2015 (10) TMI 388 - AT - Income Tax

ITAT affirms CIT(A)'s decisions on revenue's appeal for AY 2009-10, upholding various expense disallowances. (A) -10

The Income-tax Officer Ward – 1 Versus M/s Rajasthan Diesels

The Income-tax Officer Ward – 1 Versus M/s Rajasthan Diesels - TMI Issues:1. Disallowance of TTS commission expenses2. Deletion of disallowance of sales promotion expenses3. Deletion of disallowance of workshop maintenance expenses4. Deletion of disallowance of PF and ESI contributionsIssue 1 - Disallowance of TTS Commission Expenses:The appeal by the revenue contested the deletion of disallowance of TTS commission expenses. The AO disallowed the expenses due to minor defects, alleging non-compliance with section 40(a)(ia). However, the CIT(A) found the disallowance unjustified as the AO failed to provide evidence that the commission was not paid genuinely. The CIT(A) noted that the commission was credited in the accounts and TDS was deducted and deposited on time. The ITAT upheld the CIT(A)'s decision, emphasizing that the expenses were legitimate, TDS was done, and no disallowance under section 40(a)(ia) was warranted.Issue 2 - Deletion of Sales Promotion Expenses Disallowance:The second ground of appeal challenged the deletion of disallowance of sales promotion expenses. The AO disallowed a portion of the claimed expenses, citing an incentive paid to an accountant not involved in sales. The CIT(A) overturned the disallowance, stating that the payment was genuine and no evidence was presented to refute the claim. The ITAT agreed with the CIT(A), emphasizing that one employee can perform multiple roles, and the disallowance lacked merit.Issue 3 - Deletion of Workshop Maintenance Expenses Disallowance:The appeal contested the deletion of disallowance of workshop maintenance expenses. The AO treated the expenses as capital expenditure without sufficient basis. The CIT(A) deleted the disallowance, noting the lack of evidence supporting the capital expenditure classification. The ITAT upheld the CIT(A)'s decision, stating that the disallowance was unjustified as no new asset was created.Issue 4 - Deletion of PF and ESI Contributions Disallowance:The final ground of appeal challenged the deletion of disallowance of PF and ESI contributions. The AO disallowed the contributions under section 36(1)(va), but the CIT(A) ruled in favor of the assessee, applying section 43B instead. The ITAT supported the CIT(A)'s decision, citing the Mumbai High Court judgment allowing the contributions if paid before the due date of filing the return. The ITAT dismissed the appeal, upholding the CIT(A)'s decision.In conclusion, the ITAT dismissed the revenue's appeal for the assessment year 2009-10, affirming the CIT(A)'s decisions on all grounds.