TMI Blog2020 (10) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... fically concerns payments to be made to contractors which would include C F agents. Liability to deduct or collect income tax at source is upon such income as referred to in Section 190(1) of the IT Act. The expression such income would ordinarily relate to any amount which has an income element in it and not otherwise. This is because the regime of TDS was enacted for the purpose of easy collection of income tax or to prevent the tax evasion. From bare reading of text of Section 190 and other provisions to be found in Chapter XVII, it deals with collection and recovery of tax . It is clear that the TDS regime is nothing but an alternate mode of recovery or collection of income tax. In Krupp Udhe GMBH [ 2010 (3) TMI 287 - BOMBAY HIGH COURT] the Division Bench of this Court speaking through Dr. D. Y. Chandrachud, as His Lordship then was, held that the question as to whether the reimbursement of expenses will form a part of the taxable income is not res integra in so far as this Court is concerned. Reference was then made to the decision in Siemens Aktiongesellschaff [ 2008 (11) TMI 74 - BOMBAY HIGH COURT] wherein another Division Bench of this Court agreed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 80IB of the Income Tax Act, 1961 (IT Act) which arises in Tax Appeal Nos.47 of 2015, 49 of 2015 and 9 of 2016. However, they also agree that this question will be required to be answered only if the substantial question of law (ii) above is answered in favour of the Revenue and against the Assessee. This means that only if we hold that the disallowance under Section 40(a)(ia) of the IT Act was valid in the facts and circumstances of the present case, the occasion will arise to consider the third substantial question of law relating to the deduction under Section 80IB of the IT Act. 5. Mr. Vaidya, learned counsel for the Appellants submits that in the present case, the C F agents had raised separate bills towards reimbursement of freight charges paid to the carriers and the actual service charges of the C F agents. Therefore, the payments made by the Assessees towards reimbursement never had any income element therein. In such circumstances, neither was there any obligation upon C F agents to pay any income tax upon such reimbursed amounts nor was there any obligation upon the Assessees to deduct any tax at source (TDS) upon such amounts. He submits that the TDS is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the Revenue, in all these appeals. She therefore submits that all these appeals may be dismissed. 10. The rival contentions now fall for our determination. 11. In order to appreciate the rival contentions, reference is necessary to the provisions in Section 4 and Section 190 of the IT Act which explain the basis of charge of income tax and the TDS regime respectively. 12. Section 4(1) provides that where any Central Act enacts that income tax shall be charged for any assessment year at any rate or rates, the income tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions ( including provisions for the levy of additional income tax) of, this Act in respect of the total income of the previous year of every person. Proviso to Section 4(1) provides that where by virtue of any provision of IT Act, the income tax is to be charged in respect of the income of a period other than the previous year, the income tax shall be charged accordingly. 13. Sub section (2) of Section 4 of the IT Act provides that in respect of income chargeable under sub-section (1) of Section 4, the income tax shall be deducted at source or paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have raised two separate sets of bills :- (a) first towards the services rendered by the C F agents; and (b) second towards the reimbursement of freight charges paid to the carriers. (ii) These are not cases where any composite bills were raised by the C F agents without indicating the service charge components and reimbursement components separately; (iii) There are ample evidences in the form of ledger entries, bills, payment vouchers etc., placed on record to establish that separate sets of bills were invariably made towards the service charge components and reimbursement components by the Assessees to the C F agents; (iv) The Assessees have invariably deducted tax at source when it comes to payment towards the first set of bills i.e. towards the services rendered by the C F agents without any demur; (v) Even in cases where composite bills were issued or where there was any ambiguity about payment towards reimbursement components, the Assessees have deducted tax at source; (vi) It is only in cases where separate bills were raised by the C F agents towards reimbursement and the freight charges, backed by proper evidence that the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sees' contention that there was no liability to deduct tax at source upon payments made towards reimbursement of amounts to the C F agents, will have to be accepted. 23. The ITAT, in its impugned order dated 16/01/2015, indeed appears to have misread the bills issued by Jet Air Freighters and proceeded to incorrectly style Jet Air Freighters as carriers and not as the C F agents. These very bills as well as other material on record very clearly establishes that Jet Air Freighters were indeed the C F agents and it is Jet Airways which was the carrier in these cases. The reasoning of the ITAT is therefore vitiated by this apparent error. 24. Similarly, the ITAT once again erred in observing that the bills towards reimbursement was only in an amount of ₹1,25,272/- and since the Assessees had paid by cheque an amount of ₹2,05,660/-, this payment has no nexus with reimbursement of freight charges of the C F agents. The record clearly bears out that in all there were five bills raised by the C F agents towards reimbursement of freight charges and the break up of the same reads as follows :- Date Doc No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngwith supporting bill invoices, receipts etc. This was after considering the impact of Circular No.715. 29. In fact, the Gujarat High Court, referred to a previous decision of ITAT in Om Satya Exim (P) Ltd. Vs ITO rendered on 13.05.2011 in ITA No.1335/Ahd/2010 and observed therein the Tribunal held after considering Circular No.715, taken a view that when no composite bills were issued but separate bills were issued towards reimbursement of transportation charges, the Circular No.715 was not applicable. On this basis, the High Court held that there was nothing in Circular No.715 which required the deduction of tax at source in respect of payment made to C F agents towards the reimbursement of transportation charges, when separate bills were raised for reimbursement claims. 30. Since, no decision of the jurisdictional High Court or the Hon'ble Supreme Court was pointed out, the ITAT in the present case, should have construed the Circular No.715 in consonance with its construction by the coordinate Bench and in any case the High Courts of Karnataka and Gujarat. 31. For all the aforesaid reasons, we allow these appeals and answer the first two substantial questions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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