2014 (4) TMI 314 - AT - Income Tax

Deletion made u/s 40(a)(ia) of the Act Non-deduction of tax Payments made to various parties Held that - Ocean freight charges, air freight charges and in land charges are covered by the circular of the CBDT bearing no. 723 dated 19.09.1995, according to which no TDS is to be deducted on such payments the decision ITO Vs. Freight System (India) (P) Ltd. 2005 (10) TMI 229 - ITAT DELHI-F followed - payment of ocean freight is not liable for tax deduction at source u/s 194(c) in view of provisions of section 172. Inland charges u/s 172(8) of the Act - the decision in DCIT Vs. Hasmukh J. Patel 2011 (3) TMI 353 - ITAT, Ahmedabad followed - the payments made to shipping agents of non- residents is nothing but reimbursement of charges which has been clarified by the CBDT circular no. 723 which states that the provisions of section 172 would apply in such cases and no deduction of taxes required as per section 194(c) - CIT(A) has correctly appreciated the facts and position of law in deleting the additions made by the AO thus, there is no infirmity in the order of the CIT(A) Decided against Revenue. Admission of additional evidence in violation of Rule 46A of the Rules Held that - The contention of the Revenue could not be accepted because revenue could not specifically point out the additional evidences relied by the CIT(A) Decided against Revenue.

Summary

Issues:
Appeal against deletion of addition under section 40(a)(ia) of the Income Tax Act for non-deduction of tax on payments made to various parties.

Analysis:
The Revenue appealed against the deletion of an addition of Rs.21,04,074 made by the Assessing Officer (AO) under section 40(a)(ia) of the Income Tax Act for non-deduction of tax by the assessee on payments to different parties. The assessee, a firm engaged in chemical exports, had made payments towards freight and forwarding charges to various parties during the relevant year. The AO added Rs.21,04,074 related to payments made to six parties. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted most of the additions, citing reasons such as payments being for freight charges reimbursed by the assessee and below Rs.20,000, hence not requiring TDS deduction. The Revenue challenged this decision before the Appellate Tribunal.

Upon review, the Tribunal noted that certain payments were below Rs.20,000 and hence not liable for TDS deduction. The Tribunal also considered circulars issued by the Central Board of Direct Taxes (CBDT) regarding ocean freight charges, air freight charges, and inland charges, stating that no TDS should be deducted on such payments. Previous tribunal decisions were referenced to support this stance. The Tribunal upheld the CIT(A)'s decision to delete the additions, finding no error in the application of law and facts.

Additionally, the Revenue contended that the CIT(A) admitted additional evidence against Rule 46A of the Income-tax Rules. However, the Tribunal rejected this argument as the Revenue failed to specify the additional evidence and the documents were reportedly available to the AO during assessment proceedings. Consequently, the Tribunal upheld the CIT(A)'s order.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the additions under section 40(a)(ia) of the Income Tax Act. The judgment was pronounced on March 28, 2014.