2012 (8) TMI 489 - AT - Income Tax

Non deduction of tax at source on clearing and forwarding charges - Held that - As if there is one single consolidated bill then the provisions of section 194J would be attracted but here it is found that four bills raised by party at periodic intervals, which does not mean that there was one / single bill - Considering decision of the CIT(A), who has restored the issue to the file of the AO with certain directions it need to be modified by adding that the AO shall examine the issue in detail with reference (i) to the amounts that are covered by TDS, (ii) which the assessee has himself disallowed in his computation and (iii) the extent of reimbursement of expenses, which, do not get covered by the provisions of TDS. As a part of the amount on which TDS is not deducted is suo-moto disallowed by the appellant in his return of income filed, provisions of section 40 (a) (ia) are applicable only to amounts of expenditure which are payable as on 31st March every year and it cannot be invoked to disallow expenditure which has been actually paid during the previous year, without deducting TDS - in favour of assessee for statistical purposes.

Summary

Issues involved:
Disallowance of clearing and forwarding charges due to non-deduction of tax at source under section 40(a)(ia).

Analysis:
1. The appeal before the ITAT arose from the CIT(A)'s order confirming the disallowance of clearing and forwarding charges of Rs. 18,45,104 due to non-deduction of tax at source under section 40(a)(ia).
2. The AO initially disallowed the entire clearing and forwarding expenses along with portions of loading, unloading, and labor charges as the assessee failed to produce all details during assessment proceedings.
3. The CIT(A) partially allowed the appeal by deleting the ad hoc additions for loading, unloading, and labor charges. The assessee argued that a portion of the expenses was reimbursement and not subject to TDS, citing relevant case laws and circulars.
4. The CIT(A) considered new facts presented by the assessee, including the nature of payments to the clearing and forwarding agent. It was found that a significant amount was reimbursement and not subject to TDS.
5. The ITAT reviewed the case and observed that multiple bills were raised by the agent, indicating transactions were not consolidated into a single bill. The ITAT refrained from making a final decision, leaving it to the AO to verify the nature of expenses and claims made by the assessee.
6. The ITAT endorsed the CIT(A)'s decision to remand the issue to the AO for detailed examination, emphasizing the need to consider TDS coverage, self-disallowed amounts, and reimbursement of expenses under section 40(a)(ia).
7. The ITAT referred to precedents, including a Special Bench decision, to guide the AO in determining the applicability of section 40(a)(ia) based on expenditure payable as of March 31st each year.
8. Ultimately, the ITAT upheld the decision to remand the issue to the AO for further examination, aligning with the CIT(A)'s directive and emphasizing compliance with TDS provisions under section 40(a)(ia).

This detailed analysis highlights the progression of the case from the initial disallowance to the CIT(A)'s partial relief and the subsequent referral to the ITAT for further scrutiny, emphasizing the nuances of TDS applicability and reimbursement considerations under section 40(a)(ia).