Mehta Exports , vs Assessee

ी जो ग दर संह, या यक सद य एवं ी ी संजय अरोड़ा, लेखा सद य के सम । BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARORA, AM

व वध आवेदन सं./MA No. 326/Mum/2014 (Arising out of ITA No. 7321/Mum/2010) ( नधारण वष / Assessment Years: 2007-08) Mehta Exports, Addl. CIT, B-9, Viral Apartments, Opp. Shoppers बनाम/ Range 20(2), Stop, S. V. Road, Andheri (W), Vs. Mumbai Mumbai-400 059 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAAFM 1566 B (Applicant) : (Respondent) Applicant by : Shri H. N. Motiwalla & Shri Piyush Chhajed Respondent by : Shri Jitendra Kumar

ु वाई क तार ख / सन : 10.10.2014 Date of Hearing घोषणा क तार ख / : 09.01.2015 Date of Pronouncement आदे श / O R D E R Per Sanjay Arora, A. M.:

This is a miscellaneous petition by the Assessee arising out of the Order u/s. 254(1) of the Income Tax Act, 1961 ('the Act' hereinafter) by the Tribunal dated 28.08.2013, deciding the assessee's appeal for the assessment year (A.Y.) 2007-08 in the captioned appeal.

2. It would be relevant to recount the background facts and circumstances of the case. The present application is qua the first two grounds of the assessee's appeal before the tribunal, which are reproduced as under:

'1. On the facts and in the circumstances of the case without appreciating that the said payments were made towards the bills for 2 MA No. 326/Mum/2014 (A.Y. 2007-08) Mehta Exports vs. Addl. CIT

reimbursement of actual expenses incurred by the Clearing and Forwarding Agents which is not covered by section 194C and hence there cannot be any disallowance u/s. 40a(ia).

2. The learned Commissioner of Income-tax (Appeals) erred in confirming disallowance of Rs.15,30,1501- u/s. 40a(ia), without appreciating that the said payments were made towards the bills for reimbursement of actual expenses incurred by the Clearing and Forwarding Agents and therefore, were directly covered by the judgement rendered in case of Dr. Willmar Schwabe India Pvt. Ltd. 95 TTJ 53 (Del).'

The assessee, an exporter, made payments during the relevant year to two clearing and forwarding (C & F) agents, viz. Monarch Shipping Services and Mahendra Shipping Agency, at Rs.7,10,845/- and Rs.12,18,304/-, respectively, deducting tax at source u/s.194C, albeit on a part of the total payment. The balance, being at Rs.6,33,389/- and Rs.8,96,761/-, for the two parties respectively, on which tax was not deducted, was explained as on account of the same being a reimbursement, for which separate bills had in fact been raised by the Agents. The disallowance u/s.40(a)(ia), made in consequence of non-deduction of TDS, being confirmed by the first appellate authority, the assessee preferred a second appeal before the tribunal, which stood decided vide the impugned order. The tribunal clarified that the reimbursement of expenditure could not attract the charge of deduction of tax at source, explaining its reasons for the same (para 3.1 and 3.2 of the impugned order). So, however, the onus to exhibit that the same is in fact a reimbursement would only be on the assessee. The matter was, accordingly, remitted back to the file of the first appellate authority to be decided in accordance with the law after hearing the parties before him, clarifying once again that to the extent the assessee is able to show the impugned payments as being by way of reimbursement, no charge of non-deduction of tax at source and, thus, disallowance u/s.40(a)(ia), shall arise. This, as the very fact of reimbursement was disputed by the Revenue, and to which fact the attention of the tribunal was not drawn during the course of the hearing, and which was regarded by it as unfortunate (para 3.3 of the impugned order). The assessee has now moved the tribunal, drawing its attention to the decision by the hon'ble jurisdictional high court in the case of East India Hotels Ltd. vs. Central Board of Direct Taxes [2010] 320 ITR 526 (Bom), on which reliance is stated to have been placed by the assessee during 3 MA No. 326/Mum/2014 (A.Y. 2007-08) Mehta Exports vs. Addl. CIT

hearing. Per the said decision, the hon'ble high court, it is submitted, read down the word 'work', defined inclusively in s. 194C, to mean only that specified under Explanation III thereto. The C & F services not falling under the said Explanation, there could be no disallowance u/s.40(a)(ia). The tribunal is, accordingly, prayed for rectifying the mistake.

4. We have heard the parties, and perused the material on record.

Firstly, that the reimbursement is not eligible for deduction of tax at source, stands abundantly clarified by the tribunal, so that the only issue that survived for its consideration was whether the payments under reference were in fact by way of reimbursements, and toward which reference may be made to the grounds as raised by the assessee before the tribunal; the assessee having in fact already deducted the tax at source on a part of the payment. The tribunal further held the onus to establish so, i.e., of the payment being a reimbursement, to be on the assessee, so that where and to the extent it is able to so prove, the disallowance was directed for deletion. The matter, thus, stands perceived by it as wholly factual. We are unable to, therefore, find any infirmity in the order of the tribunal, and for which in fact it admitted the documents placed on file as a part of its record, so as to enable a resolution of the matter, as it could not otherwise be so in view of Rule 18(6) of the Appellate Tribunal Rules, 1963.

Coming, next, to the decision by the hon'ble jurisdictional high court in the case of East India Hotels Ltd. (supra). The same, as clarified by the bench during hearing, with reference to the log book, was not referred to nor a copy of the said order placed on record. The assessee's only case before the tribunal was toward the impugned payment/s being a reimbursement, and on which therefore no tax was required to be deducted, and toward which its arguments, made in pursuance to the grounds raised, were directed. There is, accordingly, no question of the assessee relying on the said decision during hearing of its appeal, as is being now contended before us, as also observed during the hearing of the instant application. Further, the tribunal having restored the matter back to the file of the first appellate authority, before whom the matter is thus subjudice, why we wonder the assessee does not move the said authority? The decision by the hon'ble high court is binding, while the issue sought to be now raised goes to the root of the matter.

4 MA No. 326/Mum/2014 (A.Y. 2007-08) Mehta Exports vs. Addl. CIT

Under the circumstances, we only consider it fit and proper to, while declining to recall the impugned order, further direct the first appellate authority to examine the assessee's case with reference to any decisions or materials sought to be relied upon before him by the assessee in deciding its appeal. Needless to add, the ld. CIT(A) shall adjudicate in accordance with law after hearing the parties before him; the law in the matter being sufficiently elucidated by the decisions by the apex court, as in the case of Birla Cement Works vs. Central Board of Direct Taxes [2001] 248 ITR 216 (SC); Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435 (SC), as well as several by the hon'ble jurisdictional high court, as in the case of CIT vs. Glenmark Pharmaceuticals Ltd. [2010] 324 ITR 199 (Bom); East India Hotels Ltd. (supra); BDA Ltd. vs. ITO(TDS) [2006] 281 ITR 99 (Bom), to note some. We decide accordingly.

5. In the result, the assessee's miscellaneous application is allowed on the afore-said terms.

Order pronounced in the open court on January 09, 2015 Sd/- Sd/-

(Joginder Singh) (Sanjay Arora) या यक सद य / Judicial Member लेखा सद य / Accountant Member मुंबई Mumbai; दनांक Dated : 09.01.2015 व. न.स./Roshani, Sr. PS आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Applicant 2. यथ / The Respondent 3. आयकर आयु त(अपील) / The CIT(A) 4. आयकर आयु त / CIT - concerned 5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड फाईल / Guard File आदे शानस ु ार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai