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TMI Blog2014 (11) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... r the agreement, Three Star Corporation has to pay the freight charges along with weekly bills to the assessee in dollars - Section 194C provides for deduction of tax by any person responsible for making payment for carrying out any work in pursuance of a contract. When Three Star Corporation is liable to pay the freight charges as per the arrangement / agreement and the assessee was required to pay the amount initially to the respective companies whether the assessee is liable to deduct tax or not – Held that:- The purchaser has to pay the freight charges in addition to the price agreed upon – the contention of the assessee cannot be accepted that the assessee is not expected to deduct tax - Liability to pay the money is different from responsibility to pay the money - Section 194C requires the person responsible for paying the money and it does not requires to deduct tax by the person who is liable to make money - Since the assessee is responsible for making the payment, this Tribunal is of the considered opinion that the assessee is expected to deduct tax u/s 194C of the Act - There is no further disallowance required provided the assessee credited the reimbursement of freigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax u/s 194C of the Act. Since tax was not deducted the expenditure claimed by the assessee u/s 40(a)(ia) has to be disallowed. According to the ld.DR, this is the obligation as per the provisions of the Act. Therefore, according to the ld.DR, excess relief was granted to the assessee contrary to the provisions of the Act. Since the reopening is within four years, according to the ld.DR, the assessing officer has rightly reopened the assessment. 5. We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that the assessee has paid ₹ 24,61,578 towards air freight to three companies. It is also an admitted fact that the assessee has not deducted tax. Section 40(a)(ia) clearly provides for disallowance of the payments which would otherwise be allowed as expenditure in case the assessee failed to deduct tax as provided under the relevant provisions of the Income-tax Act. Therefore, the assessing officer was under a bona fide impression that the assessee was given excessive relief under the Income-tax Act. 6. The main contention of the assessee is that there was a change of opinion. This Tribunal is of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee submitted that the assessee exported the periodicals to Sultanate of Oman. According to the ld.representative, an agreement was entered into between the assessee on one part and M/s Three Star Corporation, Sultanate of Oman on the other part. The ld.representative further submitted that since the payment was not made by the assessee on its behalf, the assessee is not liable to deduct tax. The ld.representative further submitted that in fact the assesee is not claiming the payment of freight charges as deduction even though the freight charges was debited in the profit loss account as expenditure. As soon as the amounts were received from the foreign parties, the same was shown as income under the head other income . Hence, what was received by the assessee is reimbursement of the expenditure on behalf of Three Star Corporation. The amount debited in the profit loss account was neutralized by giving credit as soon as the amounts are received under the head other income Therefore, according to the ld.representative, there will be revenue neutral; hence the question of disallownce u/s 40(a)(ia) does not arise. The ld.representative placed his reliance on the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to pay the amount initially to the respective companies whether the assessee is liable to deduct tax or not? Language of section 194C clearly says that any person responsible for paying........... Therefore, deduction of tax is the responsibility of the person who is paying the money. A person may be responsible for paying the money even though he is not liable to pay the same. The legislature intentionally worded Any person responsible for paying................ . Therefore, it is immaterial whether the assessee is liable to make the payment or not? By way of arrangement / agreement, when the responsibility to make the payment of freight charges is given to the assessee, this Tribunal is of the considered opinion that in view of the language employed by the legislature, i.e. Any person responsible for paying...... the assessee is liable to deduct tax. Therefore, this Tribunal is unable to accept the contention of the assessee that the assessee is not expected to deduct tax. Liability to pay the money is different from responsibility to pay the money. Section 194C requires the person responsible for paying the money and it does not requires to deduct tax by the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered opinion that it needs to be verified whether the assessee credited the amount as Income from other sources. Accordingly, the orders of lower authorities are set aside and the issue of disallowance u/s 40(a)(ia) is remitted back to the file of the assessing officer for the limited purpose of verifying whether the freight charges debited in the profit loss account is credited as income under the head Income from other sources as reimbursement from Three Star Corporation. If it is credited as income from other source, then, there is no need for further disallowance u/s 40(a)(ia) of the Act. If the assessing officer funds that the assessee has not credited the amount of reimbursement received from Three Star Corporation as income from other sources and there is only a debit in the profit loss account, then the expenditure claimed by the assessee as freight charges has to be disallowed. 14. With the above observations, the orders of the lower authorities are set aside and the issue is remitted back to the file of the assessing officer. 14. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on this 21st Octob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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