2017 (12) TMI 788 - AT - Income Tax

ITAT Decision on TDS Credit & Expense Disallowances

The ITAT upheld the allowance of TDS credit, citing the cash system of accounting and non-double taxation principle. Ad hoc disallowances of various ... TDS credit - Held that:- Commissioner of Income Tax(A), while directing the Assessing Officer to allow the credit of TDS, has noted that orders of ITAT Delhi Bench in DCIT vs M/s Lloyd Insulation (India) Ltd. (2013 (1) TMI 35 - ITAT NEW DELHI), ITO vs Sikka International Freight Services Pvt. Ltd. [2010 (2) TMI 930 - ITAT DELHI ] have directed that the credit be allowed. We have also perused the orders cited before the Ld. Commissioner of Income Tax (A) and duly noted by him in his appellate order while allowing relief to the assessee. Addition on account of repairs and maintenance, general and office expenses - Held that:- Similar disallowance has been made in assessment year 2007-08 against which the assessee had not filed any appeal. A perusal of the assessment order shows that the Ld. Commissioner of Income Tax (A) is absolutely correct in observing that the disallowance has been made on an estimate and we are also in agreement with the adjudication of the Ld. Commissioner of Income Tax (A) that ad hoc disallowance without pointing out any specific defect or lacuna is not sustainable. Therefore, we uphold the adjudication of the Ld. Commissioner of Income Tax (A) on this issue also and dismiss ground no. 3 of the department’s appeal. Disallowance on account of personal use of vehicle maintenance - Held that:- Although the Ld. Commissioner of Income Tax(A) has deleted the disallowance, it is an admitted fact that the assessee has not been maintaining any log book and, therefore, while we uphold the action of the Ld. Commissioner of Income Tax(A) in deleting the disallowance on account of depreciation, we are of the considered opinion that 10% of vehicle running and maintenance expenses is a reasonable estimate and in absence of log book, we set aside the order of the Ld. Commissioner of Income Tax(A) on this issue and restore the disallowance. Thus, ground no. 4 is partly allowed. Disallowance of 10% out of telephone expenses - Held that:- We are of the considered opinion that in absence of details, this disallowance also needs to be upheld. Hence, we set aside the order of the Ld. Commissioner of Income Tax (A) on this issue and restore the disallowance. Issues involved:1. Disallowance of TDS credit2. Disallowance of various expenses3. Disallowance of vehicle maintenance expenses4. Disallowance of telephone expensesAnalysis:1. Disallowance of TDS credit:The Assessing Officer disallowed TDS credit based on discrepancies in professional income and TDS claimed. The Ld. Commissioner of Income Tax (A) directed to allow TDS credit, citing relevant judgments. The ITAT upheld this decision, emphasizing the cash system of accounting followed by the assessee and the non-double taxation principle. The decision was supported by precedents, leading to the dismissal of the department's appeal regarding TDS credit.2. Disallowance of various expenses:The Assessing Officer made ad hoc disallowances without specific evidence. The Ld. Commissioner of Income Tax (A) rightly noted the lack of pinpointing specific vouchers for disallowance and upheld the appeal. The ITAT concurred, dismissing the department's appeal on this issue due to unsustainable ad hoc disallowances.3. Disallowance of vehicle maintenance expenses:While the Ld. Commissioner of Income Tax(A) deleted the disallowance on vehicle depreciation, the absence of a log book led the ITAT to partially allow the department's appeal, restoring the disallowance of 10% of vehicle running and maintenance expenses as a reasonable estimate.4. Disallowance of telephone expenses:The ITAT upheld the disallowance of 10% of telephone expenses due to insufficient details, setting aside the Ld. Commissioner of Income Tax (A)'s decision. Consequently, the department's appeal was partly allowed on this ground.In conclusion, the ITAT's detailed analysis and application of relevant legal principles resulted in the partial allowance of the department's appeal, addressing various disallowances while upholding certain decisions based on the merits of each issue.