Vinod C Jhjunjhunwala, Navi Mumbai vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI N.K. BILLAIYA, AM

ी ए.डी. जैन, या यक सद य एवं ी एन. के. बलै या, लेखा सद य । आयकर अपील सं./I.T.A. No. 1757 /Mum/2013 ( नधा रण वष / Assessment Year : 2009-10

D.C.I.T. 22(2), बनाम/ Shri Vinod C. Tower No. 6, 4 t h floor, Vs. Jhunjhunwala, Vashi Railway Station Bldg 402/403, Swastik Complex, Chambers, Vashi, CST Road, Chembur, Navi Mumbai. Mumbai 400 071.

थायी ले खा सं . /PAN : AABPJ2068C (अपीलाथ! /Appellant) .. ("#यथ! / Respondent)

Appellant by Shri Sunil Kumar Agarwal Respondent by : Shri Nishir Gandhi

ु वाई क' तार)ख / Date of Hearing सन : 02-07-2015 घोषणा क' तार)ख /Date of Pronouncement : 08-07-2015 [

आदे श / O R D E R PER A.D. JAIN, J.M. :

ए.डी. जैन, या यक सद य

This is Department's appeal for A.Y. 2009-10, raising the following grounds:-

"1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the additions of freight charges made u/s 40(a)(ia) of the Act amounting to Rs.13,02,636/-, Rs.10,42,178/- and Rs.2,60,458/- paid to three parties.

2. On the facts and in the circumstances of the case, and in law the Ld. CIT(A) erred in not appreciating the fact that the freight charges are covered u/s 194C r.w.s. 40(a)(ia) of the Act.

2 ITA 1757/M/13

3. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in interpreting that section 194C of the Act is not applicable to the assessee and the assessee is covered by shipping business of non-resident as governed by section 172 of the Act.

4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of commission paid to non- resident foreign agents without TDS made by the A.O.

2. The first issue is the Department's challenge to the action of the ld. CIT(A) in deleting the additions of freight charges made u/s 40(a)(ia) of the Income Tax Act, 1961, paid by the assessee to three parties.

3. During the year, the assessee had paid total freight charges of Rs. 24,07,924/- to 15 shipping companies. The TDS had been deducted on payment of freight charges to 13 companies. This was not done qua payment of Rs. 13,02,636/- to M/s APL India Pvt. Ltd. and Rs. 10,42,178/- and Rs. 2,60,458/-, made to M/s Yang Ming Lince (I) Pvt. Ltd. The A.O. made disallowance of these payments. The ld. CIT(A) deleted the disallowance.

4. The ld. D.R. has contended that the ld. CIT(A) did not appreciate the fact that these payments were covered under the provisions of section 194C r.w.s. 40(a)(ia) of the Act, and wrongly holding that section 194C is not applicable to the assessee, and the assessee is covered by the shipping business of the non-resident, as governed by section 172 of the Act.

5. The ld. Counsel for the assessee has placed strong reliance on the impugned order.

6. In this regard, we find that the ld. CIT(A) has duly taken into consideration the fact that, the relevant certificates were issued by the Department to the companies who were agents of their principals, and who had done the job for the shipping business of their non-resident principals. As correctly held by the ld. CIT(A), "shipping business of non-resident" is governed by the provisions of section 172. As such, no tax can be deducted 3 ITA 1757/M/13

u/s 194C of the Act. The payment was made to shipping companies who were Indian agents of non-resident foreign shipping company and had done job for them. Therefore, no disallowance u/s 40(a)(ia) of the Act could have been made and, therefore, the ld. CIT(A) has correctly deleted the disallowance.

7. Apropos the payment of freight charges of Rs. 10,42,178/- to M/s APL India Pvt. Ltd., and Rs. 2,60,458/- to M/s Yang Ming Line (I) Pvt. Ltd., the A.O. was given a copy of 100% relief certificates. Reliance therein was placed on CBDT Circular No. 723 dated 19.9.1995 and letters/certificates dated 15- 4-2008 and 21-04-2008 of the ITO (International Taxation) relief Certificate No. 11/ITO/(IT)/07-08, & ADIT(IT)/2(2)/Shipping/4/2008-09 pertaining to M/s APL Co. (P) Limited, and M/s Yang Ming Line (I) Pvt. Ltd. respectively. The Circular and the communication declared were the payments to be no tax deductible. Therefore, it has rightly been held that no disallowance u/s 40(a)(ia) of the Act was called for. The ld. CIT(A) was correct in deleting the disallowance.

8. Apropos the disallowance regarding commission to non-resident foreign agents without TDS, it is not disputed that the payees are commission agents, as evident from the credit notes issued by the assessee, and payment vouchers showed account number and credit note number with invoice number and also gave bank transaction details. Further, the ld. CIT(A) has also correctly placed reliance on the first appellate decision in the cases of "M/s K.M. Gantara & Co." and "Shri Venkatesh S. Kamat". Therein, relying on in the case of "GE India Technology Centre (P) Ltd. vs. CIT", 327 ITR 456 (SC), it was held to the effect, inter alia, where an amount is payable to a non- resident, the payer is under an obligation to deduct tax is limited to the appropriate proportion of income which is chargeable under the Act. As charging section 4,5 and 9 of the Act do not make income of a non-resident person rendering services abroad and receiving remuneration also abroad and 4 ITA 1757/M/13

having no other source of income arising in India, their income is not chargeable to tax.

9. Accordingly, the action of the ld. CIT(A) in deleting this disallowance is also upheld.

10. In the result, the appeal filed by the Department is dismissed.

Order pronounced in the open court on 8th July, 2015.

ु े यायालय म0 1दनांकः 08-07-2015 को क' गई ।

आदे श क' घोषणा खल

Sd/- sd/- (N.K. BILLAIYA) (A.D. JAIN) लेखा सद य ACCOUNTANT MEMBER या यक सद य/JUDICIAL MEMBER

मुंबई Mumbai; 1दनांक Dated [ व. न.स./ R.K., Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ! / The Appellant

2. "#यथ! / The Respondent.

3. आयकर आयु?त(अपील) / The CIT(A)-19, Mumbai

4. आयकर आय?

ु त / CIT-9, Mumbai

5. Bवभागीय " त नDध, आयकर अपील)य अDधकरण, मुंबई / DR, ITAT, Mumbai G Bench

6. गाडF फाईल / Guard file.

ु ार/ BY ORDER, आदे शानस

स#याBपत " त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai