Tax Appeal Decisions: Department's appeals dismissed, assessee's cross objections allowed. Tribunal upholds CIT(A) decisions.

The appeals by the department regarding non-deduction of tax at source under sections 194J and 194H were dismissed. Cross objections by the assessee concerning short deduction of tax and proportionate expenses were allowed. The appeal regarding pre-operative expenses was dismissed as withdrawn. The tribunal upheld the decisions of the CIT(A) on various tax deduction issues, finding in favor of the assessee in most instances.

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Issues Involved:
1. Non-deduction of tax at source under section 194J on out-of-pocket expenses of auditors.
2. Non-deduction of tax at source under section 194H on commission payments made to Sahayak.
3. Non-deduction of tax at source under section 194J on short deduction of tax on payment of conversion charges to dairies.
4. Proportionate expenses disallowed under section 40(a)(ia).
5. Pre-operative expenses considered as revenue expenditure.

Detailed Analysis:

1. Non-Deduction of Tax at Source under Section 194J on Out-of-Pocket Expenses of Auditors:
The Assessing Officer (AO) contended that payments for boarding and lodging expenses made by the assessee to auditors should be subject to TDS under section 194J, as these payments were made on the basis of bills raised by auditors, including service tax. However, the assessee argued that these expenses were paid directly to the hotels and not to the auditors. The CIT(A) accepted the assessee's explanation, supported by relevant bills and proof of payment. The tribunal upheld the CIT(A)'s decision, finding no reason to interfere with the detailed and reasoned order.

2. Non-Deduction of Tax at Source under Section 194H on Commission Payments Made to Sahayak:
The AO argued that the assessee should have deducted tax under section 194H on commission payments made to Sahayak. The assessee explained that Sahayaks were engaged on a principal-to-principal basis to collect milk from members, and payments were made based on various parameters like the quantity of milk collected and its quality. The CIT(A) agreed with the assessee, noting that the relationship was not of an agency but a contractual one, covered under section 194C. The tribunal upheld this view, citing consistency with previous years' decisions and relevant case law.

3. Non-Deduction of Tax at Source under Section 194J on Short Deduction of Tax on Payment of Conversion Charges to Dairies:
The AO treated payments made to dairies for conversion and packing of milk as technical services under section 194J. The assessee argued that these were job work payments under section 194C, as the dairies processed milk based on the assessee's specifications. The CIT(A) ruled in favor of the assessee, stating that the main nature of the transaction was job work, not technical services. The tribunal upheld this decision, referencing relevant judgments that supported the classification of such payments under section 194C.

4. Proportionate Expenses Disallowed under Section 40(a)(ia):
The AO disallowed proportionate expenses under section 40(a)(ia) due to short deduction of tax. The CIT(A) and the tribunal found that the assessee had not short deducted tax and was not in default under section 201(1). The tribunal set aside the matter to the AO to calculate the proportionate expenses and give effect to the appellant.

5. Pre-Operative Expenses Considered as Revenue Expenditure:
The assessee appealed against the AO's decision to treat certain expenses as pre-operative and disallow them. However, the assessee later requested to withdraw these grounds. The tribunal dismissed this appeal as withdrawn.

Conclusion:
- Appeals by the department regarding non-deduction of tax at source under sections 194J and 194H were dismissed.
- Cross objections by the assessee regarding short deduction of tax and proportionate expenses were allowed.
- The appeal concerning pre-operative expenses was dismissed as withdrawn.

Order Pronounced:
This order was pronounced in open court on 23/03/2018.

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