DCIT Vs MKF Logistics Pvt. Ltd. (ITAT Delhi)
ITAT Delhi Deletes Rs. 2.14 Crore Addition on Freight Reimbursements – Real Income Principle Upheld
ITAT Delhi dismissed the Revenue’s appeal and upheld the CIT(A)’s deletion of Rs. 2,14,30,665/-, holding that the AO wrongly treated the “mismatch in sales turnover” as income. The Tribunal noted that in freight/forwarding operations, bills include freight collected and paid, and a major portion represents reimbursement of cost, not income of the assessee. The assessee maintained a separate freight payable account and had not claimed these expenses in the Profit & Loss Account, showing that only its share of income was disclosed. ITAT held that the AO had “brushed aside all the documents” and ignored the peculiar nature of the business, where gross receipts in 26AS include Airlines/Shipping Line charges. Applying the real income doctrine, the Tribunal held that TDS on gross value cannot convert reimbursements into taxable income. Hence, the deletion of the addition was sustained and the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 04.02.2025 for the Assessment Year 2016-17.
