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2011 (2) TMI 830 - AT - Income TaxTDS us/ 194C - addition relates to C & F agency charges includes reimbursement and expenses - assessee was required to furnish the party-wise details of the expenses and explain whether any tax was deducted at source as required by section 194C of the Act - It was submitted that considering the nature of the expenses, no tax was required to be deducted at source - Revenue contended that since the assessee had not deducted the tax from the payments, the Assessing Officer invoked section 40(a)(ia) of the Act and disallowed the total amount- held that - The contract between the assessee and the C & F agent is a service contract which has not been specifically included in Explanation III below section 194C. In this view of the matter, the provisions of section 194C are not applicable to the payments to the C & F agents. - assessee also took up the plea, without prejudice, that each of the payments as agency fees was less than Rs.20,000/- and the aggregate was also less than Rs.50,000/- and therefore even on that ground, the assessee was not required to deduct tax under section 194C The insurance premium paid in respect of the policies was claimed as a deduction as business expenditure and they appear to have been allowed in the preceding assessment years. However, in the year under appeal, the premium was not allowed as a deduction - Held that - keeping in view the case CIT Vs. B.N.Exports 2010 -TMI - 76319 - BOMBAY HIGH COURT premium paid under keyman insurance policy is allowable as a deduction in the case of partnership firm where policies are taken out on the lives of the working partners - thus,Appeal is dismissed.
Issues involved:
1. Disallowance of C & F agency charges under section 194C of the Income Tax Act. 2. Deductibility of premium paid on the life of partner under Keyman Insurance Policy. Issue 1: Disallowance of C & F agency charges under section 194C of the Income Tax Act: The appeal pertains to the assessment year 2006-07 where the revenue challenged the deletion of an addition of Rs.4,02,252/- made by the Assessing Officer regarding C & F agency charges. The Assessing Officer contended that the assessee should have deducted tax at source under section 194C. The CIT(A) accepted the assessee's plea based on judgments of the Hon'ble Bombay High Court and the Visakhapatnam Bench of the Tribunal, ruling that the section was not applicable to the payments made to C & F agents. The Hon'ble Bombay High Court clarified that section 194C applies to specific service contracts, and since the contract between the assessee and the C & F agent was not included in Explanation III below section 194C, the provisions were not applicable. Additionally, payments to certain agents were below the threshold for TDS deduction. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal. Issue 2: Deductibility of premium paid on the life of partner under Keyman Insurance Policy: The second ground of appeal concerned the deduction of Rs.4,00,529/- being the premium paid on the life of a partner under a Keyman Insurance Policy. The CIT(A) directed the Assessing Officer to allow this expenditure, citing a Tribunal decision allowing such deductions for partnership firms. The revenue challenged this decision. However, the Tribunal noted that the issue was settled in favor of the assessee by the judgment of the Hon'ble Bombay High Court in the case of CIT Vs. B.N.Exports. Following this precedent, the Tribunal confirmed the CIT(A)'s decision and dismissed the revenue's appeal. In conclusion, the Appellate Tribunal ITAT, Mumbai, in its judgment, addressed the disallowance of C & F agency charges under section 194C and the deductibility of premium paid on the life of a partner under a Keyman Insurance Policy. The Tribunal upheld the CIT(A)'s decisions in both issues, dismissing the revenue's appeal in its entirety with no order as to costs.
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