ITA No. 1951 & 1908/Kol/2013 ITT Shipping Pvt. Ltd., AY 2008-09 IN INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [Before Shri M. Balaganesh, AM & Shri S.S. Viswanethra Ravi, JM] I.T.A No. 1951/Kol/2013 Assessment Year: 2008-09 M/s. ITT Shipping Pvt. Ltd. Vs. Assistant Commissioner of Income-tax, (PAN: AAACI5499Q) Range-9, Kolkata. (Appellant) (Respondent) & I.T.A No. 1908/Kol/2013 Assessment Year: 2008-09 Deputy Commissioner of Income-tax, Vs. M/s. ITT Shipping Pvt. Ltd. Circle-9, Kolkata. (Appellant) (Respondent) Date of hearing: 06.10.2016 Date of pronouncement: 06.10.2016 For Assessee: Shri Anikesh Banerjee, Advocate For Revenue: Shri Dinabandhu Naskar, Addl. CIT, DR ORDER Per Shri M. Balaganesh, AM: Both these appeals by assessee and revenue are arising out of common order of CIT(A)-VIII, Kolkata vide appeal No. 211/CIT(A)-VIII/ Kol/10-11 dated 26.03.2013. Assessment was framed by Addl.CIT, Range-9, Kolkata u/s. 143(3) of Income tax Act, 1961 (hereinafter referred to as Act ) for AY 2008-09 vide his order dated 28.12.2010. For sake of brevity, we dispose of both appeals by this consolidated order. 2. First we take up assessee s appeal. only issue involved in this appeal of assessee is with regard to disallowance of Rs.14,93,044/- towards freight expenses by AO u/s. 40(a)(ia) of Act. 2.1. AO observed that assessee has paid freight expenses of Rs.14,93,044/- without deduction of tax at source and accordingly disallowed same u/s. 40(a)(ia) of act. Before Ld. CIT(A), assessee produced all details and same were 2 ITA No. 1951 & 1908/Kol/2013 ITT Shipping Pvt. Ltd., AY 2008-09 subjected to remand proceedings and ld AO gave general comment in his remand report without adjudicating details filed by assessee. Ld. CIT(A), however, deleted disallowance on ground that same were paid before end of previous year by relying on decision of Special Bench of ITAT, Visakhapatna Bench in case of Merilyn Shipping & Transport Ltd. Vs. ACIT, ITA No. 477/VIZAG/2008. Aggrieved, assessee is in appeal before us on following grounds: 1. For that Assessment order u/s. 143(3) of I. T. Act, 1961 is illegal and void. 2. For that Freight Expenses of Rs.14,93,044/- on which assessee received 15I from different parties. In this case, TDS is not applicable. Therefore, as assessee collected Form 15I from different parties, it is not in default u/s. 201 of Act. In case of other parties amount was paid below taxable limit. So, sec. 40(a)(ia) is not applicable here. 3. For that during time of remand proceedings no reasonable opportunity was given and without giving any reasonable opportunity for hearing remand report was passed which is unjustified & bad in law. 2.2. We have heard rival submissions and gone through facts and circumstances of case. We find that assessee need not be aggrieved in facts and circumstances of case as subject mentioned disallowance has been deleted by Ld. CIT(A). Hence, we dismiss appeal of assessee as infructuous. 3. In revenue s appeal only issue to be decided is as to whether Ld. CIT(A) is justified in deleting disallowance made u/s. 40(a)(ia) of Act in respect of (a) Payments made to Port Management Board - Rs.17,29,970/- (b) Stevedoring charges - Rs. 5,08,277/- (c) Freight charges - Rs.14,93,044/- (d) Payment made to Indian Registrar of Shipping - Rs. 3,52,726/- AO observed that aforesaid payments were made without deduction of tax at source and accordingly invoked provisions of section 40(a)(ia) of Act. Ld. CIT(A) deleted disallowance on ground that payments were made before end of previous year and accordingly by placing reliance on Special Bench decision in case of Merilyn Shipping & Transport Ltd., supra held that provisions of section 40(a)(ia) of Act could not be invoked in facts and circumstances of case. Aggrieved, revenue is in appeal before us on following grounds: 1. Ld. CIT(A)'s direction to allow deduction for following payment is so far as made before close of accounting: 3 ITA No. 1951 & 1908/Kol/2013 ITT Shipping Pvt. Ltd., AY 2008-09 (i) Disallowance u/s. 40(a)(ia) of Rs. 17,29,970/- on account of payment made to PMB. (ii) Disallowance u/s. 40(a)(ia) of Stevedoring Charges of Rs. 50,82,771/ - made to two parties (iii) Disallowance of Freight charges of Rs. 14,93,044/- (iv) Disallowance of Rs. 3,52,729/- on account of payment made to Indian Register of shipping. 2. Ld. CIT(A)'s direction to allow following payments in so far as made before close of accounting year without making any TDS there on as required by relevant TDS provisions is not following any good law in interpreting word 'payable' appearing in provision of section 40(a)(ia) under which disallowances were made in assessment by Assessing Officer. 