Tribunal rules in favor of assessee, dismisses revenue's appeal

The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal. The Tribunal upheld the deletion of the addition towards sundry creditors under section 68 of the Act and the 10% disallowance of Arogya Shree scheme expenses. Additionally, the Tribunal directed the deletion of the disallowance of professional charges paid to doctors under section 40(a)(ia) of the Act.

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Issues Involved:
1. Addition towards sundry creditors for others u/s 68 of the Act.
2. Disallowance of 10% expenditure incurred under the Arogya Shree schemes.
3. Disallowance of professional charges paid to Doctors u/s 40(a)(ia) of the Act for failure to deduct tax at source u/s 194J of the Act.

Detailed Analysis:

1. Addition towards sundry creditors for others u/s 68 of the Act:

The A.O. added Rs. 1,17,53,802/- under section 68 of the Act, as the assessee failed to provide details such as party-wise breakup, confirmation, and bank account details of the creditors. The assessee argued that these were expenses payable towards the Arogya Shree scheme, incurred for conducting medical camps, and would be reimbursed upon receipt of funds from the State Government. The CIT(A) found that the amount shown under sundry creditors represented outstanding expenditure payable for Arogya Shree expenses due to delayed payments from the Government. The CIT(A) observed that these were not typical sundry creditors but expenses incurred and awaiting reimbursement. Hence, the CIT(A) directed the deletion of the additions, which was upheld by the Tribunal, noting that the A.O. did not doubt the genuineness of the expenses except for a 10% disallowance for lack of proper bills and vouchers.

2. Disallowance of 10% expenditure incurred under the Arogya Shree schemes:

The A.O. disallowed 10% of the expenditure under the Arogya Shree scheme, amounting to Rs. 1,49,63,563/-, as Rs. 32,09,761/- was incurred in cash without proper bills and vouchers. The CIT(A) enhanced this disallowance to 10% of the total expenditure, considering that the nature of the expenses and the fact that many were supported by self-made vouchers made it difficult to verify their genuineness. The Tribunal upheld the CIT(A)'s decision, agreeing that the nature of the expenses warranted a 10% disallowance to account for unsupported claims.

3. Disallowance of professional charges paid to Doctors u/s 40(a)(ia) of the Act for failure to deduct tax at source u/s 194J of the Act:

The A.O. disallowed Rs. 16,62,503/- out of Rs. 1,74,28,000/- paid as professional charges to doctors, as the assessee failed to deduct tax at source on this amount. The assessee contended that TDS was deducted wherever payments exceeded the threshold limits of section 194J, and that the disallowed amount was below this threshold. Alternatively, the assessee argued that since the payments were made before the end of the financial year, no disallowance should be made under section 40(a)(ia) as per the ITAT Visakhapatnam special bench decision in Merilyn Shipping & Transporters Vs. ACIT. The Tribunal found merit in the assessee's argument, noting that the payments were below the threshold limit and were made before the financial year-end. Thus, the Tribunal directed the A.O. to delete the disallowance.

Conclusion:

The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal, upholding the CIT(A)'s deletion of the addition towards sundry creditors and the 10% disallowance of Arogya Shree expenses, while directing the deletion of the disallowance of professional charges under section 40(a)(ia).

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