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TMI Blog2022 (4) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... (ia) for non-deduction of TDS on reimbursement of Transport charges aggregating to Rs. 31,59,665/- and CFS charges paid aggregating to Rs. 24,01,000/-. 2. The Learned Commissioner of Income Tax (Appeals) failed to note that the Assessing Officer has not properly carried out the directions of the Hon'ble ITAT in ITA No.1873/2012 and 190/2012 dated 18/4/2013. 3. The Commissioner of Income Tax (Appeals) ignored the law laid down by courts of law that Transport charges and CFS charges paid before the end of relevant previous year cannot be disallowed in terms of section 40 (a) (ia) for non-deduction of Tax at source. ("Paid"/ payable"). 4. The Commissioner of Income Tax (Appeals) erred in holding that Assessee had admitted that shortfall in TDS is paid in the next Financial Year ignoring submissions made to the contrary in the fresh assessment (under appeal) in giving effect to the order of Hon'ble ITAT. 5. The Commissioner of Income Tax (Appeals) ignored to properly deal with the objection raised by Assessee that provisions of section 40 (a) (ia) are not applicable to reimbursement of Transport charges and CFS charges paid before the end of relevant previous year. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are one and the same. Therefore, the AO disallowed payments made towards CFS charges for Rs. 24,01,000/- u/s.40(a)(ia) of the Act for non-deduction of TDS u/s.194C of the Act. The assessee carried the matter in appeal before the First Appellate Authority, but could not succeeded. The Ld.CIT(A), for the reasons stated in his appellate order dated 01.03.2017, sustained the additions made by the AO and rejected the ground taken by the assessee. 4. The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in not appreciating the fact that the assessee is not required to deduct TDS on payments made towards CFS charges, because said payments are in the nature of reimbursement of expenses, which is outside the scope of provisions of Sec.194C of the Act. The assessee had also made an alternative argument without prejudice to the above argument and submitted that, if at all, disallowance is required to be made u/s.40(a)(ia) of the Act, then only 30% of total expenditure incurred by the assessee without deduction of TDS, has to be made, because, the amendment made to provisions of Sec.40(a)(ia) of the Act by the Finance Act, 2010, is held to be retrospective in nature and apply to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe of Sec.194C of the Act. We further noted that the very same issue is covered by the decision of ITAT, Chennai, in the case of M/s.Prahari Agency Pvt. Ltd. v. ITO in ITA No.1701/Chny/2018 vide order dated 20.10.2001, wherein, the Tribunal had considered identical issue of payment made by custom house agent to CFS agents and held that provisions of Sec.194C of the Act, is applicable when the Custom House Agent makes payment to CFS Agents. The relevant findings of the Tribunal are as under: 9. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The assessee is in the business of clearing agent, has rendered services to their clients and made direct payment to shipping companies/CFS Agents for services rendered to their clients. The assessee has raised bills to his clients in two parts, (i) a bill for service charges towards services rendered by them along with other payments (ii) a debit not for reimbursement of other charges paid by the assessee on behalf of their clients as an intermediary for the clients and which are backed by specific invoices raised by service providers to their clients. The assessee has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be deducted, it shall be deducted by its client but not the assessee is also not correct, because, service provider does not have had an occasion to deduct TDS. In fact, payment made by the assessee to shipping companies is reimbursement in the hands of the clients and thus, there may be no occasion for the recipient of services to withhold tax on such payments. The concept of reimbursement of expenses will come into operation only when someone made payments on behalf of the assessee and assessee reimburse such expenditure. In this case, it is not so. In fact, the assessee has made payments on behalf of their clients and thus it is reimbursement for their client. In our view, the assessee being a payer directly to the shipping companies/CFS Agents ought to have deducted TDS while making the payment although such payments was made on behalf of their clients. Therefore, we are of the considered view that there is no merit in the arguments of the assessee that payments made to shipping companies/CFS Agents is in the nature of reimbursement for which TDS liability cannot be pinned on the assessee. In the present case, since, the assessee has made payments on behalf of their client ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be disallowed, then only 30% of expenses needs to be disallowed, but not the total amount paid by the assessee without deduction of TDS. We find that the provisions of Sec.40(a)(ia) of the Act, has been amended from time to time to give relaxation to the assessee for not complying with TDS provisions. The said amendments have been considered by various Courts, including the Hon'ble Supreme Court in the case of CIT v. Calcutta Export Co., and held that amendment made by the Finance Act, 2010 to provisions of Sec.40(a)(ia) of the Act, is curative in nature and should be given retrospective operation from the date of insertion of the provision i.e. w.e.f. AY 2005-06. Since, provisions of Sec.40(a)(ia) of the Act, has been amended so as to disallow 30% of any sum payable on which tax is deductible at source under Chapter-XVIIB and such tax has not been deducted or after deduction, has not been paid on or before the due date specified in sub-sec.(1) of sec.139 of the Act, and such amendment is held to be retrospective in nature and applicable from AY 2005-06. Therefore, we are of the considered view that only 30% of expenses incurred by the assessee without TDS should be disa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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