IN INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER I.T.A. No.8196/M/2011 (Assessment Year: 2008-2009) I.T.A. No.227/M/2013 (Assessment Year: 2009-2010) Balakrishnan Keshavan ITO 22(3)(1), Perumpully, Mumbai. Vs. Pro. Max Shipping Agencies, A-114, Sai Chambers, Plot No.44, 1 s t Floor, Sector -11, CBD Belapur, Navi Mumbai 400 614. PAN : ACVPP5869M ( Appellant) ( Respondent) I.T.A. No.7949/M/2011 (Assessment Year: 2008-2009) I.T.A. No.7516/M/2012 (Assessment Year: 2009-2010) ITO 22(3)(1), Balakrishnan Keshavan Mumbai. Perumpully, Vs. Pro. Max Shipping Agencies, A-114, Sai Chambers, Plot No.44, 1 s t Floor, Sector -11, CBD Belapur, Navi Mumbai 400 614. PAN : ACVPP5869M (Appellant) ( Respondent) Appellant by : Shri B.V. Jhaveri Respondent by : Miss Anupama Singh, CIT-DR Date of Hearing : 19.9.2016 Date of Pronouncement : 28.09.2016 O R D E R PER D. KARUNAKARA RAO, AM: There are four appeals under consideration involving cross appeals for assessment years 2008-09 and 2009-2010. Since, issues raised in these appeals are inter-connected identical, therefore, for sake of convenience, they 2 are clubbed, heard together and disposed of in this consolidated order. Appeal wise adjudication is given in following paras of this order. I. Cross appeals for AY 2008-2009 ITA No.8196/M/2011 (By Assessee) 2. This appeal filed by assessee on 7.12.2011 is against order of CIT (A)-33, Mumbai dated 30.9.2011 for assessment year 2008-2009. In this appeal, assessee raised following grounds which read as under:- 1. On facts and in circumstances of case and in law, Ld CIT 9A) erred in confirming action of AO in holding that reimbursement of expenses received by appellant constituted appellant s turnover. 2. On facts and in circumstances of case and in law, Ld CIT (A) erred in dismissing ground of appeal pertaining to disallowance made u/s 40(a)(ia) of Act. 3. On facts and in circumstances of case and in law, Ld CIT (A) erred in sustaining disallowance to extent of 10% of Telephone expenses incurred during course of carrying on of business. 4. On facts and in circumstances of case and in law, Ld CIT (A) erred in sustaining disallowance to extent of 10% of Mobile Telephone expenses incurred during course of carrying on of business. 5. On facts and in circumstances of case and in law, Ld CIT (A) erred in sustaining disallowance to extent of 10% of travelling expenses incurred during course of carrying on of business. 3. Briefly stated relevant facts of case are that assessee is Cargo Clearing & Forwarding agent in name of proprietorship concern named M/s. Max Shipping Agencies. Assessee filed return of income declaring total income of Rs. 8,12,850/-. Assessment was completed u/s 143(3) of Act and assessed income was determined at Rs.1,00,19,527/-. In assessment, AO made disallowance u/s 40(a)(ia) of Act in respect of payments on accounts of CWC charges (rent); Examination Expenditure; Forwarding Agent Expenses; Commission and Brokerage expenses and Consultancy Charges. Assessee made payment of Rs. 91,49,234/- and failed to effect TDS. Accordingly, AO made addition in assessment. Aggrieved, assessee carried matte in appeal before first appellate authority. 4. During proceedings before first appellate authority, assessee submitted that said amounts are basically reimbursements and such reimbursements should not be considered not only for purpose of turnover 3 determination but also for purpose of TDS. As per assessee, there is no income angle in such reimbursements. Before CIT (A) assessee took plea that TDS provisions do not apply to case of assessee who happened to be individual and that too in respect of these expenses which are reimbursements in nature. These reimbursements should not be included for purpose of turnover and relied on decision of Tribunal in case of Shri Anand D. Tambe vs. ITO (ITA No. 3379/M/2000, dated 27.1.2004). He argued that said decision of Tribunal consequently applicable to facts of present case. Therefore, he prayed for exclusion of said amounts for purpose of turnover as well as for purpose of section 40(a)(ia) of Act. After considering submission of assessee, CIT (A) dismissed appeal of assessee as per discussion given in para 5.2 of his order. Aggrieved, assessee filed present appeal before Tribunal. 