Income Tax Appellate Tribunal - Ahmedabad
The Ito, Ward-10(1),, Ahmedabad vs M/S. Aashirwad Clearing Agency, ... on 11 May, 2018
ITA Nos.1174 & 1284/Ahd/2013
Assessment Year: 2009-10
Page 1 of 6
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD 'B' BENCH, AHMEDABAD
[Coram: Pramod Kumar AM and Mahavir Prasad JM]
ITA No.1174/Ahd/2013
Assessment Year: 2009-10
Aashirwad Clearing Agencies, ..............................Appellant
101, Shahjanand Complex,
B/h. Bhagwati Complex,
C.G. Road,
Navrangpura,
Ahmedabad - 380 009.
[PAN : AAFFA 6440 D]
Vs.
Income Tax Officer,
Ward - 10(1), Ahmedabad. ............................Respondent
ITA No.1284/Ahd/2013
Assessment Year: 2009-10
Income Tax Officer,
Ward - 10(1), Ahmedabad. .................................Appellant
Vs.
Aashirwad Clearing Agencies, .............................Respondent
101, Shahjanand Complex,
B/h. Bhagawati Complex,
C.G. Road, Navrangpura,
Ahmedabad - 380 009.
[PAN : AAFFA 6440 D]
Appearances by
Ankit Talsania, for the assessee
Mudit Nagpal for the Revenue
Hearing concluded on: 14.02.2018
Order pronounced on : 11.05.2018
O R D E R
Per Pramod Kumar, AM:
ITA Nos.1174 & 1284/Ahd/2013 Assessment Year: 2009-10 Page 2 of 6
1. These cross appeals challenge correctness of the order dated 15th February 2013 passed by the learned CIT(A), in the matter of assessment under Section 143(3) of the Income Tax Act, 1961, for the assessment year 2009-10.
2. Grievances raised by the parties are as follows:-
Grievance raised by the assessee:
"The ld. CIT(A) has erred in law and on fact in confirming addition of Rs.7,66,775/-, out of total addition of Rs.139,76,847/- on the alleged ground that the appellant has failed to reconcile the figures between the figure recorded in the AIR statement and Books of Accounts. It is therefore, prayed that addition so sustained may kindly be deleted."
Grievance raised by the Assessing Officer:
"1) The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,32,10,072/- without considering the findings brought out by the AO.
2) The Ld. CIT(A) has also erred in law and on facts, in not considering the provisions of Sec. 198 which says, "All sums deducted in accordance with [the foregoing provisions of this chapter i.e. chapter-XVII] shall, for the purpose of computing the income of the assessee, be deemed to be income received."
3. Briefly stated, the relevant material facts are as follows. The assessee is engaged in the business of clearing and forwarding agency and transportation business. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that there are variations in figures of receipts as shown by the assessee vis-à- vis the figures as available with the help of AIR information gathered by the Income Tax authorities. When assessee was confronted with these discrepancies, it was submitted by the assessee that certain reimbursements have been included, in deduction of tax at source computations, in the amounts from which taxes have been deducted at source, and, consequently, reported to the Income Tax authorities. The assessee also placed on record a reconciliation statement. The Assessing Officer rejected the said explanation and proceeded to add entire amount of difference, i.e. Rs.1,39,76,847/-, to the income of the assessee. Aggrieved, assessee carried the matter in appeal before the ld. CIT(A). In a very well reasoned order, learned CIT(A) accepted the explanation of the assessee, except to the extent of Rs.7,66,775/-, by observing as follows:
"3.2 I have carefully considered the facts of the case in the light of assessment order passed by the AO, and the submissions made by the appellant. The appellant is primarily engaged in the business of providing clearing and forwarding services or what is popularly known as C & F Agent, ITA Nos.1174 & 1284/Ahd/2013 Assessment Year: 2009-10 Page 3 of 6 to its clients engaged in the business of import / export or other businesses where goods are required to be transported in or out from one point to another. Thus, the appellant facilitates to and for movement of clients goods both inland and overseas, using road, rail, air and sea routes, including temporary storage of the same in custom bonding warehouses for legal / procedural purposes. To provide the services, the appellant, on behalf of its clients, avails services of agencies like Container Corporation of India (Concord), Central Warehousing Corporation (CWC) and several shipping companies as per clients requirement The appellant charges a specific amount of commission / handling charges for rendering the services to its clients. The appellant has informed that in course of its business