2013 (8) TMI 959 - AT - Income Tax

TDS u/s 194C - non deduction of tds on freight charges and Clearing & Forwarding charges - Held that - CIT(A) has given a categorical finding that amount paid by the assessee to clearing and forwarding agent is merely reimbursement expenditure for which the agent has raised a separate bill for these expenditure. Wherever TDS was to be deducted has been deducted by agent and paid to Government account on behalf of the assessee. Therefore, assessee cannot be asked to deduct tax out of the same amount. For this purpose Ld. CIT(A) has also considered copy of Form No.16A, which reflected the deduction of tax by the agent. Ld. CIT(A) has also found that from the sample of Air waybill that Airlines had shown, the name of the assessee which had been reimbursed to the assessee by the agent and handling charges have been separately billed by the agent. Ld. CIT(A) has also found that circular in the present case was not applicable as there are two separate invoices, one issued in respect of reimbursement of charges and other for service charges of the agent. No contrary material has been brought on record to dislocate aforementioned findings recorded by Ld. CIT(A). - Decided against revenue

Summary

Issues Involved:
1. Whether the expenses on freight charges and clearing & forwarding charges are reimbursement in nature and exempt from TDS under section 194C?
2. Whether there can be double deduction of tax on the same amount when TDS is already deducted by the agent?
3. Whether Circular No. 715 dated 08.08.1995 of CBDT is applicable in the case of the appellant regarding reimbursement charges and service charges of the agent?

Issue 1:
The first issue revolves around whether the expenses on freight charges and clearing & forwarding charges are reimbursement in nature and thus exempt from TDS under section 194C. The AO contended that the assessee should have deducted tax on these amounts under section 194C. However, the Ld. CIT(A) deleted the disallowance of Rs. 61,72,427, stating that the freight charges were reimbursement expenditures and that TDS had already been deducted by the agent. The Ld. CIT(A) considered the separate billing by the agent and the submission of Form No.16A reflecting tax deduction by the agent. The decision was supported by precedents and detailed reasoning, ultimately leading to the deletion of the disallowance.

Issue 2:
The second issue questions the possibility of double deduction of tax on the same amount when TDS is already deducted by the agent. The Ld. CIT(A) held that TDS had been deducted by the agent and paid to the government on behalf of the appellant, thus precluding the need for the assessee to deduct tax again on the same amount. The Ld. CIT(A) analyzed the Form No.16A and the sample Airway bills to support this finding. The decision was further reinforced by citing precedents and relevant legal provisions, leading to the deletion of the addition and sustaining a partial addition.

Issue 3:
The final issue pertains to the applicability of Circular No. 715 dated 08.08.1995 of CBDT in the case of the appellant regarding reimbursement charges and service charges of the agent. The Ld. CIT(A) found that the circular was not applicable as there were separate invoices issued for reimbursement charges and service charges by the agent. This decision was supported by the absence of contrary material and the reliance on relevant case law and tribunal decisions. The Ld. CIT(A) provided a detailed analysis and reasoning, ultimately dismissing the appeal filed by the revenue.

In conclusion, the judgment by the Appellate Tribunal ITAT Mumbai delves into the intricacies of reimbursement expenditures, TDS deductions, and the applicability of CBDT circulars in the context of taxation laws. The detailed analysis, supported by legal precedents and factual evidence, resulted in the deletion of certain additions and the dismissal of the revenue's appeal.