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TMI Blog2014 (3) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... f Revenue. Disallowance u/s 40(a)(ia) of the Act – TDS not deducted on payment made to C& F agents - Held that:- The C & F agent is seeking reimbursement of expenditure incurred on Customs Duty, Clearing and Forwarding, Port dues, Transporting charges etc. on actual basis - the payments relating to the above said expenses is made on behalf of the assessee - the assessee is authorizing the C & F agent to incur the expenses on its behalf - the break up details given in the single consolidated bill raised by the C & F agents should be considered as separate bills relating to (a) reimbursement of expenses and (b) charges for clearing quoted by the Agent - the applicability of TDS provisions on "reimbursement of expenses" should be considered separately in respect of each of the item and it cannot be clubbed with the charges levied by the C & F agent – CIT(A) did not examine the break-up details of the bills raised by the C & F agents – thus, the matter is remitted back to the CIT(A) for fresh examination of the applicability of TDS provisions on the charges paid to C & F agents and also on the expenses reimbursed – Decided in favour of Assessee. - ITA No. 645/Coch/2013 & Cross Ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to Tuticorin by way of Self addressed delivery note. It was further submitted the timbers are unloaded en- route to the customers, depending upon the demand. It was submitted that the goods were supplied to the assessee under identical circumstances and hence, the purchase invoices did not contain delivery details. 3.2 The AO noticed that the documents pertaining to M/s Victory Timbers and M/s Indian Timbers were furnished by a person named Mr Zaheer claimed to be the Accountant of the assessee. However, the above said person Mr Zaheer did not have the proper authorization from the above said parties to furnish the details. Hence, the AO did not take cognizance of the documents filed by Mr Zaheer. Since there is no explanation about the location of the office of the assessee, the AO came to the conclusion that the addresses mentioned in the sales tax registration; bill book etc., are bogus. The AO noticed that the assessee herein did not maintain day-to-day stock registrar and hence he doubted about the claim of purchases of timbers from the above said concerns. The AO also noticed that the purchase invoices issued by M/s Victory Timbers were found to be dated one day prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clearing and Forwarding Agent is different. They act as independent contractors. Any payments made to them would hence be liable for deduction of tax at source. They would also be liable to deduct tax at source while making payments to a carrier of goods. 4.2 Accordingly, the AO came to the conclusion that the assessee is liable to deduct tax at source on the amount of bill raised by the Clearing Forwarding Agents and there is no scope to split the payment into various components. Since the assessee has not deducted tax at source, the AO disallowed the amount of Rs. 10,16,894/- by invoking the provisions of sec. 40(a)(ia) of the Act. 4.3 In the appellate proceedings, the ld CIT(A) confirmed the disallowance made u/s 40(a)(ia) of the Act and deleted the disallowance of purchases. Aggrieved, both the parties are contesting the decision of Ld CIT(A) on the points decided against each of them. 5. We have heard rival contentions and perused the record. The first issue relates to the disallowance of amount relating to the purchases made from M/s Indian Timbers and M/s Victory Timbers. We have already noticed that the AO has disallowed the said claim on the following reasonin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has disallowed the purchases amount for two reasons viz., (a) genuineness of the suppliers were not proved and (b) claim of receipt of goods by the assessee was not proved. We notice that the ld CIT(A) was satisfied with the genuineness of the suppliers on the basis of various documents furnished by the assessee and accordingly deleted the disallowance. However, we notice that the Ld CIT(A) has not examined the second reason at all viz., the claim of receipt of goods by the assessee. In our view, the said action of Ld CIT(A) is not correct. When the assessing officer is making disallowance for more than one reason, it may not be possible to give relief on the satisfaction of one of the reasons only. The Ld CIT(A) should have considered both the reasons before coming to a conclusion. In our view, the second reason cited by the assessing officer is more relevant than the first reason, i.e., even if the assessee is able to prove the genuineness of the suppliers, still the disallowance is possible if the assessee is not able to prove that it has actually received the goods. Accordingly, the second reason cited by the assessing officer and the explanations given by the assessee needs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that there is no requirement of deducting tax at source on the Service tax component included in the Rent payments, since the service tax does not partake the character of income. Accordingly, the assessee submitted before the Ld CIT(A) that it has merely reimbursed the Customs duty and other Government levies to the C F agents, which do not have any income element. Accordingly the assessee contended that there is no requirement of deduction of tax at source on the said payments. In respect of expenses like transport charges, Ground rent paid to yard at port and short handling charges, the assessee submitted that the C F agents have incurred these expenses on its behalf and the payments have been made to various persons, each receiving less than the limit prescribed u/s 194C for deduction of tax at source. Accordingly, it was contended that there is no requirement of deducting TDS from the said payments also. 6.2 The Ld CIT(A), however, held that the provisions of sec. 194C is attracted on all the payments made to C F agents, since the said section uses the words Any sum . The Ld CIT(A) also held that the circular issued for sec. 194I cannot be taken support of, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax at source on many payments. Under these set of facts, the Tribunal has granted relief to the assessee. Hence, in our view, the said case law is also not applicable to the facts of the instant case. 8.2 In the case of Dr. Wilmar Schwabe India (P) Ltd (supra), the assessing officer had rejected the identical claim relating to reimbursement of expenses made by the assessee therein by placing reliance on the Circular No.715 dated 08th August, 1995 issued by the CBDT as in the present case. However, the Tribunal has considered the circular cited above and has expressed the following view in para 12 of the order:- 12. After considering the rival submissions and perusing the relevant material on record, we find no infirmity in the impugned order of learned CIT(A) on this issue. It is observed that as agreed by and between the assessee company and M/s Indochem Techno Consultants Ltd., a vehicle was to be provided by the assessee company to the said consultant for attending to its work and thus, the assessee company was to bear the vehicle expenses actually incurred by the said party. Bills for such expenses incurred by the said consultant were separately raised by them on the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under TDS proceedings, it is necessary to identify the payments on which there is a liability to deduct tax at source. In our view, the question whether the tax is required to be deducted at source only on the commission amount or on commission plus expenses would depend upon the nature of agreement between the assessee and his franchisees. If the franchisee is entitled to commission alone and the expenses are incurred on the instructions of the assessee, then in our view, the tax is required to be deducted at source on Commission amount alone. However, if the franchisee is entitled to commission plus expenses and he himself incurs expenses, then the tax is required to be deducted at source on the aggregate payments made. Thus, we have expressed the view that the agreement entered between the parties play a pivotal role in deciding the issue of deduction of tax at source on the expenses. Hence, the view taken by the AO that a single bill has been raised by C F agents for expenses and for charges may not be, in our view, the deciding factor for deduction of TDS. In fact, the bill raised by the C F agent is culmination of the agreement entered between the parties. In the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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