2023 (1) TMI 205 - AT - Income Tax

TDS u/s 194C - non-deduction of TDS on certain payments made towards clearing and forwarding charges (CFS charges), plot rent and Dock charges - AR submited that no TDS is liable to be deducted in case of an amount paid on account of reimbursement of expenses - HELD THAT - Assessee has submitted that the issue may be restored to the file of the Assessing Officer so that the assessee may produce the relevant evidences in this respect. The matter in this respect, is accordingly restored to the file of the AO for limited purpose of examining the above contention of assessee and if the assessee will be able to prove its above contention, then no disallowance be made in respect of such payments which have been taken into account by the respective payees and due taxes paid on their income. Assessee has further submitted that some of the payments were made to Kolkata Port Trust and that since the Kolkata Port Trust is under the Ministry of Surface Transport wherein the Government of India has full beneficial interest, therefore, any payment made to Kolkata Port Trust will be covered u/s 196 of the Act and, therefore, the income of the Kolkata Port Trust was not chargeable to tax. That, therefore, the assessee cannot be deemed to be an assessee in default for non-deduction of TDS out of payments made to Kolkata Port Trust because there was no tax payable on the income of the said payee Kolkata Port Trust. The ld. counsel, in this respect, has relied upon the decision of the Coordinate Bench of the Tribunal in the case of M/s Gourishankar Bihani 2014 (12) TMI 1323 - ITAT KOLKATA . The matter in respect of above contention is also restored to the file of the AO. The Ld. AO shall adjudicate upon the above contention by way of a speaking order. Payment made towards shipping company charges - CIT(A) has not given any detailed or factual finding as to which of the payees were foreign shipping companies or their agents. CIT(A) has simply relied upon the list given by the assessee without discussing as to which of the payees were resident companies and which of the payees were non-resident companies and no basis has been given for his such conclusion. In view of this, we agree with the contention of the ld. DR that this issue is also required to be examined at the end of the Assessing Officer to give a factual finding as to which of the payee companies will be covered under the provisions of section 172 and to re-compute the disallowance on the payments made to shipping companies covered under the provisions of section 194C and 195. In view of this, the impugned order of the CIT(A) is set aside and the matter is restored to the file of the Assessing Officer on the limited issue as noted above. Appeal of the assessee is treated as partly allowed for statistical purposes

Summary

Issues Involved:
1. Deletion of addition towards "CFS Charges" (Clearing & Forwarding Service).
2. Deletion of addition towards "Plot Rent".
3. Deletion of addition towards "Dock Expenses".
4. Deletion of addition towards "Shipping Company Charges".
5. Request for leave to make any addition, alteration, or modification of the grounds.

Issue-wise Detailed Analysis:

1. Deletion of Addition towards "CFS Charges":
The Department appealed against the deletion of Rs. 24,07,539/- towards CFS charges made by the CIT(A). The assessee company, engaged in transporting and clearing goods, paid CFS charges to Emee Logistics Pvt. Ltd. The Assessing Officer (AO) disallowed this expenditure due to non-deduction of TDS under section 194C of the Income Tax Act. The CIT(A) deleted this addition, considering the payment as reimbursement of expenses. However, the Tribunal noted that the assessee was responsible for deducting TDS on payments made to Emee Logistics Pvt. Ltd., regardless of whether the payment was a reimbursement. Since the assessee could not prove that TDS was deducted, the Tribunal held that the reimbursement theory was inapplicable, and the CIT(A)'s deletion of the addition was not justified.

2. Deletion of Addition towards "Plot Rent":
The Department contested the deletion of Rs. 68,31,267/- towards plot rent. The AO disallowed this expenditure due to non-deduction of TDS under section 194I. The CIT(A) deleted the addition, applying the reimbursement theory. The Tribunal found that the CIT(A)'s application of the reimbursement theory was not substantiated, as the assessee failed to demonstrate that TDS was deducted on the payment. Thus, the deletion of the addition by the CIT(A) was deemed unsustainable.

3. Deletion of Addition towards "Dock Expenses":
The Department challenged the deletion of Rs. 42,58,982/- towards dock expenses. The AO disallowed this expenditure due to non-deduction of TDS under section 194C. The CIT(A) deleted the addition, applying the reimbursement theory. The Tribunal noted that the assessee could not prove the applicability of the reimbursement theory regarding TDS deduction on payments made to the payees. Therefore, the deletion of the addition by the CIT(A) was found to be unjustified.

4. Deletion of Addition towards "Shipping Company Charges":
The Department appealed against the deletion of Rs. 4,56,40,926/- towards shipping company charges. The CIT(A) deleted the addition based on a list provided by the assessee, which included payments to foreign shipping companies or their agents, arguing that sections 194C and 195 were not applicable. The Tribunal found that the CIT(A) did not provide detailed factual findings on which payees were foreign shipping companies or their agents. The matter was remanded to the AO to determine the applicability of section 172 for non-resident shipping companies and to re-compute the disallowance accordingly.

5. Request for Leave to Make Additions or Modifications:
The Department sought leave to make any addition, alteration, or modification of the grounds either before or during the appellate proceedings. This request was noted but not specifically addressed in the judgment.

Conclusion:
The Tribunal partially allowed the appeal for statistical purposes, setting aside the CIT(A)'s order on the issues of CFS charges, plot rent, dock expenses, and shipping company charges, and remanding the matters to the AO for further examination and factual determination.