5. During proceedings before us, Ld Counsel for assessee submitted that CIT (A) has not property appreciated facts of case and not followed precedents cited by assessee before him. He fairly submitted that Ground no.1 and 2 are required to be re-adjudicated by AO and seeks opportunity for want of proper appreciation of facts and settled legal propositions. 6. After hearing both parties, we find, issue of inclusion of reimbursements for purpose of turnover calculations as well as for purpose of attracting provisions of section 40(a)(ia) of Act, is now settled legally. reimbursements are outside scope of provisions. Considering prayer of Ld Counsel for assessee, we are of opinion Ground no.1 and 2 should be remanded to file of AO for fresh adjudication of issues raised in said grounds. We order accordingly and direct AO to adjudicate issues afresh after granting reasonable opportunity of being heard to assessee as per set principles of natural justice. Thus, Ground nos. 1 and 2 are allowed for statistical purposes. 7. In connection with Ground no.3 (relating to Telephone expenses); Ground no.4 (relating to Mobile Telephone expenses) and Ground no.5 (relating to Travelling Expenses), Ld Counsel for assessee submitted that Bench may consider these issues and restrict disallowance to minimum possible. 4 However, Ld Counsel for assessee is of opinion that whole of these Telephone, Mobile and Travelling Expenses were incurred for purpose of business and they are fully allowable. Further, Ld Counsel for assessee submitted that CIT (A) has erred in restricting disallowance uniformly to 10% of said expenses in P&L Account. In this regard, we have perused paras 6 and 6.1 of CIT (A) s order and find, AO disallowed 20% of Telephone / Mobile expenses and 10% of Travelling Expenses and CIT (A) uniformly restricted to 10% in all three heads of expenses. Considering same, we find it relevant to extract para 6.1 of CIT (A) s order and same reads as under:- 6.1. During appellate proceedings, appellant has not argued on this and has also not furnished any submissions for same though orally it has been argued that disallowances are on higher side ie 20% for telephone and mobile and 10% for travelling expenses. I have considered same and I find that disallowances of expenses under heads telephone and mobile for personal element have to be made. However, disallowances are restricted to 10% under these heads. Again for travelling expenses, as there is no log book maintained some disallowance are called for. Since, they are made at 10% only, I have no reason to interfere with same. Accordingly, ground no.4 is partly allowed. 8. Considering above, we are of opinion, conclusions drawn by CIT (A) in above extracted para are fair and reasonable and it does not call for any interference. Accordingly, Grounds no.3, 4 and 5 raised by assessee are dismissed. 9. In result, appeal of assessee is partly allowed for statistical purposes. ITA No.7949/M/2011 (By Revenue) 10. This appeal filed by Revenue on 25.11.2011 is against order of CIT (A)-33, Mumbai dated 30.9.2011 for assessment year 2008-2009. In this appeal, Revenue raised following grounds which read as under:- 1. On facts and in circumstances of case and in law, Ld CIT (A) erred by holding that disallowance of expenses of Rs. 88,44,970/- made by AO u/s 40(a)(ia) do not attract provisions of section 194 as same are reimbursement of expenses. 2. Once reimbursement of expenses is included in part of sales turnover and not distinguishable from bills raised by assessee and corresponding TDS benefit is available by assessee, it is not open for assessee to argue that provisions of section 40(a)(ia) of Act are not applicable especially when such expenses are debited to P&L Account. 