2015 (1) TMI 733 - AT - Income Tax

Tribunal decision on disputed payments and advances for tax assessment

The ITO, Ward-9(2), Ahmedabad Versus M/s. Bhavya Developers

The Tribunal partly allowed the Revenue's appeal for statistical purposes, remanding the matter to the Assessing Officer for further verification on the ... Disallowance of expenses u/s 40(a)(ia) - TDS u/s 194C from the advances made - labour/transport/professional charges - CIT(A) deleted the addition - Held that:- While deleting the addition of ₹ 2,40,000/- paid to Ramesh Ramjibhai Patel and ₹ 7,00,000/- paid to Mukesh G. Patel, has held that the said amounts paid were advances to the concerned persons. Under Section 40(a)(ia) of the Act, the disallowance of an amount which is otherwise allowable as deduction to the assessee, while computing the business income of the assessee, can be made for non-deduction of TDS from the payments made to the payee. Since the assessee paid these amounts as advances to the said persons and had not claimed any deduction from the income of the year under consideration, therefore, no addition could have been made of the said amounts to the income of the assessee by disallowing the same u/s 40(a)(ia) of the Act. - Decided in favour of assessee. With regard to other disallowances, the CIT(A) has held that the amount of each bill was less than ₹ 20,000/- although the payments were made together which exceeded ₹ 20,000/- and, therefore, deleted the disallowances but has brought no material on record to show that whether the payments made were with respect to different contracts or the payments were made with respect to the same contract. If the payments are made with respect to the same contract, then they will be hit by the provisions of Section 40(a)(ia) as well as 194C of the Act and if the payments are made for separate contracts, then they will not be hit by the provisions of Section 194C and Section 40(a)(ia) of the Act. Since both the parties have not produced any material before us to verify the same; therefore, in the interest of justice, we set aside the order of the CIT(A) and restore the matter back to the file of the Assessing Officer to re-adjudicate the issue afresh. - Decided in favour of Revenue for statistical purposes. Issues Involved:1. Deletion of addition of Rs. 11,31,790/- made by the Assessing Officer under Section 40(a)(ia) of the Income Tax Act.2. Applicability of Section 194C and Section 40(a)(ia) of the Income Tax Act on various payments made by the assessee.Issue-wise Detailed Analysis:1. Deletion of Addition of Rs. 11,31,790/- Made by the Assessing Officer Under Section 40(a)(ia):The Assessing Officer disallowed expenses totaling Rs. 11,31,786/- under Section 40(a)(ia) due to non-compliance with Section 194C. The disallowed amounts pertained to payments made to various contractors and professionals without deducting TDS. The CIT(A) deleted the disallowance, stating that either the amounts were advances or individual bills were below the threshold of Rs. 20,000/- for TDS applicability.2. Applicability of Section 194C and Section 40(a)(ia) on Various Payments:A. Shri S. I. Carting Contractor:- Rs. 30,000/-: The Assessing Officer treated this as an advance against contract work, requiring TDS deduction under Section 194C. The CIT(A) found it to be a loan/advance not subject to TDS.- Rs. 28,656/-: The Assessing Officer noted this was paid by cheque, thus requiring TDS. The CIT(A) found it consisted of two bills below Rs. 20,000/- each, thus not subject to TDS.B. Shiv Transport:- Rs. 33,600/-: The Assessing Officer required TDS on the payment made by cheque. The CIT(A) found it consisted of two bills below Rs. 20,000/- each, thus not subject to TDS.C. Shree Om Carting:- Rs. 22,500/-: The Assessing Officer required TDS on the payment made by cheque. The CIT(A) found it consisted of two bills below Rs. 20,000/- each, thus not subject to TDS.D. Ramesh Ramjibhai Patel:- Rs. 2,40,000/-: The Assessing Officer treated this as an advance against contract work, requiring TDS. The CIT(A) found it to be a loan/advance not subject to TDS.- Rs. 36,660/-: The Assessing Officer noted this was paid by cheque, thus requiring TDS. The CIT(A) found it consisted of three bills below Rs. 20,000/- each, thus not subject to TDS.E. Mukesh G. Patel:- Rs. 7,00,000/-: The Assessing Officer treated this as an advance against contract work, requiring TDS. The CIT(A) found it to be a loan/advance not subject to TDS.- Rs. 40,430/-: The Assessing Officer noted this was credited, thus requiring TDS. The CIT(A) found it consisted of bills below Rs. 20,000/-, thus not subject to TDS.Tribunal's Observations and Decision:- The Tribunal upheld the CIT(A)'s deletion of additions for Rs. 2,40,000/- and Rs. 7,00,000/- as these were advances not claimed as deductions.- For other disallowances, the Tribunal noted that the CIT(A) did not verify whether payments were for the same or different contracts. The Tribunal remanded the matter back to the Assessing Officer for re-adjudication to determine if payments were for the same contract (thus requiring TDS) or separate contracts (not requiring TDS).Conclusion:The appeal of the Revenue was partly allowed for statistical purposes, with the matter remanded to the Assessing Officer for further verification regarding the nature of contracts for the disputed payments. The Tribunal upheld the deletion of additions for advances not claimed as deductions.