2019 (10) TMI 1076 - AT - Income Tax

Tribunal directs re-examination of evidence for AY 2013-14 and 2014-15

M/s. Kavya Travel Pvt. Ltd. Versus The Income Tax Officer, Corporate Ward-4 (4), Chennai-34.

The Tribunal allowed the appeals for AY 2013-14 and 2014-15 for statistical purposes, directing the CIT(A) to re-examine the evidence and make a fresh ... TDS u/s 194C - addition u/s 40(a)(ia) - HELD THAT:- Issue of disallowance of expenses by invoking provisions of Section 40(a)(ia) read with provisions of Chapter XVII-B for both the ay’s : 2013-14 and 2014-15 needs to be restored to the file of Ld.CIT(A) for fresh adjudication . The assessee has made statement before us that if given one more opportunity, the assessee will produce all the necessary and relevant evidences/ certificates as required under the statute/rules to substantiate that the payees have duly included the aforesaid amounts as income in their return of income filed with Revenue and paid due taxes to the credit of Central Government. Now, the onus is entirely on the assessee to produce all relevant evidences/ certificates as are required under the law before learned CIT(A) in set aside proceedings for both the ay’s to justify that no additions are warranted in the case of the assessee u/s 40(a)(ia) of the 1961 as these payees have included aforesaid amounts paid by the assessee in return of income filed with Revenue as their income and paid due taxes to the Credit of Central Government. CIT(A) is directed to verify these evidences/certificates and accordingly adjudicate the issue on merits in accordance with law , keeping in view ratio of decision of Hon’ble Delhi High Court in the case of Ansal Land Mark Township [2015 (9) TMI 79 - DELHI HIGH COURT] and Hindustan Coca Cola [2007 (8) TMI 12 - SUPREME COURT] Issues Involved:1. Disallowance of interest paid to Non-Banking Financial Institutions (NBFIs) under section 40(a)(ia) for want of TDS.2. Disallowance of payments made to other travel agencies under section 40(a)(ia) for want of TDS.3. Disallowance of audit fees and professional fees for non-deduction of TDS.4. Disallowance of vehicle maintenance expenses under section 40(a)(ia) for want of TDS.Detailed Analysis:1. Disallowance of Interest Paid to Non-Banking Financial Institutions (NBFIs):The assessee argued that interest payments to NBFIs should not be disallowed under section 40(a)(ia) for non-deduction of TDS, as these institutions are reputed companies that would have discharged their tax obligations. The assessee cited the Supreme Court decision in Hindustan Coco Cola and the second proviso to section 40(a)(ia). The AO observed that the assessee did not deduct TDS on interest payments amounting to Rs. 53,18,606 for AY 2013-14 and Rs. 57,64,891 for AY 2014-15. The CIT(A) provided partial relief for AY 2014-15 by excluding interest payments to banks under section 194A(3)(iii)(a), but confirmed the disallowance for AY 2013-14.2. Disallowance of Payments Made to Other Travel Agencies:The assessee contended that payments to other travel agencies were made during emergencies when the appellant could not honor its commitments, and thus, there was no formal contract necessitating TDS under section 194C. The AO disallowed Rs. 1,06,20,450 for AY 2013-14 and Rs. 1,45,68,958 for AY 2014-15 for non-deduction of TDS. The CIT(A) upheld these disallowances.3. Disallowance of Audit Fees and Professional Fees:The assessee argued that the auditor had accounted for the audit/professional fees in their return of income, and thus, TDS was not required. The AO disallowed Rs. 1,34,677 (audit fees) and Rs. 67,000 (professional fees) for AY 2013-14, and Rs. 1,80,000 (audit fees) for AY 2014-15. The CIT(A) confirmed these disallowances.4. Disallowance of Vehicle Maintenance Expenses:The assessee claimed that vehicle maintenance expenses were normal repairs with no formal contracts, thus not requiring TDS under section 194C. The AO disallowed Rs. 57,84,247 for AY 2013-14 and Rs. 94,83,080 for AY 2014-15 for non-deduction of TDS. The CIT(A) upheld these disallowances, stating that section 194C applies to both oral and written contracts.Tribunal's Decision:The Tribunal considered the rival contentions and the material on record. It noted that the assessee did not deduct TDS on various payments, invoking section 40(a)(ia). The Tribunal recognized the assessee's request for an opportunity to produce evidence showing that the payees had included the payments in their returns and paid due taxes, referencing the Delhi High Court's decision in CIT v. Ansal Land Mark Township Private Limited and the Supreme Court's decision in Hindustan Coca Cola. The Tribunal restored the issue to the CIT(A) for fresh adjudication, directing the assessee to produce relevant evidence and certificates. The CIT(A) was instructed to verify the evidence and adjudicate the issue on merits, providing an adequate opportunity for the assessee to be heard.Conclusion:The appeals for AY 2013-14 and 2014-15 were allowed for statistical purposes, with the Tribunal directing the CIT(A) to re-examine the evidence and make a fresh determination in accordance with the law. The decision emphasized the need for the assessee to substantiate its claims with appropriate documentation.