Maersk India Private Limited Vs JCIT (ITAT Mumbai)
Mumbai ITAT: Pure Reimbursement of Common Legal Expenses Not Liable to TDS; Year-end Provisions Remanded for Fresh Verification
The Mumbai ITAT held that reimbursement of legal and counsel fees made by the assessee to the Container Shipping Line Association (CSLA) did not attract TDS under section 194J, as the payment represented only the assessee’s proportionate share of common legal expenses incurred by the association without any profit or income element. The Tribunal noted that CSLA had already deducted tax at source while making payment to the actual legal professionals and that the accounting head “Professional Fees” could not determine the true nature of the transaction. Accordingly, the disallowance under section 40(a)(ia) was deleted. However, in respect of another payment of professional fees where the assessee had itself deducted TDS belatedly, the Tribunal held that the deduction would be allowable only in the year in which the statutory conditions were satisfied, and restored the matter for limited verification, treating the issue as allowed for statistical purposes.
On the issue of year-end provisions, the Tribunal observed that although the Assessing Officer had treated the provisions as contingent liabilities for want of supporting details regarding payees, nature of expenditure and crystallisation of liability, the assessee had, before the Tribunal, produced a detailed break-up identifying the parties, amounts and the specific disputes giving rise to the provisions. Since these materials had not been produced before the lower authorities, the Tribunal admitted the additional evidence and restored the matter to the Assessing Officer for fresh adjudication. The Assessing Officer was directed to verify, for each provision, whether it represented an ascertained business liability that had accrued during the relevant previous year and satisfied the conditions of section 37(1) before passing a fresh speaking order after granting adequate opportunity to the assessee. The appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the Assessee against the order of Ld. The Commissioner of Income Tax (Appeals), NFAC, dated 17-Jul-2025 for the Assessment Year 2022-23. The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance made by the Assessing Officer of 30% under section 40(a)(ia) of the Act on the total payment of IN 4,12,065 made by the Appellant to Container Shipping Line Association (CSLA), on the ground of non-deduction of tax at source.
Your Appellant prays that the deduction of expenditure of IN 1,23,620 disallowed by the learned AO and CIT(A) be kindly allowed.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act, of 30% from the payment of professional fees of 21,30,350 to Soumiachandran KN by your Appellant, despite deduction of tax at source.
Your Appellant prays that the deduction of expenditure of INR 39,105 disallowed by the learned AO and CIT(A) be allowed.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance of expenses made by the Assessing Officer of INR 1,27,44,990 under section 37(1) of the Act from the genuine year end provisions made on best estimate basis following the mercantile system of accounting.
Your Appellant prays that the deduction of expenditure of INR 1,27,44,990 disallowed by the learned AO and CIT(A) be allowed.
4. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that the Appellant had already suo moto disallowed 30% of the expenditure under section 40(a)(ia), and any disallowance of the balance 70% genuine business expenditure is bad in law and would result in double disallowance of expenditure incurred wholly and exclusively for the purposes of business.
2. The brief facts of the case are that the assessee is a company engaged in the business of providing shipping agency services in India to Maersk A/S, Denmark, and also renders support and crewing services to its associated enterprises. For Assessment Year 2022-23, the assessee filed its return of income on 30.11.2022 declaring a total income of ₹21,68,06,070/-.
