2018 (4) TMI 1948 - AT - Income Tax

Disallowance u/s. 40(a)(ia) - TDS on reimbursement of charges - assessee made an oral prayer that the assessee can produce necessary evidence to show that the recipient of the amount i.e. the warehousing corporations have offered the amount paid by assessee to tax if the matter is remitted back - HELD THAT - We do not find merit in the submissions made by the assessee. There is no document on record that would indicate that it is a case of reimbursement of charges - the plea raised by the assessee that it is a case of reimbursement or expenses is without any merit. We do not find any infirmity in the order of CIT (Appeals) in confirming the addition. We remit this issue back to the file of Assessing Officer for verification. The assessee shall furnish necessary details before the AO to substantiate that the recipients of the amount i.e. the warehousing corporations have offered the amount to tax. AO shall decide this issue de-novo after considering the necessary documents furnished - Appeal of assessee is partly allowed for statistical purpose.

Summary

Issues involved: Disallowance of expenses under section 40(a)(ia) for non-deduction of tax at source on payments made to warehousing corporations.

Analysis:
The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2009-10. The assessee, a commission agent and general merchant, had filed her return of income declaring total income and agriculture income. The Assessing Officer observed that the assessee made payments to warehousing corporations without deducting tax at source, leading to disallowance under section 40(a)(ia) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) upheld the addition made by the Assessing Officer, prompting the assessee to appeal before the Tribunal.

During the appeal, the assessee's representative argued that the payments to warehousing corporations were merely reimbursement of charges collected from buyers of goods, and hence, no TDS was required to be deducted. On the other hand, the Department's representative contended that the assessee was obligated to deduct tax at source under section 194I of the Act. The invoices presented by the assessee indicated that charges were for goods only, with no mention of reimbursement of warehousing charges.

After considering the submissions and orders, the Tribunal found no merit in the assessee's contention of reimbursement. The invoices did not support the claim, as they showed charges for goods without any reference to warehousing charges. Consequently, the Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to confirm the addition.

However, the Tribunal allowed an alternate prayer by the assessee to produce evidence showing that the warehousing corporations had offered the amount paid by the assessee to tax. The matter was remitted back to the Assessing Officer for verification in light of the second proviso to section 40(a)(ia) inserted by the Finance Act, 2012. The Tribunal directed the Assessing Officer to decide the issue afresh after considering the necessary documents provided by the assessee.

In conclusion, the appeal of the assessee was partly allowed for statistical purposes, and the matter was remitted back to the Assessing Officer for verification regarding tax payment by the warehousing corporations.