Marico vs It

Mobile View

User Queries

service tax

all agreements are not contracts

marico

agent

marico ltd

cargill

tds

m/s t.t. ltd

baskaran

Main Search Forums Advanced Search Disclaimer

Get this document in PDF Print it on a file/printer

Income Tax Appellate Tribunal - Vizag

Annavarapu Enterprises, ... vs Department Of Income Tax on 8 August,

2011

ITA No 487 of 2010 Annavarapu Enterprises Vijayawada

IN THE INCOME TAX APPELLATE TRIBUNAL

VISAKHAPATNAM BENCH, VISAKHAPATNAM

BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND

SHRI BR BASKARAN, ACCOUNTANT MEMBER

ITA No.487/Vizag/2010

Assessment Year: 2006-07

ITO Ward-2(4), Annavarapu Enterprises, Vijayawada Vijayawada Vs.

(Appellant) (Respondent) PAN No: AAEFA 0457 H

Appellant By: Smt. D. Komali Krishna, Sr.DR

Respondent By: Shri Sobhanadriswara Rao, CA

Annavarapu Enterprises, ... vs Department Of Income Tax on 8 August, 2011 http://indiankanoon.org/doc/71434833/

1 of 7 03/02/2014 7:11 AM

ORDER

Per Shri B. R. BASKARAN, Accountant Member:

The appeal of the Revenue is directed against the order dated 13.08.2010 passed by learned

CIT(A), Vijayawada and it relates to the assessment year 2006-07.

2. The revenue is assailing the decision of the learned CIT (A) in deleting the addition of

`21,21,788/- made under section 40(a)(ia) for non deduction of tax at source from the payment

made to the transporters.

3. The facts relating to the issue are stated in brief. The assessee firm is carrying on in the business

of C&F agency. The return filed by the assessee firm for the year under consideration was

processed under section 143 (1) initially. Subsequently the Assessing Officer noticed that there was

difference between the amount of contract receipts shown in the TDS

Page 1 of 6


certificates and the Profit and loss account filed by the assessee. Accordingly the assessment was

reopened by the Assessing Officer by issuing notice under section 148 of the Act. During the course

of assessment proceedings, the Assessing Officer noticed that the assessee had made following

payments to the transporters without deducting tax at source under section 194C of the Act:

a) Nagarjuna Transport Transport Charges ` 2,71,851 b) Navata Transport Transport Charges `

4,19,389 c) Decent Lorry Service Transport Charges ` 3,62,508 d) Kranthi Transport Transport

Charges ` 5,50,251 e) Karnool Nandyal Transport Transport Charges ` 1,54,204 f) BRL Freight

Transport Charges ` 2,71,701 g) Chennupati Transport Transport Charges ` 91,884 Total Transport

Charges ` 21,21,788


2 of 7 03/02/2014 7:11 AM

The assessee submitted before the Assessing Officer that the above said payments were made by it

on behalf of its principal and it also did not claim the above payments as its expenditure.

Accordingly, it was contended that the provisions of 194C shall not apply in the hands of the

assessee in respect of the above said payments. The Assessing Officer was not convinced with the

said explanation. He referred to certain clauses of a contract agreement entered with M/s Cargill

India Private Limited and concluded that the assessee is under the obligation to provide

transportation facilities to the principals either through own vehicle of the assessee or through

hired vehicles. Hence the assessee is solely responsible for transportation of the goods, in which

case, the assessee has to necessarily deduct TDS on the impugned transport payments under

section 194C of the Act. Since the assessee has failed to so deduct tax at source, the Assessing

Officer disallowed the entire amount of `21,21,788/- by

Page 2 of 6


invoking the provisions of section 40(a)(ia) of the Act. The appeal filed by the assessee before the

learned CIT (A) was allowed. Hence the revenue is in appeal before us.

4. We have heard the rival contentions. During the course of appellate proceeding before Learned

CIT(A), it was brought to his notice that the agreement with M/s Cargill India Private Limited,

which was relied upon by the Assessing Officer, was actually entered by the sister concern of the

assessee named M/s Annavarpu Enterprises. Accordingly it was submitted before Learned CIT(A)

that the Assessing Officer has drawn adverse inferences on the basis of an irrelevant agreement. It

was further submitted that the assessee is acting as "C & F Agent" for a company named M/s

Marico Industries Ltd and the said company has already deducted TDS on the impugned transport

payments. In support of this fact, the assessee filed copies of TDS certificates issued by the

Principal, Viz., M/s Marico Industries Ltd to the Transporters. Accordingly, the learned CIT(A)

deleted the impugned addition with the following observations:


3 of 7 03/02/2014 7:11 AM

"I have carefully considered the submissions made on behalf of the appellant. I find that the

Assessing Officer has relied on the terms and conditions of the contract agreement entered into by

M/s Annavarapu Enterprises with M/s Cargill India Pvt. Ltd. The learned Authorised

Representative has pointed out that M/s Annavarapu Enterprises, a sister concern, is distinct from

M/s Annavarapu Enterprises (1989), the appellant firm. The appellant firm apparently has no

business dealings with M/s Cargill India Ltd. It is a C&F agent only for M/s. Marico Industries Ltd.

