2022 (3) TMI 129 - AT - Income Tax

TDS u/s 194C - reimbursement of customs duty charges and other charges which are incurred by agents on behalf of the assessee - As argued assessee had incurred the transportation/freight charges and the assessee had only reimbursed the same i.e. freight/transport charges incurred by them was given back to the agents - HELD THAT - As the assessee pursuant to the AO s query has categorically stated that the payment was in fact reimbursement since the same was paid by the agents on behalf of the assessee, and the assessee had in turn reimbursed the same to the agents and booked the same as expenses in its book. It is noted that the AO failed to contradict the explanation given by the assessee that the payments (freight charges) were paid by the agents on behalf of the assessee and that the assessee has only reimbursed the same to the agents. Since this fact could not be contradicted even during the hearing also we are inclined to allow this ground of appeal of the assessee by relying on the ratio of the decision given by the Tribunal in Satyendra Jhunjhunwala 2011 (11) TMI 703 - ITAT KOLKATA . Estimation of profits - method of estimating/computing the profits - profits arising out of sale and purchase of tea, profits arising out of tea manufacture out of bought leave and profit arising out tea manufacture out of home grown leaves - HELD THAT - In the light of the aforesaid decision of the Hon ble Supreme Court in Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT find force in the submission of the Ld. AR that since for decades assessee has been computing its profits from the aforesaid three sources which has been accepted even in several scrutiny proceedings and according to the Ld. AR, there is no change in facts and law and that the department had accepted the estimated income of the assessee from the three sources. In such a scenario, according to him, the AO ought not to have disturbed the estimation of income made by the assessee without the AO pointing out the deviation or changes if any in the facts or law. According to this Tribunal if the facts permeating in the earlier years are identical/same and the department has accepted the same in the earlier years even in scrutiny proceedings, then the AO ought not to have disturbed the estimation made in this assessment year without pointing out changes/deviation in the facts or law while computing the income of the assessee from all the three sources - we set aside the order of the Ld. CIT(A) and remand the issue back to the file of AO to de novo pass the order on this issue based on the observation (supra) and as per the Hon ble Supreme Court in Radhasoami Satsang (supra).

Summary

Issues:
1. Disallowance of reimbursement of transportation/freight charges under section 40(a)(ia) of the Income-tax Act, 1961.
2. Addition of profits arising from the sale and manufacture of tea.

Issue 1: Disallowance of Reimbursement of Transportation/Freight Charges:
The appellant contested the disallowance of reimbursement of transportation/freight charges under section 40(a)(ia) of the Income-tax Act, 1961. The appellant argued that the agents had incurred the charges, and the appellant had only reimbursed them, citing precedents where such reimbursements were not subject to TDS. The Tribunal referred to various cases supporting the appellant's contention, emphasizing that reimbursement expenses incurred by agents on behalf of the assessee do not attract TDS provisions. The Tribunal upheld the appellant's claim, noting that the AO failed to contradict the explanation that the payments were reimbursed to the agents. Consequently, the Tribunal allowed this ground of the appellant's appeal.

Issue 2: Addition of Profits Arising from Tea Sale and Manufacture:
The appellant challenged the addition of profits from the sale and manufacture of tea, arguing that the computation method had been consistently accepted in previous scrutiny assessments. Citing the decision in Radhasoami Satsang Vs CIT, the appellant contended that if facts remain unchanged and the department accepted previous computations, there should be no disturbance in subsequent assessments. The Tribunal agreed with the appellant, noting that the department had accepted the income estimation from the three sources in previous scrutiny proceedings. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the issue to the AO for a fresh decision based on the principles outlined in Radhasoami Satsang. The appeal was partly allowed for statistical purposes.

In conclusion, the Tribunal ruled in favor of the appellant on the disallowance of reimbursement charges and remanded the issue of tea profits back to the AO for reconsideration. The judgment highlighted the importance of consistency in assessments and the need for deviations in facts or law to warrant changes in income computations.