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2013 (2) TMI 549 - AT - Income TaxTDS on Transportation - held that - the payments made by assessee are in the nature of purchase account and not transportation charges in respect to above four parties and once this is the position, the assessee is not liable to deduct any TDS under any of the provisions of Chapter XVIIB of the Act. Once assessee is not liable or not under obligation to deduct TDS, no disallowance u/s. 40(a)(ia) - Decided in favor of assessee. TDS on Testing & Certification - held that - Assessee has deducted TDS in the last month of the previous year and paid on 31.10.2006 and hence assessee has complied with the provision of section 40(a)(ia) of the Act and qua this amount no disallowance is required. - In favor of assessee. TDS on Loading and unloading charges - a sum of Rs.5,97,500/- was capitalized and the balance amount was on account of payment of labour charges etc - held that - the amount capitalized at Rs.5,97,500/- cannot be subject matter of TDS. Hence, the same should not be disallowed by invoking the provisions of section 40(a)(ia) of the Act. With respect to balance, the Assessing Officer will confirm the disallowance. - partly in favor of assessee. TDS on Agency charges, supervision documentation - held that - no doubt no written contract is there, but the assessee has made payment on account of commission, service charges for documentation, custom clearance and supervision of loading, operation of vessels to clearing and forwarding agents. This clearly falls under the provisions of section 194C of the Act and liable to TDS u/s. 194C of the Act. - Decided against the assessee. Deemed dividend - shareholder - held that - clause (e) of section 2(22) of the Act as it existed provided that if the loan is received by the shareholder, it is only then that the loan can be deemed to be dividend in his hands. The assessee firm was not the shareholder of the company and the partners of the firm were the shareholders in the books of the company. Therefore, the loan advanced by the company to the assessee firm could not be deemed to be dividend inasmuch as the loan was not to the shareholder but to the assessee who was not the shareholder in the books of the company. - Decision in ACIT, Circle-33 vs. Bhaumik Colour (P) Ltd. 2008 (11) TMI 273 - ITAT BOMBAY-E and CIT vs. Rajkumar Singh & Co. 2005 (7) TMI 91 - ALLAHABAD HIGH COURT followed. - Decided in favor of assessee.
Issues Involved:
1. Disallowance of deduction of transport expenses due to non-deduction of TDS under Section 194C of the Income Tax Act, 1961. 2. Deletion of addition made by the Assessing Officer by invoking the provisions of Section 2(22)(e) of the Act by treating the loan as deemed dividend. Issue-wise Detailed Analysis: 1. Disallowance of Deduction of Transport Expenses: - Assessee's Appeal (ITA No. 1791/K/2009): The primary issue is the confirmation of disallowance of deduction of transport expenses by the CIT(A) due to non-deduction of TDS under Section 194C of the Act. The assessee raised three grounds, arguing that the CIT(A)'s order was arbitrary and failed to appreciate the non-applicability of Sections 194C, 194J, and 194H to the impugned payments. The assessee also contended that genuine business payments should be allowable under Section 37 of the Act. - Payments to Specific Parties: The Assessing Officer noted that the assessee paid various amounts without deducting TDS, invoking Section 40(a)(ia). The CIT(A) confirmed this disallowance. The assessee argued that payments to Anil Trading Co., Vijay Chandra Mishra, MA Chhinnamasta Steel & Power Ltd., and Akhilesh Kumar Jaiswal were for the supply of material, not transportation charges. After reviewing evidence, it was concluded that these payments were indeed for purchases, not transportation, and thus, no TDS was required. The disallowance was deleted for these parties. - M/s. A. K. Sons: The assessee claimed payments to M/s. A. K. Sons were for the purchase of iron ore, and transportation charges were included in the sale price. However, the absence of clear agreement details led to the remand of this issue to the Assessing Officer for verification. - M/s. Omega Consultants, M/s. Indicative Consultants, and M/s. Itlab (Goa) Pvt. Ltd.: The assessee did not press these issues, and they were dismissed. - M/s. AM Enterprises: The assessee deducted TDS for Rs. 20,65,438/- and paid it before the due date, complying with Section 40(a)(ia). This disallowance was deleted. For the balance amount of Rs. 9,02,107/-, verification by the Assessing Officer was required. - East Coast Marine Services: Payments included capitalized expenses of Rs. 5,97,500/-, which were not subject to TDS. The disallowance for this amount was deleted, while the balance was confirmed. - R. B. Logistics and Crystal Shipping Corporation: These payments were for services like documentation, custom clearance, and supervision, falling under Section 194C. The disallowance was confirmed as the assessee failed to deduct TDS. 2. Deletion of Addition as Deemed Dividend (Revenue's Appeal - ITA No. 1725/K/2009): - Assessee's Firm and Loan from M/s. Shilpa Creation (P) Ltd.: The assessee-firm received a loan of Rs. 16,28,951/- from M/s. Shilpa Creation (P) Ltd., where the partners held significant shares. The Assessing Officer treated this loan as deemed dividend under Section 2(22)(e), adding it to the assessee's income. - CIT(A)'s Decision: The CIT(A) deleted the addition, relying on the Special Bench decision in ACIT vs. Bhaumik Colour (P) Ltd., which held that deemed dividend can only be assessed in the hands of a shareholder, not a non-shareholder entity like the assessee-firm. - Legal Precedents: The CIT(A) referenced decisions from the Rajasthan High Court (CIT vs. Hotel Hilltop) and the Allahabad High Court (CIT vs. Rajkumar Singh & Co.), which supported the view that deemed dividend provisions apply only to shareholders, not to entities merely associated with shareholders. - Conclusion: The Tribunal confirmed the CIT(A)'s order, dismissing the revenue's appeal, as the assessee-firm was neither a registered nor a beneficial shareholder of M/s. Shilpa Creation (P) Ltd. Final Judgment: - The assessee's appeal was partly allowed for statistical purposes, and the revenue's appeal was dismissed. The order was pronounced in open court on 20.01.2012.
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