2017 (6) TMI 1313 - AT - Income Tax

Disallowance u/s. 40(a)(ia) - non deduction of tax at source on payments made by the assessee to C F agents - HELD THAT - In the case of Deepak Bhargava 2015 (1) TMI 56 - ITAT DELHI where also the question was disallowance u/s. 40(a)(ia) for non deduction of tax at source on payments effected to clearing and forwarding agents. Same view was taken by the Bangalore Bench of this Tribunal in the case of DCIT vs. Dhanyaa Seeds (P) Ltd. 2013 (9) TMI 1072 - ITAT BANGALORE . Hon ble Gujarat High Court in the case of Pr. CIT vs. Consumer Marketing (India) (P.) Ltd. 2015 (11) TMI 124 - GUJARAT HIGH COURT held that when separate bills are there for reimbursement of expenditure received by C F agent, TDS was not required to be made on reimbursement. It is an admitted position in the case before us that assessee had in addition to reimbursement of expenses, separately paid brokerage and commission which was subjected to disallowance in the original assessment. CIT(A) was justified in deleting the disallowance made u/s. 40(a)(ia) of the Act. We do not find any reason for interference with the order of the CIT(A) . Appeal of the Revenue stands dismissed.

Summary

Issues:
Disallowance of expenses under section 40(a)(ia) of the Income Tax Act for non-deduction of tax at source on payments made to C&F agents.

Detailed Analysis:

1. Issue of Disallowance under Section 40(a)(ia):
- The appeal was filed by the Revenue against the CIT(A)'s order deleting the disallowance of expenses amounting to ?60,80,063 made by the Assessing Officer under section 40(a)(ia) of the Income Tax Act for non-deduction of tax at source on payments to C&F agents.
- The Assessing Officer contended that the assessee should have deducted tax at source on payments made to M/s. Mark Logistics, a C&F agent, and applied section 40(a)(ia) to disallow the expenses.
- The CIT(A) examined a statement from M/s. Mark Logistics, which certified that the amounts received from the assessee were reimbursement of expenditure incurred on behalf of the assessee, not C&F charges. Relying on the judgment of the Hon'ble Gujarat High Court, the CIT(A) held that tax deduction was not required for reimbursement of expenditure and deleted the disallowance.

2. Arguments of the Revenue and Assessee:
- The Revenue argued that the payments to M/s. Mark Logistics were contractual services, not reimbursement of expenditure. They contended that even if it was reimbursement, profit booking would be involved, justifying tax deduction under section 194C.
- The Assessee cited a Delhi Tribunal case and other judgments to support their claim that section 194C did not apply to reimbursement of expenditure. They provided details and bills showing the nature of the payments made to M/s. Mark Logistics.

3. Tribunal's Decision:
- The Tribunal examined the certificate and bills provided by M/s. Mark Logistics, confirming that the payments were indeed reimbursement of expenses incurred on behalf of the assessee.
- Referring to previous tribunal decisions and high court judgments, the Tribunal concluded that tax deduction was not required for reimbursement of expenditure. They upheld the CIT(A)'s decision to delete the disallowance under section 40(a)(ia) of the Act.
- The Tribunal noted that separate bills were raised for reimbursement of expenses, and considering all facts, they found no reason to interfere with the CIT(A)'s order, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee and dismissing the Revenue's appeal regarding the disallowance of expenses under section 40(a)(ia) of the Income Tax Act.