2016 (11) TMI 660 - AT - Income Tax

TDS u/s 194C - amount paid as plant repairs - non deduction of tds - whether the payment made under the head plant repair represents reimbursement of expenses? - Held that - In our view this agreement is based on the parties having regard to the actual expenses incurred. The processing charges paid is separately billed on which TDS has been deducted. Having regard to the fact that separate bills have been given and based on various Judicial Pronouncements cited by the Ld. AR and having regard to the fact that the revenue has accepted this fact of separate bill is another case as directed by the Jurisdictional High Court. We are of the considered opinion that the assessee is not liable to deduct tax on reimbursement of expenses Addition of cleaning and forwarding charges - CIT(A) has held that M/s. Al Mustafa Agencies were carrying out various services to the assessee for the export of goods such as documentation with customs, registration, insurance, rent and other port dues - Held that - Nevertheless all the above payment relates to payment to statutory authorities, labourers and others, on behalf of the assessee and none of them accrued to the agent. In our view the above payment will also not be liable to TDS. The Assessing Officer has neither quantified nor clear of the exact charges paid to M/s. Al Mustafa Agencies. In the absence of any material on record, we uphold the view of the Ld. CIT(A) in this regard. Vehicle loan hire charges - CIT(A) has held that hire purchase payment would not come within the meaning of section 194C for the purpose of tax deduction - Held that - In our view merely because a claim for the hire charges portion has been made in the account, it cannot be stated that such payment are liable to TDS. Further the assessee has been claiming such payment in earlier years also which has been accepted by the department. The legislature thought it fit to introduce Form 26a with effect from 01/04/2013, for obtaining certificate from the receiver to the effect that they have included such receipts as part of their income. The verdict of Ld. CIT(A) on this score has also to be upheld. Revenue appeal dismissed.

Issues Involved:
1. Deletion of disallowance of ?1,14,07,877/- paid to M/s. Geo Acquatic under the head "Plant Repair" without deduction of tax at source.
2. Deletion of addition of ?20,02,535/- under the head "Clearing and Forwarding" for non-deduction of tax at source.
3. Deletion of addition of interest on vehicle loan paid to M/s. Sundaram Finance and other private companies without deduction of tax at source.

Detailed Analysis:

1. Deletion of Disallowance of ?1,14,07,877/- Paid to M/s. Geo Acquatic:
The Revenue contended that the amount paid to M/s. Geo Acquatic under "Plant Repair" was subject to tax deduction at source (TDS) under Section 194C of the Income Tax Act, as the payment included charges for various services like freezing, processing, packing, and storing. The Assessing Officer (AO) argued that the entire amount should be subject to TDS as it was a consolidated bill.

The assessee argued that the amount represented reimbursement of expenses and not payments for services rendered, citing the Hon'ble Supreme Court's decision in Hindustan Coco Cola Beverages Pvt. Ltd. vs. CIT. The CIT(A) agreed with the assessee, stating that the payments were in the nature of reimbursements as per the agreement, and separate bills were raised for processing charges and other expenses.

The Tribunal upheld the CIT(A)'s decision, noting that the payments were indeed reimbursements and did not attract TDS liability. The Tribunal relied on various judicial pronouncements, including the ITAT Delhi Bench's decision in ITO vs. Dr. Willmar Schwab (I) Pvt. Ltd., which held that reimbursement of expenses does not attract TDS provisions.

2. Deletion of Addition of ?20,02,535/- Under "Clearing and Forwarding":
The Revenue argued that payments made under "Clearing and Forwarding" were inclusive of commission/service charges and should be subject to TDS, as clarified by Circular No. 5/2002 of the CBDT.

The assessee contended that M/s. Al Mustafa Agencies were engaged for various services like filing documents with customs, inspection by customs, labour charges, and other port payments, which do not fall under TDS provisions. The CIT(A) agreed, stating that the payments were made to statutory authorities, labourers, and for trailer rent, and none of these accrued to the agent.

The Tribunal upheld the CIT(A)'s decision, noting that the AO did not quantify the exact charges paid to M/s. Al Mustafa Agencies and that the payments were not liable to TDS.

3. Deletion of Addition of Interest on Vehicle Loan:
The Revenue argued that interest on vehicle loan paid to M/s. Sundaram Finance and other private companies was separately debited in the profit and loss account and should be subject to TDS.

The assessee contended that the payments were made as Equated Monthly Instalments (EMI) along with principal, and hire purchase payments do not come within the meaning of Section 194C for TDS purposes. The CIT(A) agreed, stating that such payments were not liable to TDS and had been accepted by the department in earlier years.

The Tribunal upheld the CIT(A)'s decision, noting that the legislature introduced Form 26A effective from 01/04/2013 for obtaining certificates from recipients that they included such receipts as part of their income. The Tribunal concluded that the assessee was not liable to deduct tax on these payments.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The payments made to M/s. Geo Acquatic were deemed reimbursements and not subject to TDS. The clearing and forwarding charges paid to M/s. Al Mustafa Agencies were not liable to TDS due to the nature of the payments. The interest on vehicle loan paid to M/s. Sundaram Finance was not subject to TDS as it was part of EMI payments.

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