2019 (6) TMI 1120 - AT - Income Tax

Addition u/s 56(2)(vii) (b) - issues of shares at a price more than the FMV - effective date of amendment - from the year of application (receipt of money) or allotment of shares - HELD THAT - We find since shares were applied in AY 2012-13 as per the terms and conditions settled in AY 2012-13, the provision u/s 56(2)(viib) introduced from AY 2013-14 which is year under consideration in the present case and, therefore, cannot be applied merely on the basis that shares were allotted in AY 2013-14. Thus, we find the reasons recorded by the CIT(A) in the impugned order specifically at para 4.2 is justified in terms of applicability of provision u/s 56(2)(viib) of the Act. Therefore, we find no infirmity in the order of CIT(A) and it is justified. Thus, Ground No.1 raised by the Revenue is dismissed. TDS u/s 194C - non deduction of tds on clearing and forwarding charges - addition u/s 40(a)(ia) - HELD THAT - All the details regarding the list of payments indicating the address, names of the shipping clearing agencies were before the two lower authorities for their consideration. We find that the AO did not accept the submissions of the assessee that no evidence brought on record to show the shipping and export expenses were reimbursed. However, it is seen in the assessment order itself that the AO mentioned that on perusal of the details field by the assessee and written submissions dated 28.01.2016, the AO mentioned only that the assessee failed to give bifurcation expenses relating to the impugned amount. CIT(A) in his impugned order clearly said that all the details as submitted by the assessee before him as well as in the assessment proceedings clearly shows that the payments were made to clearing shipping agencies and are in the nature of reimbursement. On such payments, we find which were paid on behalf of the assessee to different parties including the government authorities. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition made by invoking the provision under section 56(2)(viib) of the Income Tax Act.
2. Deletion of addition made by invoking section 40(a)(ia) for the violation of the provision under section 194C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 56(2)(viib):
The primary issue pertains to whether the addition made by the Assessing Officer (AO) under section 56(2)(viib) of the Income Tax Act was justified. The AO added ?61,69,200 to the assessee's income, arguing that the consideration for shares should be treated as received in the year of allotment (AY 2013-14), not the year of receipt (AY 2012-13). The assessee contended that the provision under section 56(2)(viib) was not applicable as it came into force in AY 2013-14, while the consideration was received in AY 2012-13.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, stating that the provision should be construed with respect to the year in which the consideration was received, not the year of allotment. The CIT(A) concluded that the share application monies were received in FY 2012-13, thus the provision under section 56(2)(viib) was not applicable.

The Revenue appealed, arguing that the transaction is complete only when shares are allotted, and hence, the section should apply to the year of allotment. However, the Tribunal upheld the CIT(A)'s decision, emphasizing that the provision is applicable based on the year of receipt of consideration.

2. Deletion of Addition under Section 40(a)(ia) for Violation of Section 194C:
The second issue involves the AO's addition of ?36,97,339 for non-deduction of TDS under section 194C on shipping and clearing expenses. The AO contended that TDS was required on these expenses, while the assessee argued that these were reimbursements to various clearing and forwarding agents, and thus not subject to TDS.

The CIT(A) accepted the assessee's argument, noting that the payments were indeed reimbursements and not liable for TDS under section 194C. The CIT(A) found no merit in the AO's action, as the AO did not provide material evidence to counter the assessee's claim.

The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to substantiate the claim that the expenses were not reimbursements. The Tribunal found that the CIT(A) correctly concluded that the payments were reimbursements and thus not subject to TDS.

Conclusion:
The Tribunal dismissed the Revenue's appeal on both grounds. The Tribunal found no infirmity in the CIT(A)'s order regarding the non-applicability of section 56(2)(viib) based on the year of receipt of consideration and the deletion of the addition under section 40(a)(ia) for the violation of section 194C, as the expenses were reimbursements not subject to TDS. The Tribunal's decision was pronounced in open court on 19.06.2019.