2018 (11) TMI 318 - AT - Income Tax

TDS u/s 194C - payments made for reimbursement of expenses to clearing house agents - addition u/ 40(a)(ia) - Held that - It is noticed that the assessee has not deducted tax at source as the bills raised by the clearing and forwarding agent were in respect of reimbursement of actual expenses incurred by them on behalf of the assessee. We observe that these facts demonstrate that there was no element of income involved in such reimbursement transaction. The Hon ble High Court in the case of Principal CIT-1 vs. Consumer Marketing Pvt. Ltd. Tax 2015 (11) TMI 124 - GUJARAT HIGH COURT has held that since the reimbursement bills were separately raised there was no requirement to deduct TDS and disallowance u/s. 40(a)(ia) of the act could not be made in respect of reimbursement bill which were separately raised as no TDS was required to be in respect thereof. - Decided against revenue Order passed u/s.201(1) & interest charged u/s. 201(1A) - default in deduction of tds - mismatch of CIN number registered in the OLTAS statement and the CIN number mentioned by the assessee - Held that - The assessee claimed that actually TDS was paid and there was no case of non-payment of TDS because on processing of TDS statement it was wrongly shown as nonpayment of TDS. This mistake has been occurred due to mismatch of CIN number registered in the OLTAS statement and the CIN number mentioned by the assessee. The revised TDS statement after rectifying the mistake in CIN number could not be submitted because of technical reason as the online system was not allowing the processing of TDS statement for financial year 2006-07. Therefore, the assessee has simultaneously applied to the assessing officer for rectification of the order passed. It is also stated that the annexure to the order of the assessing officer provides list of challans reported in the return but not found in the OLTAS. CIT(A) has directed the assessing officer to verify from the bank as to whether the claim of the assessee having deposited the amount through challan are correct or not. - decided against revenue

Summary

Issues:
1. Disallowance of payment to clearing house agent without TDS deduction under section 40(a)(ia) of the Income Tax Act, 1961.
2. Deletion of order passed under section 201(1) and interest charged under section 201(1A) of the Act.

Issue 1: Disallowance of Payment to Clearing House Agent without TDS Deduction:
The revenue appealed against the CIT(A)'s decision to delete the disallowance of payment made to a clearing house agent without TDS deduction under section 40(a)(ia) of the Income Tax Act. The assessing officer disallowed the payment of ?4,27,30,166 made by the assessee to the clearing and forwarding agent due to non-deduction of TDS. However, the CIT(A) allowed the appeal of the assessee based on the decision of the ITAT "D" Bench, Ahmedabad. The ITAT directed the AO to verify if the exact amount of expenditure incurred by the agent was reimbursed by the appellant. If established, section 40(a)(ia) would not apply. The CIT(A) concluded that in this case, the reimbursement amount of ?4,27,30,166 was not subject to disallowance under section 40(a)(ia) as it was purely for reimbursement of actual expenses without any income element. The ITAT upheld the CIT(A)'s decision, citing precedents and the absence of any income element in the reimbursement transaction.

Issue 2: Deletion of Order under Section 201(1) and Interest under Section 201(1A):
The second appeal concerned the deletion of the order passed under section 201(1) and the interest charged under section 201(1A) of the Act. The assessing officer declared the assessee as a defaulter for failing to deduct tax on a specific amount and levied interest for short payment of tax. The CIT(A) deleted the order under section 201(1) as it was time-barred but upheld the interest charged under section 201(1A). The CIT(A) directed the AO to verify the TDS deposits made by the appellant through challans and rectify any discrepancies. The ITAT dismissed the revenue's appeal after considering the technical errors in TDS statements and the subsequent rectification process initiated by the assessee.

In conclusion, both appeals filed by the revenue were dismissed by the ITAT, upholding the decisions of the CIT(A) in both cases. The judgment provided detailed analysis and references to legal precedents to support the decisions on disallowance of payments without TDS deduction and the deletion of orders under section 201(1) and interest under section 201(1A) of the Income Tax Act, 1961.