2023 (3) TMI 1308 - AT - Income Tax

TDS u/s 194C - payment made to both the parties for clearing and forwarding expenses - HELD THAT - It is not a case of the AO that the assessee could not produce necessary bills and vouchers for entire expenditure debited into profit and loss account. In fact, the assessee could able to furnish necessary details along with bills and vouchers for majority of expenses. Therefore, AO is erred in disallowing part of expenditure for non-furnishing of vouchers for clearing and forwarding expenses and thus, we direct the AO to delete addition made towards disallowance towards clearing and forwarding expenses. Disallowance of C F charges u/s. 40(a)(ia) - In this case, there is an agreement between the assessee and C F agents for rendering certain clearing and forwarding services, which in our considered view is definitely a contract in terms of provisions of section 194C and thus, the assessee ought to have deduct TDS, when payment is made to C F agents because the assessee is a person responsible for making payment for rendering services. Therefore, we are of the considered view that, there is no error in the reasons given by the AO and the CIT(A) to make addition towards disallowance of C F charges u/s. 40(a)(ia) of the Act. As decided in case of Prahari Agency Private Limited 2021 (11) TMI 82 - ITAT CHENNAI where it has been held that TDS is applicable u/s. 194C of the Act, for C F charges and for non-deduction of TDS, expenses can be disallowed u/s. 40(a)(ia). Alternate plea of the assessee for disallowance of 30% in light of amendment to section 40(a)(ia) of the Act, by the Finance Act, 2014 w.e.f. 01.04.2015 - We find that said amendment is considered to be prospective in nature from assessment year 2015-16 onwards and thus, it is not applicable for the impugned assessment year as held in the case of Shri. Choudhary Transport Company 2020 (8) TMI 23 - SUPREME COURT where it has been clearly held that amendment to section 40(a)(ia) of the Act, is prospective in nature which cannot be applied for retrospective purpose. Therefore, we are of the considered view that there is no merit in the alternate plea taken by the assessee and thus, same is rejected. Appeal filed by the assessee is partly allowed.

Summary

Issues Involved:
1. Legality and jurisdiction of the assessment order.
2. Disallowance of Rs. 5,05,756/- for non-furnishing of vouchers.
3. Applicability of section 194C for payments to clearing and forwarding agents.
4. Extent of disallowance under section 40(a)(ia) post amendment.

Summary:

1. Legality and Jurisdiction of the Assessment Order:
The assessee contended that the assessment order was illegal, opposed to the facts, and without jurisdiction. However, the Tribunal did not address this issue in detail, implying no significant findings or changes were made regarding the legality and jurisdiction of the assessment order.

2. Disallowance of Rs. 5,05,756/- for Non-furnishing of Vouchers:
The assessee argued against the disallowance of Rs. 5,05,756/- for non-furnishing of vouchers. The Tribunal noted that the assessee had produced bills and vouchers for the majority of expenses and concluded that the AO erred in disallowing part of the expenditure solely for non-furnishing of vouchers. The Tribunal directed the AO to delete the addition made towards the disallowance of Rs. 5,05,756/-.

3. Applicability of Section 194C for Payments to Clearing and Forwarding Agents:
The AO disallowed Rs. 38,00,098/- under section 40(a)(ia) for non-deduction of TDS under section 194C on payments made to C&F agents. The Tribunal upheld this disallowance, agreeing with the AO and CIT(A) that there was a contract between the assessee and the C&F agents, making the provisions of section 194C applicable. The Tribunal referenced the ITAT Chennai Bench decision in Prahari Agency Private Ltd vs ITO, confirming that TDS is applicable for C&F charges and non-deduction leads to disallowance under section 40(a)(ia).

4. Extent of Disallowance under Section 40(a)(ia) Post Amendment:
The assessee argued that the disallowance should be restricted to 30% as per the amendment to section 40(a)(ia) by the Finance Act, 2014. The Tribunal rejected this argument, citing the Hon'ble Supreme Court in Shri. Choudhary Transport Company vs ITO, which held that the amendment is prospective from AY 2015-16 and not applicable retrospectively. Thus, the Tribunal upheld the full disallowance under section 40(a)(ia).

Conclusion:
The appeal filed by the assessee was partly allowed. The Tribunal directed the deletion of the disallowance of Rs. 5,05,756/- for non-furnishing of vouchers but upheld the disallowance of Rs. 38,00,098/- under section 40(a)(ia) for non-deduction of TDS under section 194C. The alternate plea for restricting the disallowance to 30% was rejected.