A copy of the agreement between the appellant and M/s Marico Industries Ltd has been filed

during the appeal proceedings. An examination of the agreement would reveal that the terms and

conditions similar to those

Page 3 of 6


referred to in the assessment order as per the contract agreement with M/s Cargill India Ltd are

not existing in the agreement of the appellant with M/s Marico Industries Ltd. All goods are

dispatched by M/s Marico Industries to the appellant on a stock transfer or on consignment basis.

For the professional services rendered, the appellant firm is entitled to fixed remuneration. The

learned Authorised Representative submitted that the appellant as an agent to the principal, M/s

Marico Industries Ltd would only deal with transport operators and book consignments in the

name of the principals. In support of this, copies of the lorry receipts were produced during the

appeal proceedings. The lorry receipts are issued in the name of the consignor M/s Marico

Industries Ltd. He further submitted that the original lorry receipts are sent to the principals for

reimbursement of the actual amount incurred on behalf of the principals. Further, the learned

Authorised Representative stated that tax deduction at source was made by the principals to the

transporters and service tax on payments to the transports was also paid only by the principals.

Copies of some TDS certificates issued by M/s Marico Industries Ltd to the transporters have been

filed before me. Copies of service tax challans and service tax return filed by M/s Marico Industries

have been produced in support of the argument that transportation of goods was a matter between


4 of 7 03/02/2014 7:11 AM

M/s Marico Industries and the transporters individually. He further stated that on account of the

TDS being made on the amounts reimbursed to the appellant, it was a case of deduction of tax at

source twice. Merely because tax was deducted at source by M/s Marico Industries from the

reimbursed amounts, it would not alter the nature of the receipt which was in the instant case, only

amounts reimbursed to the extent of expenditure incurred on behalf of the principal. I am inclined

to accept the arguments put forth by the learned Authorised Representative. In the absence of any

contract between the appellant and the transporters, the applicability of the provisions of Sec.194C

would not arise. On the contrary, the appellant has not claimed any expenditure in the P&L

Account towards payments made to different transporters as transport charges against which the

provisions of Sec.40(a)(ia) can be invoked. In the absence of any

Page 4 of 6


expenditure claim or debit to the P&L Account by the appellant, there is no justification for

invoking the provisions of Sec.40(a)(ia) which would result in the disallowance of any claim of

deduction. Even in the event of a revised P&L Account being drawn up including the

reimbursements received and expenditure incurred by the appellant, in the absence of a contract

between the appellant and the transporters as stated above, there can be no justification for

invoking the provisions of Sec.194C against the appellant. In the light of the foregoing discussion,

the disallowance of `21,21,788/- under section 40(a)(ia) is held to have no sanction of law and,

therefore, is deleted".

5. Before us, the learned D.R submitted that the claim of the assessee that the principal has

deducted TDS on the impugned transport payments is not borne out of record and the same

requires verification. She further submitted that the assessee has claimed that it is paying full

amount of transport charges to the transporter and getting reimbursement of the same from the

principal. However, it is not clarified how the TDS amount is deducted/recovered from the


5 of 7 03/02/2014 7:11 AM

transport charges so paid. However, the Learned A.R could not readily clarify the points raised by

the Learned D.R. Hence, as contended by Learned D.R, we are of the view that the claim of the

assessee that the TDS has been deducted by the principal on the impugned transport payments

needs to be verified at the end of the Assessing Officer. It is also to be verified how the TDS

amount is recovered from the transporters. As contended by Learned D.R, these facts are not

borne out of the record. We also notice that the learned CIT(A) has accepted these contentions

without confronting the same before the Assessing Officer. In view of the above, we set aside the

order of Learned CIT(A) and restore the issue back to the file of the Assessing Officer with a

direction to examine the claim of the assessee and take appropriate

Page 5 of 6


decision in accordance with law. The assessee should be given necessary opportunity of being

heard.

6. In the result, the appeal of the revenue is treated as allowed for statistical purposes.

Pronounced in the open Court on 8th August, 2011.

Sd/- Sd/- (SUNIL KUMAR YADAV) (B R BASKARAN) Judicial Member Accountant Member

PVV/SPS

Visakhapatnam,

Date:08-08-2011

Copy to

1 The ITO Ward-2(4) Vijayawada


6 of 7 03/02/2014 7:11 AM

2 M/s Annavarapu Enterprises, 30-14-6/1 Kothavanthena Road, Durgagraharam, Vijayawada-2.

3 The CIT - Vijayawada

4. The CIT(A), Vijayawada

5 The DR, ITAT, Visakhapatnam.

6 Guard file.

By Order

Senior Private Secretary

INCOME TAX APPELLATE TRIBUNAL

VISAKHAPATNAM

Page 6 of 6


7 of 7 03/02/2014 7:11 AM

Marico vs It

Documents

Transcript of Marico vs It