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TMI Blog2016 (5) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... h the shipping lines, arrangement of labour for upholding unloading cargo, etc. The major area of activity of the assessee is custom clearance which involved clearing of goods from docks/airports. As stated, major clearing work is conducted from the Jawaharlal Nehru Port Trust and Bombay Port Trust and payments were made to Port Authorities/Port Trust Authorities, Airport Authorities and Container Freight Station (CFS) on behalf of its principal. For the service rendered the assessee earns agency commission which is offered as income. For the assessment year under consideration, the assessee filed its return of income on 22nd September 2010, declaring total income of Rs. 18,74,970. In the course of assessment proceedings, the Assessing Officer after verifying the computation of income, Profit & Loss account, Balance Sheet forming part of tax audit report noticed that the assessee has earned gross income from agency commission of Rs. 83,47,952 during the year and after claiming expenditure and remuneration to partners, net profit amounted to Rs. 18,75,468. On verification of the financial statements of the assessee, the Assessing Officer noticed that during the relevant previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the obligation of the assessee to deduct tax at source while making such payment. He also rejected the contention of the assessee that CFS/ICD being Government and Semi Government bodies there is no requirement of deduction of tax at source. Thus, on the aforesaid reasoning, the Assessing Officer disallowed an amount of Rs. 3,28,88,794 by invoking the provisions of section 40(a)(ia). Being aggrieved of such disallowance, assessee preferred appeal before the learned Commissioner (Appeals). 4. Learned Commissioner (Appeals) after examining the submissions of the assessee in the context of facts and material on record, found that the payment made by the assessee to the CFS/ICD were on behalf of its clients as a custom house agent. He noticed, the Assessing Officer has himself noted that the assessee has made payments to the CFS and ICDs for/on behalf of his clients. He also noticed that the assessee has raised separate bills towards expenditure actually incurred on behalf of the client and a separate bill for agency commission on account of services rendered. The learned Commissioner (Appeals) was of the view, when there is no dispute that the assessee has made the payments on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry bills and vouchers in support of the payments made but has also furnished all relevant details to co-relate each item of expenditure/payment made to CFS/ICD to the imports made by the clients. In this context, he drew our attention to the information submitted before the Assessing Officer in the course of assessment proceedings, indicating the name of importers, details of imports, duty payment, container name, details of storage in CSF/ICD, etc. He submitted, the Assessing Officer has not found anything adverse in the documents submitted by the assessee and in fact accepted that the assessee is acting as a clearing agent on behalf of the importer while making such payment to CFS/ICD, but at the same time he has concluded that the assessee was required to deduct tax at source on such payments. Learned Authorised Representative submitted, in fact, the assessee raises separate bills on its clients one for reimbursement of cost / expenditure actually incurred on behalf of the importers and second one is for agency commission. To demonstrate such fact, the assessee drew our attention to the copies of the bills raised. Learned Authorised Representative finally submitted the issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de to CFS/ICD operating under JNPT/BPT. On a perusal of the relevant details / documentary evidences, it is found that before the Assessing Officer, the assessee has not only produced the bills raised by the CFS/ICD on the assessee but also the bills raised by the assessee on the importers towards expenditure incurred on behalf of them. It is also noticed, in the final invoice drawn by the CFS/ICD submitted before the Assessing Officer all particulars of transactions were noted such as importer's address, liner code, vessels particulars of transaction, vessels' name and item code, description, rate charged, etc. These facts prove that the payment made by the assessee to the CFS/ICD were for/on behalf of importer of goods to whom the assessee rendered services as custom house agent. In fact, on a perusal of the observations made in the assessment order would reveal that the Assessing Officer has also accepted the fact that the assessee has made the payments to CFS/ICDs on behalf of its clients/importers as a custom house agent. The only reason for which the Assessing Officer has treated the payments to be subject to deduction of tax is, the assessee has directly paid them to the CFS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding identical issue of applicability of TDS provisions to payments made by a custom house agent on behalf of importers held as under:- 9. We have considered submissions of ld representatives of parties and orders of authorities below. 10. During the course of hearing, ld D.R. has not disputed the fact that assessee received the said payment aggregating to Rs. 18,79,38,741 on account of reimbursement of expenses from its clients apart from agency commission and the agency commission has been considered as assessee's income and the same is reflected in its profit and loss account. Assessee has adjusted reimbursement of the expenses received on behalf of its clients and, therefore, we agree that the same do not constitute part of assessee's income. We observe that similar issue was considered by the Delhi Tribunal by its order dated 1.8.2012 in the case of Jay Kay Freighters Pvt Ltd (supra) and it was held that the amount mentioned in the bill raised by shipping companies on ultimate consumer were initially paid by the assessee and, thereafter assessee got reimbursed the said amount from its client including the charges of the assessee for service rendered. Therefore, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters/exporters on the other. The contract is between the parties and not with the agent. The invoices and other shipping documents are in the names of importer/exporter and the assessee merely receives funds and disburses to the airline/shipping lines till clearance by the customs. The statutory warehousing charges is also the sole liability of the clients and the assessee merely defrays the expenses on behalf of the clients, thus, the assessee/agents are not liable to deduct tax u/s 194C of the Act. Thus, it is unjustified on the part of the Assessing Officer to hold the assessee as "assessee in default". The privity of contract is between the clients and not with the assessee. There was no contract between the assessee and the authorities rather the assessee is working as a facilitator/agent between the parties and the authorities. It is well understood that TDS is deductable u/s 194C on the payments made to the contractors/ sub-contractors thus the basic premise for deducting tax is on the contracting parties. In the absence of any contractual relationship between the assessee and airlines/shipping lines/Authorities the assessee agent is not liable to withhold tax/deduct tax u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is merely acting as intermediator for the smooth clearance on behalf of the clients. Identical is the situation for crane/fork lift charges. Reliance can be placed upon the decision in ACIT vs Accenture Services (P) Ltd. (Mumbai Bench of the Tribunal) and GIRDCO Ltd. vs ACIT (Cuttack Bench of the Tribunal). Respectfully following the decisions discussed hereinabove and also discussed in the impugned order, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income tax (Appeals). The impugned orders are upheld." 10. The other decisions of the Tribunal also express similar view. Thus, applying the ratio laid down in the decision referred to above, we hold that the assessee having made the payments on behalf of its clients, there is no liability to deduct tax at source on the assessee. Consequently, no disallowance under section 40(a)(ia) can be made for alleged failure of the assessee to deduct tax at source on the payment made on behalf of the importers / clients. Therefore, finding no infirmity in the order of the learned Commissioner (Appeals), we uphold the same by dismissing the ground raised by the Department. 11. In the result, Department's appeal is dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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