2013 (11) TMI 1321 - AT - Income Tax

Appeal partly allowed, disallowance confirmed under section 40(a)(ia), recomputation required. Sundry creditors, ad hoc expenses additions deleted.

The Tribunal partly allowed the appeal for statistical purposes. The disallowance under section 40(a)(ia) was confirmed but required recomputation based ... Nature of agreement between assessee and dumper owners, a contractual or not - Disallowance u/s 40(a)(ia) of the Income Tax Act - Assessee has paid Dumper hire charges amounting to Rs.36,37,815/- to ten different parties - No TDS has been deducted on these payments, though these were contractual/sub-contractual payment in nature under section 194C of the Act – Held that:- Reliance has been placed upon the decision of the Hon’ble Jurisdictional High court in the case of Pijush Kanti Chowdhury [2007 (5) TMI 559 - CALCUTTA HIGH COURT]. and also obedience has been placed to decision of the Hon’ble Supreme Court in the case of Shree Chamund Mopeds Ltd [1992 (4) TMI 183 - SUPREME COURT OF INDIA], the decision of the special bench of this tribunal in the case of Merilyn Shipping & Transports [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] still holds ground and accordingly, TDS provisions will apply, for the purpose of invocation of the provisions of section 40(a)(ia) of the Act, only on the amounts remained payable at the end of financial year and not on the paid amounts - Directed the AO to recompute the disallowance accordingly – Decided in favor or Revenue, partly. Issues Involved:1. Disallowance under section 40(a)(ia) of the Income-tax Act, 1961 for non-deduction of TDS on transport charges.2. Addition on account of sundry creditors.3. Ad hoc disallowance of expenses.Detailed Analysis:1. Disallowance under section 40(a)(ia) of the Income-tax Act, 1961:The primary issue in this appeal is whether the CIT(A) was justified in deleting the disallowance made by the Assessing Officer (AO) under section 40(a)(ia) of the Income-tax Act, 1961 due to non-deduction of TDS on transport charges paid. The AO had disallowed Dumper hire charges amounting to Rs.36,37,815/- on the grounds that no TDS was deducted as required under section 194C of the Act. The CIT(A) deleted the disallowance, referencing a decision by the ITAT, Kolkata in the case of M/s. Samanwaya, stating there was no contractual agreement between the assessee and the Dumper owners.However, the Tribunal found that the issue is covered against the assessee by the decision of the Karnataka High Court in the case of Smt. J. Rama vs. CIT, which held that a written contract is not a prerequisite for invoking section 194C. The Tribunal also referenced its own decision in the case of Kamal Mukherjee & Co. (Shipping) (P.) Ltd., affirming that even oral contracts are sufficient for the application of section 194C. Consequently, the Tribunal confirmed the AO's disallowance but directed the AO to recompute the disallowance in light of the special bench decision in Merilyn Shipping & Transports, which restricts disallowance to amounts payable at the end of the financial year.2. Addition on account of sundry creditors:The second issue pertains to the addition made by the AO regarding sundry creditors amounting to Rs.1,18,419/- out of a total of Rs.3,96,280/-. The AO disallowed these liabilities in the absence of vouchers. However, the assessee provided ledger copies and evidence of subsequent payments, which the CIT(A) verified and found satisfactory, leading to the deletion of the addition. The Tribunal confirmed the CIT(A)'s decision, noting that the assessee follows an accounting system that accounts for outstanding expenses as of 31st March each year, and the necessary evidence of payments was produced.3. Ad hoc disallowance of expenses:The third issue involves an ad hoc disallowance of Rs.1,00,000/- made by the AO from various expenses claimed by the assessee, including repairs and maintenance, rent, road tax and permit, insurance, labour charges, and telephone expenses. The AO made this disallowance due to the absence of proper vouchers. The CIT(A) deleted the addition, noting that the expenses were petty and supporting evidence was not readily available, but the AO did not doubt that these expenses were actually incurred. The Tribunal agreed with the CIT(A) and confirmed the deletion, finding no cogent basis for the ad hoc disallowance.Conclusion:In summary, the Tribunal partly allowed the appeal for statistical purposes. The disallowance under section 40(a)(ia) was confirmed but required recomputation based on the special bench's decision. The additions regarding sundry creditors and ad hoc expenses were deleted, confirming the CIT(A)'s decisions. The order was pronounced in the open court on 15.3.2013.