2022 (6) TMI 754 - HC - Income Tax

TDS on entire amounts paid to the agent - whether Tribunal committed an error in upholding the decision of the First Appellate Authority and thereby affirming the finding of the Assessing Officer that tax had to be deducted at source even in respect of reimbursements which had been incurred by the agent? - HELD THAT - Tribunal has approved the factual finding recorded by the First Appellate Authority stating that there is no proof that brokerage and freight charge by consignment agent from the assessee are not loaded with profit and if it had been a case of true reimbursement the consignment would have enclosed the bill drawn by its brokers and transporters and in that case the assessee could have decided the deductibility of TDS from such bills of brokers and transporters without depending on the consignment agent. Further, the First Appellate Authority has recorded that even after an opportunity was given during the appeal proceeding, the assessee could not establish their stand and, therefore, held that amounts of brokerage and freight can be paid by the assessee to consignment agent are the only available criteria to decide the deductibility of tax at source on the payment of brokerage and freight - the terms and conditions of the agreement of consignment sale was taken note of wherein it is stated that the consignment agent is required to remit the entire sale proceeds and depending on the maximum price realized or other such criteria the assessee will pay commission to the consignment agent. Further noting the facts of the case, the Tribunal held that deduction of tax at source under Section 194C is required to be made on any sum paid by the assessee to clearing and forwarding agent and it includes reimbursement of the expenditure. In this regard, the clarification issued by the CBDL was referred to. The decision in DLF Commercial Project Corporation 2015 (7) TMI 576 - DELHI HIGH COURT which was rendered following the decision in CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. 2014 (4) TMI 235 - GUJARAT HIGH COURT would be wholly applicable to the facts of the case on hand, wherein the Court had approved the concurrent finding rendered by the First Appellate Authority. The facts of the case on hand has been noted by the CIT(A), who has rendered a categorical finding that the assessee was unable to establish their stand in spite of opportunity granted to them at the appellate stage. Further, in CIT vs. Gujarat Narmada Valley Fertilizers Co. ltd. it has been held that law obliges only amounts which fulfilled the character of income to be subject to TDS. In the case before us, all the two Authorities and the Tribunal have concurrently held that the assessee was unable to produce any document to establish their stand. This Court while exercising jurisdiction under Section 260A of the Income Tax Act cannot be called upon to reexamine the facts or to re-appreciate the tenor and ambit of the document which was placed before the Assessing Officer, CITA and more importantly the Tribunal has noted that the assessee has failed to establish the reimbursement which was pleaded by producing document despite opportunity being given at the appellate stage. No substantial question of law.

Summary

Issues involved:
1. Whether the assessee was liable to deduct tax at source on amounts paid to the agent.
2. Whether the Income Tax Appellate Tribunal erred in granting relief to the assessee on the claim of additional depreciation.

Issue 1: Tax Deduction at Source (TDS) on Amounts Paid to Agent
The primary issue in this case revolved around whether the assessee was liable to deduct tax at source on the entire amounts paid to the agent. The appellant contended that the authorities erred in not considering settled legal positions. The appellant cited precedents from the High Courts of Gujarat and Delhi to support their argument. The Assessing Officer disbelieved the stand taken by the assessee, emphasizing that the Income Tax Act does not provide exceptions for non-deduction of TDS on reimbursements. The First Appellate Authority and the Tribunal upheld this view, noting the lack of proof that the expenses incurred by the agent were not loaded with profit. The Tribunal emphasized that TDS under Section 194C should be made on "any sum paid" by the assessee to the agent, including reimbursements. The Court found that the assessee failed to establish the reimbursement claim despite opportunities during the appellate stages. Consequently, the Court held that no substantial question of law arose for consideration in this appeal.

Issue 2: Claim of Additional Depreciation
The second issue pertained to the grant of relief to the assessee on the claim of additional depreciation under Section 31(1)(iia) of the Income Tax Act. The assessee questioned the Tribunal's decision to disallow the claim due to the provision coming into effect after the relevant assessment year. The Tribunal, along with the First Appellate Authority, ruled against the assessee. The appellant argued that relevant documents supporting the claim were not properly appreciated. However, the Court, after thorough examination of the facts and legal precedents, found no merit in the appeal. The Court concluded that the decision in DLF Commercial Project Corporation, which aligned with the Gujarat High Court's ruling, was applicable to the case. It was noted that the assessee failed to produce documents to substantiate their claim, leading to the dismissal of the appeal.

In conclusion, the High Court of Calcutta, in the judgment delivered by Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya, dismissed the appeal filed by the assessee under Section 260A of the Income Tax Act. The Court found no substantial questions of law arising from the issues related to tax deduction at source on amounts paid to the agent and the claim of additional depreciation. The judgment highlighted the importance of substantiating claims with proper documentation and adherence to legal provisions in tax matters.