise the bill and the assessee reimburses such money to the dealers on actual basis on behalf of the company as the principal company pays such reimbursement and the job of the assessee is only to facilitate such payment. The assessee also placed reliance on the ratio of the assessee's own case before the CIT(Appeals) - XXXII, Kolkata and ITAT, Kolkata C Bench for the A/Y 2008-09, where the assessee got relief based on the facts that liability to deduct tax at source u/s 194C would only arise when the payment is made under a contract, which is not true in this inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing before us. We therefore conclude that the CIT(A) has rightly deleted the impugned disallowance. 4. Next comes the Revenue s latter substantive ground that CIT(A) has made in law as well as on facts in deleting secondary freight charges disallowance of ₹ 95,05,125/- with the following discussion: The facts for the sake of ground -wise completion are being briefly stated again: 1) The appellant is a C F Agent of the agent of Ultratech Cement Ltd who is manufacturer of cement. The assessee handles the cement from the railway rake point till it reaches the dealer's godown. So the assessee unloads the cement from the railway siding and forward the same by truck to the godown and the expense incurred for this activity is called the Primary Transportation and/ or Freight and such amount is reimbursed by the principal company. Then the assessee arranges delivery of the cement bags from the godown to the various dealers point by truck and the expense incurred for it is called the Secondary Freight Charges and this amount is reimbursed by the company as well and all such reimbursements are made in actual basis as per the prefixed rates. In the case of Secondary Freigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee also placed reliance on the ratio of the assessee's own case before the CIT(Appeals) - XXXII, Kolkata and ITAT, Kolkata C Bench for the A/Y 2008-09, where the assessee got relief based on the facts that liability to deduct tax at source u/s 194C would only arise when the payment is made under a contract, which is not true in this instant case as there is no finding by the AO that the impugned payments were made to a contractor or sub-contractor under some contract. Rather the facts of the case suggest that the impugned payments are made to the dealers of the company and not to any transporters. There is nothing on record to suggest the existence of any contract between the assessee and the recipient of the impugned payment and such is denied by the assessee as well. I have carefully examined the issues at hand as well all the relevant material as listed above. The issue has been discussed at length in the preceding paragraphs. The fact is that it has been established that the appellant was under contractual obligation with the principal company to ensure the handling and delivery of cement to the dealers and the principals would reimburse the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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