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TMI Blog2015 (1) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to prove that the payment made by it to the C&F agent represents the reimbursement and not the amount paid for any services rendered by them. Board has clearly laid down in Circular no. 715 dt. 8.8.1995 that “As regards payments made to clearing and forwarding agents for carriage of goods, the same shall be subjected to tax deduction at source u/s 194C of the Act.‟ The ld. AR could also not adduce any evidence that the C&F agent deducted tax at source while making payment to the carrier so as to prove that the amount which was paid by the Assessee to the C&F agent represents reimbursement of the freight paid by the C&F agent on behalf of the Assessee to the airlines. It is not the intention of the legislature that neither the C&F agent deducts the tax when it makes the payment to the carrier nor the Assessee deducts the tax at source when it makes payment to C&F agent. If the Assessee claims that the amount paid to the C&F agent by the Assessee represents reimbursement, the onus is on the Assessee to prove that it represents the reimbursement of the claim. In our opinion, provisions of Sec. 194C are clearly applicable in the case of the Assessee. - Decided in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax deduction at source. They would also be liable to deduct TDS while making payment to a carrier of goods. In question no. 30 in the same very circular, the Board clarified that Sec. 194C and 194J referred to any sum paid. The AO was of the view that as per the amended provisions of Sec. 194C the Forwarding Clearing agents come within the purview of service contractors/transport contractors. The AO noted that the Assessee has made the following payments towards the freight to Forwarding Clearing agents. IMG The AO therefore disallowed sum of ₹ 73,21,304/- by applying provisions of Sec. 40(a)(ia). The Assessee went in appeal before CIT(A). CIT(A) deleted the disallowance by observing as under : 8. I have gone through the assessment order and the submission of the appellant. The A.O. has made disallowance u/s 40(a)(ia)as the assessee has not deducted tax at source on payment made to the clearing and forwarding agents. The A.O. has held that in view of the amended provisions u/s 194C and CBDT circular No.715, dated 8/8/1995, wherein the work includes carriage of goods and passengers by any mode other than railways and transport contract shall include the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount paid by the Assessee through the cheque is also ₹ 2,05,660/- and not ₹ 1,25,272/-. The invoice nowhere states that it represents reimbursement of the air freight but it is the invoice made by Jet Air Freighters. This document, in our opinion, does not prove that the Assessee has reimbursed the air freight paid by the C F agent. The bills raised by Jet Air Freighters are directly in the name of the Assessee. In view of these facts, we do not agree with the contentions of the Assessee. The onus, in our opinion, lies on the Assessee to prove that the payment made by it to the C F agent represents the reimbursement and not the amount paid for any services rendered by them. 6. We have also gone through Circular no. 715 dt. 8.8.1995. We noted that in reply to question no. 7 the CBDT has opined as under (relevant extract is reproduced) : Question 7 : Whether a travel agent/clearing and forwarding agent would be required to deduct tax at source from the sum payable by the agent to an airline or other carrier of goods or passengers ? Answer : The travel agent, issuing tickets on behalf of the airlines for travel of individual passengers, would not be required to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . P.P. Overseas, 2011-TOIL-440-ITAT-MUM we noted that the Mumbai Bench of the Tribunal took the view that the provisions of Sec. 194C are not applicable. In this case we noted that the Tribunal after interpreting the nature of the business and the services rendered by the contractor took the view that the contract between the Assessee C F agent is a service contract which has not been specifically included in Explanation III below Sec. 194C. Therefore, they took the view that the provisions of Sec. 194C are not applicable to the payment made to C F agent. Under Explanation IV to Sec. 194C work does not include carriage of goods and passenger by Railways while in this case the carriage of the goods was by railways. This decision, therefore, will also not assist the Assessee. 9. In the case of ITO vs. M/s. ONS Creations Pvt. Ltd., the Delhi Bench of the Tribunal vide its order dt. 13.5.2011 gave a finding that amount claimed by the forwarding agent represents reimbursement of actual amount on the basis of separate bills raised by them. This decision, therefore, will also not assist the Assessee. 