3.1. At time of hearing Ld. DR vehemently relied on order of ld AO. In response to this, Ld. AR argued that in respect of Rs.17,29,970/- being payment made to Port Management Board, same represents supply of fresh water to ship for which payments were made which does not warrant deduction of tax at source in terms of section 194C of Act. Hence, provisions of section 40(a)(ia) of Act could not be invoked in same, in support of which he placed copies of invoices for same issued by Port Management Board, Anadaman & Nicobar Islands, Port Blair. He argued that in respect of payments made towards stevedoring charges, no finding has been given by ld AO in his assessment order as to how subject mentioned expenditure would fall under purview of deduction of tax at source. He also submitted details of stevedoring charges paid to various parties throughout year including relevant ledger account which he fairly stated that same may kindly be directed to be verified by ld AO and decide matter accordingly. Ld. DR also fairly conceded for setting aside of this issue to file of Ld. AO. In respect of payments made to Indian Register of Shipping in sum of Rs.3,52,726/-, Ld. AR stated that said party had furnished certificate u/s. 197(1) of Act dated 30.11.2007 which is valid upto 31.03.2008, wherein payments to them would have to be made without deduction of any tax at source. Accordingly, he argued that there is no need for assessee to deduct any tax at source in respect of said payments. 3.2. In respect of freight expenses paid by assessee in sum of Rs.14,93,044/- he argued that all payments were made to various parties below Rs.50,000/- and hence, provision of section 194C of Act would not be applicable in facts and circumstances 4 ITA No. 1951 & 1908/Kol/2013 ITT Shipping Pvt. Ltd., AY 2008-09 of case and in support of this he filed details of same. However, he fairly conceded that same requires examination by ld AO. 3.3. We have heard rival submissions and gone through facts and circumstances of case. We find that Ld. CIT(A) had deleted all disallowances u/s. 40(a)(ia) of Act only on ground that expenses were paid by assessee before end of previous year. In this regard he had placed reliance on Special bench Decision of Vizag Tribunal in case of Merilyn Shipping & Transport Ltd., supra. However, we find that issue has been held in favour of revenue by decision of Hon ble Calcutta High Court in case of CIT Vs. Crescent Exports Syndicate (2013) 33 Taxman.com 250 (Cal) wherein it has been held that provisions of section 40(a)(ia) of Act would be applicable even if amounts were paid before end of previous year. 3.4. In respect of payments made to Port Management Board in sum of Rs.17,29,970/-, we are convinced on verification of invoices given by Port Management Board that said payment is made towards supply of fresh water to ships. Hence, same does not fall under ambit of deduction of tax at source under any of provisions of Act. Hence, disallowance made u/s. 40(a)(ia) of Act to that effect is deleted. 3.5. In respect of payments made in sum of Rs.50,82,771/- towards stevedoring charges, we find that ld AO had not given any finding in his order as to how subject mentioned expenditure would fall under ambit of provisions of deduction of tax at source. Accordingly, we deem it fit and proper to set aside this issue to file of ld AO to give clear finding in this regard in light of evidence submitted by assessee with regard to subjection mentioned expenditure. 3.6. In respect of payments made to Indian Register of Shipping in sum of Rs.3,52,726/-, we are convinced from page 32 of paper book that said party had given certificate u/s. 197(1) issued by I. T. Department wherein payments made to them has to be made without deduction of Tax at source which has been clearly mentioned. Hence, there is no violation of provision of section 194C of Act warranting any disallowance u/s. 40(a)(ia) of Act. 5 ITA No. 1951 & 1908/Kol/2013 ITT Shipping Pvt. Ltd., AY 2008-09 3.7. In respect of payment of freight charges in sum of Rs.14,93,044/-, we are in agreement with argument of Ld. AR which was also considered by Ld. DR that issue requires fresh examination by AO as to whether payment exceeded in aggregate of Rs.50,000/- in respect of each party thereby warranting any deduction of tax at source in terms of section 194C of Act. It is true that no such finding was given in assessment order in this regard. Accordingly, we deem it fit and proper to set aside this issue to file of AO to decide this issue afresh in accordance with law after affording reasonable opportunity of being heard to assessee. assessee is also at liberty to adduce fresh evidence in support of his contention to justify claim of expenditure. Accordingly, this aspect of issue is set aside to file of AO. 4. In result, appeal of assessee is dismissed and that of revenue is partly allowed for statistical purposes. Order pronounced in open court. Sd/- Sd/- (S.S. Viswanethra Ravi) (M. Balaganesh) Judicial Member Accountant Member Dated : 6th October, 2016 Jd.(Sr.P.S.) Copy of order forwarded to: 1. APPELLANT M/s. ITT Shipping Pvt. Ltd., 6th Floor, 4, Fairlie Place, Kolkata-01 2 Respondent ACIT, Range-9, Kolkata. 3. CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order, Asstt. Registrar. M/s. ITT Shipping Pvt. Ltd. v. Assistant Commissioner of Income-tax, Range-9, Kolkata