on behalf of its clients it makes payments to agencies mentioned supra which are reimbursed by the respective clients along with appellants agency commission / handling charges. The amount of reimbursement expenses are raised by the appellant through debit notes and the commission / agency charges are credited in his books as income in the P & L A/c. On perusal of the facts of the case, it is noted that the only controversy is as to whether the amounts of monies of Rs.1,39,76,847/- received by the appellant from his clients as reimbursement of expenses incurred on behalf of such clients can be treated as income of the appellant or not. There is no dispute that the amounts of monies have been claimed by the appellant from his clients by way of debit note and that the said amounts have not been routed through its P & L A/c. In support of its contention, in its paper book the appellant has filed copies of bills and vouchers which indicate that the party which had provided the services to the appellants client and to whom the appellant had made the payment, had in the bill indicated the name of appellants client and not that of appellant. Thus, the fact that the amounts have been incurred by the appellant for and on behalf of its clients gets evenly established The argument of the AO that the appellant has not deducted TDS at the time of making payments to parties for and on behalf of its clients is ill-founded since it is a settled principle of law that TDS is not to be effected in cases of reimbursement of expenses. Similar view to this effect has been held by Hon'ble Bombay High Court in the case of CIT vs. Information Architects 322 ITR 1 (2010). Again, the same was reiterated by Hon'ble ITAT Jodhpur Bench in the case of ACIT vs Minpro Industries 143 TTJ (JD) 331 (2012) holding that matters involving C & F agents, TDS provisions are not attracted on transaction involving on reimbursement expenses. Consequently, the blame of non deduction of TDS cannot be attached to the appellant. There do not exists an contractual relationship between the appellant and such parties and hence TDS provisions of the Act are not attracted. Further TDS provisions are only attracted in a case wherein amounts of monies are routed through P&L accounts which has not been done in this case. In this case the appellant is merely an facilitator between his clients and such agencies In the remand report of the AO mentioned supra, the AO has clearly and categorically indicated that 'the appellant is maintaining separate accounts for agency charges and the reimbursement expenses which are recorded through debit notes. The AO in the impugned report has clearly stated that 'the payments received against debit notes are reimbursement and the payments received against invoices are its income' The AO has in the remand report thus accepted that only the agency charges is the income of the appellant.
ITA Nos.1174 & 1284/Ahd/2013 Assessment Year: 2009-10 Page 4 of 6 The argument of the AO taken in the assessment order are thus, untenable. In this regard, it is seen that it has been held by several Hon'ble courts that amounts of monies received on account of reimbursement expenses cannot be treated as income of the recipient. In the case of CIT vs Information Architects 322 ITR 1, Hon'ble Bombay High Court was to decide whether amounts of monies paid by an employer to his employee in the nature of reimbursement of expenses would constitute salary in the hands of employee or not Hon'ble High Court held that reimbursement of expenses do not partake the nature of income and hence would not be categorized as income under the head salary in the hands of the employee Drawing an analogy to the present case, the amounts of monies received by the appellant from his clients would not assume the character of income in appellants hand It is further seen that Hon'ble jurisdictional ITAT in the case of ITO vs Hans Road Carriers Pvt Ltd ITA No 1792/Ahd/2007 have held that "the deduction of tax on income does not ipso facto declare that the amount referred to in the TDS certificate is subject to Tax on the whole figure that too on the same year mentioned in the certificate and further an income of a tax payer is not required to be computed merely w.r.t. the TDS certificate but assessment of an income is altogether an independent exercise "further, in the case of Heto Cosntruction Pvt. Ltd. vs. ACIT. ITA No 218/Ahd/2009, it was held that "An observation at this stage can be made that the provisions relating to Tax Deduction at Source are not the provisions for the computation of income. An income of a taxpayer is