10. We have also gone through the decision of CIT vs. Opera Global Pvt. Ltd., 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court has simply held that it is not a fit case where special leave petition should be granted. The same principle will not apply in a case where a civil appeal is dismissed by the Supreme Court holding that the appeal has no merit. In our opinion, when once a civil appeal is dismissed after hearing the parties by the Supreme Court holding that the appeal has no merit then such order becomes one which attracts article 141 of the Constitution, which provides that the law declared by the Supreme Court shall be binding on all the courts within the territory of India. We, therefore, do not agree with the observations made by the Bench in the order dt. 22.12.2014 in the case of M/s. Arcadia Share Stock Brokers Pvt. Ltd. vs. DCIT. 12. We noted that this question had arisen before the Special Bench of this Tribunal in Merilyn Shipping Transports vs. Addl. CIT, 16 ITR (Trib) 1 in which the Special Bench took the view that the provisions of Sec. 40(a)(ia) is applicable only in respect of the amount remains payable on the last day of the financial year. When the matter went before the Hon'ble Andhra Pradesh High Court, Their Lordships vide interim judgement stayed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the effect of the so-called representations made by the professional bodies. The Learned Tribunal held that Section 40(a)(ia) of the Act creates a legal fiction by virtue of which even the genuine and admissible expenses claimed by an assessee under the head income from business and profession : if the assessee does not deduct TDS on such expenses are disallowed . Having held so was it open to the Tribunal to seek to justify that this fiction cannot be extended any further and, therefore, cannot be invoked by Assessing Officer to disallow the genuine and reasonable expenditure on the amounts of expenditure already paid ? Does this not amount to deliberately reading something in the law which is not there? We, as such, have no doubt in our mind that the Learned Tribunal realized the meaning and purport of Section 40(a)(ia) correctly when it held that in case of omission to deduct tax even the genuine and admissible expenses are to be disallowed. But they sought to remove the rigour of the law by holding that the disallowance shall be restricted to the money which is yet to be paid. What the Tribunal by majority did was to supply the casus omissus which was not permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eductible at source under Chapter XVII-B. Once this is realized nothing turns on the basis of the fact that the legislature used the word payable‟ and not paid or credited‟. Unless any amount is payable, it can neither be paid nor credited. If an amount has neither been paid nor credited, there can be no occasion for claiming any deduction. The language used in the draft was unclear and susceptible to giving more than one meaning. By looking at the draft it could be said that the legislature wanted to treat the payments made or credited in favour of a contractor or sub-contractor differently than the payments on account of interest, commission or brokerage, fees for professional services or fees for technical services because the words amounts credited or paid were used only in relation to a contractor or sub-contractor. This differential treatment was not intended. Therefore, the legislature provided that the amounts, on which tax is deductible at source under XVII-B payable on account of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or to a contractor or sub-contractor shall not be deducted in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and thus the question of law as framed does not arise for consideration in the appeal. In plain words, what their Lordships did was simply rejection of the question of law proposed by the Income Tax Department by observing that this question of law does not arise for consideration in the appeal. 14. On this, the Agra Bench of the Tribunal in the case of DCIT vs. Gupta Overseas in ITA No. 1961 for A.Y 2008-09 observed as under : 35. Having noted the above, we must also take note of the fact that there is indeed an observation of their Lordships to the effect that this is to be noted, for disallowing expenses from business or profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year but such an observation may probably stem from the fact that apparently the Income-tax Department did not question the law laid down by the Special Bench in the case of Merilyn Shipping and Transports v. Addl. CIT [2012] 16 ITR (Trib) 1 (Vishakapatnam) [SB] and that is precisely what the Special Bench had held. In these circumstances, the question that we should normally ask ourselves is whether we should proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of understanding, which included contract, the provisions of section 40(a)(ia) of the Act were attracted. As their Lordships observed in unambiguous words, this question did not arise from the Tribunal's order and that was the reason why their Lordships decline to consider the same. As observed by the hon'ble Supreme Court in the case of CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297 (SC) (page 320) : the judgment must be read as a whole and the observations from the judgment have to be considered in the light of the question which were before this court and that a decision of this court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this court, to support their reasoning . What was thus expressed for analysing decision of the hon'ble Supreme Court must equally apply in analysing of the hon'ble High Court's judgment. It could thus be, by this sch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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