Tribunal allows appeals on tax deductions for rental payments and cash handling expenses.

The Tribunal allowed both appeals, overturning disallowances under section 40(a)(ia) for non-deduction of tax at source on rental payments and for cash handling expenses due to lack of evidence for Assessment Years 2011-12 and 2012-13. The Tribunal cited compliance with TDS provisions and the necessity of cash handling charges for business operations, ordering the deletion of disallowances and granting deductions. The orders were pronounced on 28th June 2018.

---

---

Issues:
1. Disallowance under section 40(a)(ia) for non-deduction of tax at source on rental payment.
2. Disallowance of cash handling expenses for lack of evidence.

Analysis:

Issue 1: Disallowance under section 40(a)(ia) for non-deduction of tax at source on rental payment (Assessment Year 2011-12):
The assessee, running a petrol pump, made a payment to BPCL without deducting tax at source. The Assessing Officer disallowed the amount under section 40(a)(ia) for non-compliance with TDS provisions. However, the second proviso to section 40(a)(ia) deems tax deduction if the payee includes the sum in their income tax return. The retrospective effect of this proviso was upheld by various courts. In this case, since BPCL likely included the rental income in its return, the disallowance was deemed unsustainable. The Tribunal ordered the deletion of the disallowance, citing compliance with TDS provisions.

Issue 2: Disallowance of cash handling expenses for lack of evidence (Assessment Year 2011-12):
The assessee incurred cash handling expenses but failed to provide concrete evidence to support the payments. The Assessing Officer disallowed the expenses, a decision upheld by the CIT(A). However, the Tribunal noted that vouchers for the payments were available, indicating the expenses were necessary for business operations. Considering the expenses were incurred in the course of business and essential for its functioning, the Tribunal ordered the deletion of the disallowance, granting deduction for the cash handling charges.

Issue 3: Disallowance under section 40(a)(ia) for non-deduction of tax at source on rental payment (Assessment Year 2012-13):
The circumstances in this assessment year mirrored those of the previous year. Following the precedent set for the earlier year, the Tribunal deleted the disallowance under section 40(a)(ia) for non-deduction of tax at source on rental payment. Additionally, the Tribunal ordered the grant of deduction for cash handling charges, maintaining consistency with the decision for the preceding year.

In conclusion, the Tribunal allowed both appeals, overturning the disallowances under section 40(a)(ia) for non-deduction of tax at source on rental payments and for cash handling expenses due to lack of evidence. The orders were pronounced on 28th June 2018.

---