11. In above grounds, Revenue raised issues relating to applicability of provisions of section 40(a)(ia) r.w. section 194 of Act. In our opinion, these 5 issues are already remanded by us while dealing with grounds of assessee s appeal in above paragraphs of this order. We are aware of fact that Revenue is aggrieved with relief granted by CIT (A) so far as clear reimbursements are concerned. CIT (A) confirmed such expenditure which are in nature of reimbursements that are figuring in composite bills. Considering fact that there is no income on reimbursements, we are of opinion that order of CIT (A) on this issue is fair and reasonable and it does not call for any interference. There is no need for effecting TDS on amounts which are paid by assessee and are in nature of reimbursements. Accordingly, grounds raised by Revenue are dismissed. 12. In result, appeal of Revenue is dismissed. II. Cross appeals for AY 2009-2010 ITA No.7516/M/2012 (By Revenue) 13. This appeal filed by Revenue 19.12.2012 is against order of CIT (A)-33, Mumbai dated 30.10.2012 for assessment year 2009-2010. In this appeal, Revenue raised following grounds which read as under:- 1. On facts and in circumstances of case and in law, Ld CIT (A) erred in holding that disallowance of expenses of Rs. 54,98,808/- made by AO u/s 40(a)(ia) do not attract provisions of section 194 as same are reimbursement of expenses. 2. On facts and in circumstances of case and in law, Ld CIT (A) erred in allowing assessee appeal without considering fact that once reimbursement of expenses is included in part of sales turnover and not distinguishable from bills raised by assessee and corresponding TDS benefit is available by assessee, it is not open for assessee to argue that provisions of section 40(a)(ia) of Act are not applicable especially when such expenses are debited to P&L Account. 14. In above grounds, Revenue raised issues relating to relief granted by CIT (A) in respect of addition of Rs. 54,98,808/- made u/s 40(a)(ia) read with section 194 of Act. On going through facts, we find, these issues are identical to ones already adjudicated by us in connection with appeal by Revenue for AY 2008-2009. In said appeal for AY 2008-2009, we held that relief granted by CIT (A) in connection with payments made by assessee which are in nature of reimbursements of expenses is fair and reasonable. Considering commonality of issues, our decision given on 6 identical issues raised in Revenue s appeal for AY 2008-2009 squarely applies to present appeal too. Considering same, we are of opinion, order of CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, Grounds raised by Revenue are dismissed. 15. In result, appeal of Revenue is dismissed. ITA No.227/M/2013 (By assessee) 16. This appeal filed by assessee on 7.11.2013 is against order of CIT (A)-33, Mumbai dated 30.12.2012 for AY 2009-2010. 17. In this appeal, assessee raised issues identical to ones raised in Grounds no.1 and 2 of assessee s appeal for AY 2008-2009. In connection with decision of AO in invoking provisions of section 40(a)(ia) of Act in respect of payments by virtue of reimbursements and composite bills, CIT (A) confirmed addition. Aggrieved with same assessee is in appeal before Tribunal. While dealing with similar issues in assessee s appeal for AY 2008-2009 in above paragraphs of this order, we remanded same to file of AO with direction that so far as amounts are in nature of reimbursements, provisions of section 40(a)(ia) of Act cannot be invoked. In remanding proceedings, AO is directed to examine each of payments after granting reasonable opportunity of being heard to assessee and decide issue afresh in accordance with law. Accordingly, grounds raised by assessee are allowed for statistical purposes. 18. In result, appeal of assessee is allowed for statistical purposes. 19. Conclusively, both appeals filed by Revenue are dismissed. Assessee s appeal for AY 2008-09 is partly allowed for statistical purposes and appeal for AY 2009-2010 is allowed for statistical purposes. Order pronounced in open court on 28th September, 2016. Sd/- Sd/- (RAVISH SOOD) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; 28.09.2016 . . OKK , Sr. PS copy of Order forwarded to : 7 1. Appellant 2. Respondent. 3. CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Balakrishnan Keshavan Perumpully v. ITO 22(3)(1), Mumbai