2019 (4) TMI 1379 - AT - Income Tax

Addition u/s 40(a)(ia) - Freight charges to shipping lines airlines - assessee is not liable to deduct TDS in respect of the exempted parties covered u/s.197 - AO has accepted the assessee s stand in order passed u/s.154 - HELD THAT - In respect of airport/port charges, since these were reimbursed by the clients of the assessee to the assessee towards the monies defrayed by the assessee towards these authorities, the CIT(A) has rightly deleted the addition. Therefore, this issue also does not survive. Addition u/s 40(a)(ia) - Custom clearance charges, shipping line charges, documentation charges and other payments viz, handling charges, rent etc - reimbursement of actual expenditure - pure agent - HELD THAT - Since the assessee has not laid proper materials before the AO during the course of assessment, these issues are remitted back to the file of the AO for a fresh examination. The assessee shall place all the materials in support of its contentions and comply to the requirements of AO in accordance with law. AO after affording adequate opportunity to the assessee shall pass a speaking order. The corresponding grounds are treated as partly allowed for statistical purposes.

Summary

Issues:
Appeal against order disallowing expenses under section 40(a)(ia) for assessment year 2012-13.

Analysis:
The appellant, a company engaged in international freight forwarding, appealed against the disallowance of expenses by the Assessing Officer under section 40(a)(ia) for non-deduction of TDS. The Commissioner of Income Tax (Appeals) allowed the appeal, leading to the Revenue filing an appeal against this decision. The grounds of appeal included contentions regarding the nature of payments made by the appellant to various parties and the absence of Principal-Agent relationship. The Departmental Representative argued that the appellant failed to establish the reimbursement of charges and should be liable for TDS. Conversely, the Authorized Representative contended that the appellant acted as a "pure agent" for its customers, thereby justifying the non-deduction of TDS for certain expenses. The Authorized Representative highlighted that the Commissioner had found the payments within threshold limits and that TDS had been deducted for some payments. The Tribunal observed that certain issues were settled, while others required further examination due to inadequate materials provided during assessment. Consequently, the Tribunal partly allowed the Revenue's appeal for statistical purposes, remitting certain issues back to the Assessing Officer for a fresh examination with proper documentation and compliance.

This judgment delves into the intricacies of TDS provisions under section 40(a)(ia) concerning expenses incurred by an international freight forwarding company. The analysis revolves around the establishment of a Principal-Agent relationship to determine the applicability of TDS on payments made by the appellant. The contrasting arguments presented by the Departmental Representative and the Authorized Representative shed light on the nature of expenses, ownership of goods, and the appellant's role as a "pure agent" for its customers. The Tribunal's decision to partly allow the appeal emphasizes the importance of providing adequate documentation and complying with legal requirements during assessments to avoid disputes regarding TDS liabilities.