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TMI Blog2020 (5) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... on record suggesting that earlier TDS certificate issued by the AO for ₹ 50 lakhs was substituted by ₹ 1.50 crores. Thus it is transpired that the TDS certificate issued by the AO up to ₹ 2 crores whereas the payment was made less than ₹ 2 crores. Payment in the given case does not exceeds the limit as specified in the TDS certificate. Hence the ground of appeal of the revenue is dismissed. TDS u/s 194C/195 - addition u/s 40 (a)(ia) - terminal handling charges on account of non-deduction of TDS - Applicability of provisions of section 172(8) - HELD THAT:- Handling charges were recovered/received by the agents of the non-shipping companies as evident from the invoice issued by them which are placed. There is a Circular issued by the CBDT. The said Circular No. 723, dt. 19th Sept., 1995 states that where the provisions of s. 172 are to apply, the provisions of ss. 194C and 195 relating to tax deduction at source are not applicable. We also find that handling charges paid to the non-shipping companies also covered under the provisions of section 172(8) DR at the time of hearing has not brought anything on record suggesting that the handling charges w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts in deleting the addition of ₹ 1,98,07,861/- on account of processing charges. 2. The Ld. CIT(A)-IV, Rajkot has erred in law and on facts in deleting the addition of ₹ 1,29,22,949/- on account of Terminal handling charges disallowed uls 40(ia). 3. The Ld. CIT(A)-IV, Rajkot has erred in law and on facts in deleting the addition of ₹ 26,69,502/- on account of unpaid liabilities uls 41(1). 4. The Ld. CIT(A)-IV, Rajkot has erred in law and on facts in partly deleting the addition on account of car motor bike expenses ₹ 83452/-, telephone postage expenses ₹ 1,15,2671- travel conveyance expenses ₹ 58,9201-. 5. Any other ground that the revenue may raise before or during hearing proceedings before the Hon'ble ITA T. 6. It is therefore, prayed that the order of the CIT-IV, Rajkot may kindly be set-aside and that of Assessing Officer be restored., 2. The 1st issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition made by the AO for ₹ 1,98,07,861/- towards the processing charges on account of non-deduction of TDS. 3. The facts in brief are that the assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment framed under section 143(3) of the Act. Similarly transaction was also made by the assessee with respect to other parties but there was no disallowance made by the AO. ii. The premises of the processes were registered under the Marine Products Export Development Authority Rules 1972 and furthermore the name of the party was also appearing in the export invoices raised by the assessee. iii. There was no doubt by the AO for the purchases and the quantities procured from the said party which was subsequently sold in the export market. iv. The authorized representative of M/s Cham trading organization has accepted to have received the payment towards the plant higher charges as per the agreement. Thus, the statement suggests that there was the agreement between the assessee and M/s Cham trading organization. Furthermore, there was the clear direction by M/s Cham trading organization to make the payment to its partner as discussed above. Thus the finding of the AO is contradictory. The AO on one hand is denying the genuineness of the expenses but on the other hand admitting the fact that the assessee has paid plant higher charges. v. There was no finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s implied that the AO has accepted the plant hiring charges paid by the assessee to the party. Thus, the finding of the AO in itself is contradictory in the given facts and circumstances. Therefore we are reluctant to make any reference to such finding of the AO. 8.2 We also note that the assessee has made the payment to the partner of M/s Cham trading organization under the instruction. Merely, the payment made to thirdparty under the instruction of the main party cannot be ground to make the disallowance of the expenses. Furthermore, the Shri Ramjibhai Kanji bhai is representing the partnership firm in the capacity of the partner. Thus, payment to the partner cannot be a ground for making the disallowance. 8.3 We also note that there was no documentary evidence brought on record suggesting that earlier TDS certificate issued by the AO for ₹ 50 lakhs was substituted by ₹ 1.50 crores. Thus it is transpired that the TDS certificate issued by the AO up to ₹ 2 crores whereas the payment was made less than ₹ 2 crores. Accordingly we hold that the payment in the given case does not exceeds the limit as specified in the TDS certificate. Hence the ground o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 195 will not apply. Sec. 172(8) lays down that for the purposes of Sec. 172, the amount referred to in sub-section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature. In the case law relied upon it is held that inland haulage charges and charges for transportation of cargo by feeder vessels from Indian port to the mother vessel where there is a link between the two would also form part of the profits from operation of ships in international traffic in various double tax agreements and are also not subject to TDS by virtue of Sec. 172. In the case of the appellant it is seen that there is no distinction anywhere or separate contracts for transport of cargo inland and overseas, unlike what is sought to be made out by the Assessing Officer. I find force in the submissions that there is a single and composite contract for transportation of export containers by the appellant with the non-resident shipping companies for which a single debit note is raised for the total work. Further, as explained in the case law cited, amount of handling charges are small percentage of total freight. I also agree with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies. In view of the above, we hold that the assessee was not liable to deduct the TDS under the provisions of section 194C/195 of the Act. Hence the ground of appeal of the Revenue is dismissed. 14. The next issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO for ₹ 26,69,502/- on account of unpaid liabilities under section 41(1) of the Act. 15. The assessee in its balance sheet as on 31 March 2008 has shown certain liabilities as detailed under: Sr.No. Name of the party Opening CR balance Closing CR balalnce 1. Maersk India Pvt. Ltd. Ahmedabad ₹ 24,76,700/- ₹ 24,76,700/- 2. Rafique Mahmad Malek, Veraval ₹ 1,92,802/- ₹ 1,92,802/- Total ₹ 26,69,502/- ₹ 26,69,502/- 15.1 As per the assessee, the aforesaid parties have supplied the goods of inferior quality, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal before us. 17. Both the learned DR and the AR before us relied on the order of the authorities below as favourable to them. 18. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute about the fact that the liability shown by the assessee has not ceased to exist in its books of account and the same is very much reflected in its balance sheet. Therefore, in our considered view, the same cannot be added to the total income of the assessee u/s 41(1) of the Act until and unless it is not written off in the book of accounts. In this regard, we find support and guidance from the order of Hon ble ITAT in the case of Opto Audio Electronics Products Pvt. Ltd. Vs. ITO in ITA No.592/Kol/2008 for the A.Y 2002- 03 vide order dated 25.05.2012 wherein it was held as under: 4. We have heard the rival contentions and gone through facts and circumstances of the case. We find that assessee has disclosed sundry creditors to the extent of ₹ 15,34,818/- as on 31.03.2002. The AO required assessee to file complete name and addresses and on the given address notice issued by AO u/s 133(6) of the Act returned unse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 95,610/-. As the assessee could not substantiate the sundry creditor ARC Infotech Private Limited which was outstanding as on 31.03.2002 the AO made the addition but assessee has never made any write off of this liability in its books of account. Similar are the facts in the present issue as in the above issue of sundry creditors, hence taking a consistent view we delete this addition. 6. As regards to the liability of ₹ 54,918/- on account of commission payable to Shri Narendra Kumar Duggar, it is also a fact that this liability is outstanding and it pertains to financial year 1997-98 relevant to A.Y.1998-99 and this liability does not pertain to the relevant assessment year 2002-03. The facts are exactly identical to the facts of the first issue of sundry creditors. Hence taking a consistent view, we delete this addition. 18.1 We also find support and guidance from the judgment of Hon ble Gujarat High Court in the case of PCIT Vs. Matruprasad C. Pandey reported in 377 ITR 363 wherein it was held as under: However, it is required to be noted that as such those sundry creditors mentioned in the balance sheet of the assessee were shown as sundry cred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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