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2013 (1) TMI 167 - AT - Income TaxDisallowance of freight charges in terms of section 40(a)(ia) - Non deduction of TDS - CIT(A) deleted the addition - Held that - As from the various details filed by the assessee and nature of the assessee s business of clearing and forwarding agents, it is found that the assessee is nothing but an intermediary between the exporters and the shipping lines. The assessee facilitates the contract for carrying goods for and on behalf of its client i.e. exporters or importers, and the principle contract for carrying goods is between the exporter/importer and the shipping lines. As decided in Commissioner of Income Tax vs. Cargo Linkers (2008 (3) TMI 619 - DELHI HIGH COURT) from the nature of the contract between the parties concerned it was found as a matter of fact that the contract was actually between the exporter and the airline, and the assessee was only an intermediary. It was, therefore, held that the assessee is not a person responsible for deduction of tax at source in terms of sec. 194C. Thus the present assessee, who is carrying on the business of clearing and forwarding agents, is not a person responsible for deducting the tax at source in terms of sec. 194C as the assessee is only an intermediary between the exporters and the shipping lines and it merely facilitates the contract for carrying the goods - provisions of sec. 40(a)(ia) cannot be invoked - in favour of assessee.
Issues:
1. Addition of Rs.29,09,679 under section 40(a)(ia) of the I.T. Act, 1961. 2. Admissibility of additional evidence by CIT(A) without following Rule 46A of the I.T. Rules, 1962. Analysis: 1. The judgment concerns the department's appeal against the CIT(A)'s order related to the assessment year 2008-09. The department challenged the deletion of an addition of Rs.29,09,679 made under section 40(a)(ia) of the I.T. Act, 1961, regarding freight charges. Additionally, the department contested the CIT(A)'s admission of additional evidence without following the procedure laid down in Rule 46A of the I.T. Rules, 1962. 2. The CIT(A) deleted the aforementioned addition after the assessee, engaged in Custom House Agent services, filed an appeal. The assessee argued that the issue was covered by a Delhi ITAT 'C' bench decision in a similar case. The department, however, supported the Assessing Officer's order. 3. The ITAT found that the issue was indeed covered in favor of the assessee based on the precedent set by the Delhi ITAT 'C' bench in a specific case. The ITAT analyzed the nature of the assessee's business as a clearing and forwarding agent, highlighting the intermediary role played by the assessee between exporters/importers and shipping lines. 4. The ITAT referred to the decision of the Hon'ble Delhi High Court in a similar case, where it was held that a C&F Agent acting as an intermediary is not responsible for tax deduction at the source. Therefore, the ITAT reversed the lower authorities' order and deleted the disallowance under section 40(a)(ia) of the Act. 5. Since the facts and issue were identical, and no contrary material was presented by the department, the ITAT upheld the CIT(A)'s order and dismissed the department's appeal, ultimately rejecting the appeal filed by the department. In conclusion, the judgment addressed the issues of addition under section 40(a)(ia) of the I.T. Act, 1961, and the admissibility of additional evidence by CIT(A). The ITAT ruled in favor of the assessee, citing precedents and highlighting the intermediary role of the assessee in the business of clearing and forwarding agents, ultimately leading to the deletion of the disallowance made by the Assessing Officer.
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