not required to be computed merely with reference to the TDS Certificate but assessment of an income is altogether an independent exercise. With this understanding of law if we compare the facts of the case, and then it is evident that the amount which was certified on the TDS Certificate could or could not have been subject to tax in the hands of the assessee-recipient. The deductor had chosen safe procedure of deduction of tax on the entire amount of freight. Otherwise the freight was to be paid to the truck owners and not to the assessee-company, who is only a conduit in arranging the hiring of the trucks. The freight was to be passed on to the trucks owners, therefore, the freight was not subject to tax in the hands of the assessee. Nevertheless, accounts of the assessee have also demonstrated the same. With the result, the amount on which the TDS was deducted had not matched with the figures of the income disclosed by the assessee in respect of those transactions. Such a business transaction can be dealt with in two ways; i.e. either to be treated as the receipts with overriding liability or secondly that the freight receipts were subject to the expenditure of freight charges to be paid to the truck-owners. On appreciation of the facts, the transaction in question had fallen in first category." Thus the reimbursement of expenses received by the appellant from his clients, received on account of debit notes for which separate accounts has been maintained by the appellant and which had not been routed through the P & L A/c., cannot be regarded as the income of the appellant available for taxation during the year under consideration i e A Y 2009-10. The action of the AO in making the impugned addition of Rs 1,39,76,847/- thus suffers from the vice of inappropriate understanding of the facts of the case and incorrect application of law Having said that it is equally important to note that in the chart submitted by the appellant which has been reproduced at para-3.1 above, there are certain differences of amounts appearing in the information ITA Nos.1174 & 1284/Ahd/2013 Assessment Year: 2009-10 Page 5 of 6 available in the AIR module and in the books of the appellant which appellant has failed to reconcile with any evidence whatsoever. The total amount of differences, as per appellants own calculation comes to Rs.7,66,775/- . Since this amounts represents a failure on part of the appellant, to submit a complete reconciliation of figures between the AIR and its books of accounts the same cannot be allowed. Accordingly, the addition made by the AO is confirmed to the extent of Rs.7,66,775/- only and the ground of appeal No.1 is partly allowed."
4. None of the parties is satisfied by the order of the learned CIT(A). While Assessing Officer is aggrieved of the relief granted by the learned CIT(A) to the assessee, the assessee is not satisfied with learned CIT(A) confirming the addition to the extent of Rs.7,66,775/-. Both the parties are in appeal before us.
5. We have heard the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
6. We have noted that the assessee has duly explained variations in the figures of the AIR and the figures disclosed by the assessee. The mere fact that a person making payment of reimbursement claim deducts tax at source does not convert the reimbursement into income. Various co-ordinate benches of the Tribunal, such as in the cases of ITO vs. Hansa Road Carriers Pvt. Ltd. [(2011) 45 SOT 149 (Ahd)] and Hetu Construction Pvt. Ltd. vs. ACIT (ITA No.218/Ahd/2009; order dated 04.03.2011); have held so. In this view of the matter, and having noted that no specific information are pointed out in the reconciliation statement filed by the assessee, we approve very well reasoned findings of the learned CIT(A) and decline to interfere in the relief granted by the CIT(A). However, so far as the additions of Rs.7,66,775/- is concerned, we have noted that there is no explanations whatsoever for these variations and the assessee has not really challenged the basis of AIR inputs. In this view of the matter, to this extent, confirmation of additions of Rs.7,66,775/- is indeed justified. We, therefore, confirm this action of the Assessing Officer.
7. In the result, both the appeals are dismissed. Pronounced in the open court today on the 11th May, 2018.
Sd/- Sd/-
Mahavir Prasad Pramod Kumar
(Judicial Member) (Accountant Member)
Dated: 11 th May, 2018
ITA Nos.1174 & 1284/Ahd/2013
Assessment Year: 2009-10
Page 6 of 6
PBN/*
Copies to: (1) The appellant (2) The respondent
(3) CIT (4) CIT(A)
(5) DR (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad