2015 (2) TMI 61 - AT - Income Tax

Non deduction of TDS on clearing and forwarding charges - disallowance u/s 40(a)(ia) - assessee s submission that the amount paid to C & F agents includes the expenditure which has been reimbursed to the clearing and forwarding agents and there is no element of profit in it - Held that - We find that there is no finding of Ld. CIT(A) that the amount paid by the assessee was not in the nature of reimbursement but on the contrary he has held that there cannot be any exemption from TDS even in case of reimbursement. As find that the issue of disallowance u/s. 40(a)(ia) amount paid to the clearing and forwarding agents with respect to the reimbursable expenditure was also before the Co-ordinate Bench Tribunal in the case of Gujarat Narmada Valley Fertilizer Company Ltd 2015 (2) TMI 1 - ITAT AHMEDABAD held that on pure reimbursement of expenses no TDS is deductable. Against the aforesaid order of Tribunal, the matter was carried before Hon ble Gujarat High Court by the Revenue who accepted the finding of Tribunal and dismissed the appeal of Revenue 2014 (4) TMI 235 - GUJARAT HIGH COURT . Considering the aforesaid facts, we are of the view that the assessee s contention that the expenditure which are on account of reimbursement and on which no TDS has been deducted needs to be re-examined de-novo. We therefore remit the issue to the file of AO to consider the submissions of the assessee and thereafter decide the issue in accordance with law and if the expenditure incurred by the assessee is on account of reimbursement, the same be allowed. The assessee is also directed to furnish all the required information to the AO so as to enable him to decide the issue. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Appeal against order of CIT(A)-VI, Ahmedabad for A.Y. 2007-08 regarding disallowance u/s. 40(a)(ia) of the Act.

Analysis:
The appellant, a company engaged as a merchant exporter, filed an appeal against the order of CIT(A)-VI, Ahmedabad for A.Y. 2007-08. The primary issue revolved around the disallowance of an amount paid under the head of clearing and forwarding charges of Rs. 33,29,238 under section 40(a)(ia) due to non-deduction of TDS. The appellant argued that no TDS was required as the payments were reimbursements of expenses to agents. However, both the Assessing Officer (AO) and CIT(A) upheld the disallowance citing circular No. 715 issued by CBDT, which stated that gross amounts paid to clearing and forwarding agents are liable for TDS. The CIT(A) emphasized that the appellant's interpretation of section 204 was incorrect and that TDS under section 194C is deductible on the gross amount paid. The appellant's reliance on certain decisions and circulars was deemed inapplicable to the case. The CIT(A) concluded that the appellant was liable to deduct TDS on the payments to clearing and forwarding agents, confirming the AO's disallowance.

The appellant further appealed before the ITAT, reiterating that the payments to agents included reimbursement of expenses and no profit element. The appellant provided sample bills to demonstrate the nature of payments. The ITAT noted that a Co-ordinate Bench Tribunal had previously ruled in favor of the assessee in a similar case, where pure reimbursements did not require TDS deduction. The matter was also taken to the Hon'ble Gujarat High Court, which upheld the Tribunal's decision. Considering these precedents, the ITAT remitted the issue back to the AO for a de novo examination. The AO was directed to consider the submissions of the assessee and allow the expenditure if it was indeed on account of reimbursement. The appellant was instructed to provide all necessary information for the AO's assessment.

In conclusion, the ITAT allowed the appellant's ground for statistical purposes, emphasizing the need for a fresh assessment by the AO to determine the nature of the payments and whether TDS deduction was applicable based on the reimbursement aspect.