2022 (11) TMI 887 - AT - Income Tax

Tribunal partially allows appeal, remands depreciation issue, deletes addition for creditor balance, upholds disallowance for TDS.

M/s. Jugalkishore R. Agrawal Infrastructure Pvt. Ltd. Versus JCIT, B.K. Range, Palanpur C/o Income Tax Office, Palanpur

M/s. Jugalkishore R. Agrawal Infrastructure Pvt. Ltd. Versus JCIT, B.K. Range, Palanpur C/o Income Tax Office, Palanpur - TMI Issues Involved:1. Disallowance of depreciation and insurance expenses.2. Unreconciled creditor balance.3. Addition for non-deduction of TDS on payments to transporters.Detailed Analysis:1. Disallowance of Depreciation and Insurance Expenses:The assessee claimed depreciation on certain vehicles not registered in its name, which the AO disallowed, citing lack of evidence that the vehicles were used for business purposes. The CIT(A) upheld this disallowance, noting that the assessee failed to substantiate the claim with proper documentation and proof of dominion over the vehicles. The vehicles were purchased in the names of various individuals whose relationship with the company was not established.The Tribunal, however, recognized that depreciation can be claimed on assets used for business purposes, even if not registered in the company's name, as long as the company has dominion over them. The Tribunal cited relevant case law and remanded the matter back to the CIT(A) to verify if the vehicles were acquired with the company's funds and if the individuals in whose names the vehicles were registered were directors of the company. If these conditions are met, the CIT(A) should allow the depreciation claim.2. Unreconciled Creditor Balance:The AO noted a discrepancy of Rs. 6,52,296/- between the assessee's books and the creditor M/s Ambika Construction's books. The assessee attributed this to an accounting error by the creditor, who recorded the receipt in the next financial year. The CIT(A) upheld the addition, stating that the assessee failed to reconcile the difference and provide adequate explanations.The Tribunal accepted the assessee's argument that the discrepancy was due to the creditor's accounting error, not the assessee's fault. The Tribunal noted that the entire amount was paid through banking channels and TDS was deducted. Consequently, the Tribunal deleted the addition, stating that the assessee should not be penalized for the creditor's mistake.3. Addition for Non-Deduction of TDS on Payments to Transporters:The AO disallowed expenses under repairs, maintenance, and advertisement, totaling Rs. 2,05,800/-, and carting expenses of Rs. 1,15,714/- due to non-deduction of TDS. The CIT(A) upheld the disallowance, noting that the assessee did not provide any explanation or supporting documents.The Tribunal upheld the CIT(A)'s decision regarding the carting expenses, acknowledging that the assessee admitted to not deducting TDS and failed to provide additional documents to show that the payee had included the income in their return and paid taxes. Therefore, the disallowance of Rs. 1,15,714/- was confirmed.Conclusion:The appeal was partly allowed for statistical purposes. The Tribunal remanded the issue of depreciation and insurance expenses back to the CIT(A) for verification, deleted the addition related to the unreconciled creditor balance, and upheld the disallowance for non-deduction of TDS on carting expenses.