2024 (12) TMI 987 - AT - Income Tax

ITAT Mumbai deletes TDS disallowances on fuel charges and professional fees, remands cash payment and generator hire matters for fresh examination

Inspire Films Ltd. Versus Income Tax Officer Mumbai

ITAT Mumbai held in favor of the assessee on multiple disallowances. For cash payments exceeding INR 20,000 under section 40A(3), the matter was remanded ... Disallowance u/s 40A(3) - cash payments in excess of INR 20,000 to a person in a day - Assessee argued payment was advance to cashiers and not the cash expenses - HELD THAT:- During the hearing, AR submitted that an individual expense ledger account is also maintained day-wise, wherein the cashier account is reversed. AR also furnished the sample copy of such ledger. Assessee has also placed on record sample invoices/vouchers in respect of the expenditure incurred in cash to show that the expenditure incurred in cash at any time is not more than INR 20,000. It is evident from the record that none of these evidences were examined by the authorities and merely on the basis that the total amount of cash paid to each cashier is more than INR 20,000, the addition was made under section 40A(3) - we are of the considered view that it is relevant to examine the accounting treatment of these expenditures in the books of the assessee and also it is necessary to examine and verify all the ledger accounts in respect of these expenditures. Thus, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication - Decided in favour of assessee for statistical purposes. Disallowance u/s 40(a)(ia) - non-deduction of tax u/s 194C on payment made for generator/hire and fuel charges - plea of the assessee that the payment made in respect of fuel charges is in the nature of reimbursement of expenditure on fuel - HELD THAT:- We find merit in the submission of the assessee that no TDS is applicable on fuel charges paid by the assessee as the same was reimbursed on a cost-to-cost basis to J.K. Films Power - the provisions of section 194C cannot apply to the charges paid for fuel as the payment is not in nature envisaged u/s 194C particularly the same is not for the “work” as defined in Explanation to the section. Accordingly, the AO is directed to delete the disallowance in respect of payment made in respect of fuel charges u/s 40(a)(ia) of the Act. Payment made for generator/attendant hire charges - As per the assessee on generator hire charges no TDS was deducted as it was below the threshold limit provided u/s 194I - on attendant charges TDS at the rate of 1% was deducted by the assessee. We find that apart from the ledger account of J.K. Films Power in the books of the assessee no other document, such as Form 16A, has been placed on record by the assessee to support the aforesaid plea. Accordingly, we restore this issue to the file of the AO limited to the extent of verification of the plea of the assessee that TDS as per applicable provisions was deducted on generator hire charges and attendant charges. If upon verification of the necessary documents, it is found that the TDS as per applicable provisions was deducted, then the AO is directed to delete the disallowance made under section 40(a)(ia) of the Act with respect to the generator hire charges and attendant charges. With the above directions, the impugned order on this issue is set aside and ground raised in assessee’s appeal is allowed for statistical purposes. Disallowance u/s 40(a)(ia) - non-deduction of tax on payment of professional charges - HELD THAT:- We find no basis in the disallowance of INR 97,250 made by the AO u/s 40(a)(ia) of the Act as the total payment made to Ms. Annu Pathak was INR 1,33,796 and as is evident from the Form 16A, the TDS was also deduction under section 194J of the Act on the aforesaid payment of professional fees. Accordingly, the addition u/s 40(a)(ia) of the Act on account of payment made to Ms. Annu Pathak is deleted. As a result, the impugned order on this issue is set aside and ground no.3 raised in assessee’s appeal is allowed. Disallowance u/s 40(a)(ia) - non-deduction of tax on payment for a film set - HELD THAT:- From the perusal of ledger account, we find that it is specifically mentioned that the amount was paid towards the purchase of said property at M/s Kathasis Studio Private Limited. Thus, we find no merits in the findings of the AO that as per the ledger account, the amount was paid for site rental charges. Assessee has also placed on record the invoice raised by M/s Kathasis Studio Private Limited for the sale of set furniture and shooting properties. No material contrary to the aforesaid evidence was placed on record by the Revenue. Therefore, from the perusal of the aforesaid documents, we find merits in the submission of the assessee that the amount was paid for the sale of the set and thus no TDS is liable to be deducted on same. Accordingly, the disallowance made u/s 40(a)(ia) of the Act is deleted and the impugned order on this issue is set aside Issues Involved:1. Disallowance under Section 40A(3) of the Income Tax Act, 1961.2. Disallowance under Section 40(a)(ia) regarding non-deduction of TDS on generator/hire and fuel charges.3. Disallowance under Section 40(a)(ia) concerning non-deduction of TDS on professional charges.4. Disallowance under Section 40(a)(ia) related to non-deduction of TDS on payment for a film set.5. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.Detailed Analysis:1. Disallowance under Section 40A(3):The issue pertains to the disallowance of cash expenses exceeding INR 20,000 in a day, which the assessee argued were advances to employees for petty expenses during television serial production. The assessee contended that these were not direct expenses but advances for subsequent petty expenses, each less than INR 20,000. The Tribunal found that the authorities did not examine the evidence provided by the assessee and deemed it necessary to verify the accounting treatment and ledger accounts. Therefore, the matter was remanded back to the Assessing Officer (AO) for fresh adjudication after due verification, with directions to provide the assessee an opportunity for a hearing.2. Disallowance under Section 40(a)(ia) on Generator/Hire and Fuel Charges:The dispute involved the non-deduction of TDS on payments made for generator hire and fuel charges. The assessee argued that TDS was deducted on generator hire charges but not on fuel charges, as these were reimbursements. The Tribunal accepted the assessee's submission that fuel charges were reimbursements and not subject to TDS under Section 194C. However, the Tribunal remanded the issue of TDS on generator hire charges back to the AO for verification of compliance with TDS provisions, directing deletion of disallowance if compliance is confirmed.3. Disallowance under Section 40(a)(ia) on Professional Charges:The issue concerned the non-deduction of TDS on professional charges paid to Ms. Annu Pathak. The assessee claimed that TDS was deducted and provided evidence, including Form 16A, to support this. The Tribunal found that the total payment was INR 1,33,796, on which TDS was deducted, and no contrary evidence was provided by the Revenue. Consequently, the Tribunal deleted the disallowance under Section 40(a)(ia), allowing the assessee's appeal on this ground.4. Disallowance under Section 40(a)(ia) on Payment for Film Set:This issue involved the non-deduction of TDS on payments for a film set, which the assessee claimed was a purchase, not a rental or service transaction. The Tribunal reviewed the ledger and invoice evidence, confirming that the payment was for the purchase of set furniture and shooting properties. The Tribunal found no basis for TDS deduction and deleted the disallowance under Section 40(a)(ia), setting aside the impugned order on this issue.5. Penalty Proceedings under Section 271(1)(c):The initiation of penalty proceedings under Section 271(1)(c) was mentioned, but no specific details or judgments were provided in the text concerning its resolution or outcome.Conclusion:The Tribunal allowed the appeal for statistical purposes, remanding certain issues for verification and deleting disallowances where evidence supported the assessee's claims. The judgment emphasized the importance of verifying accounting treatments and compliance with TDS provisions, ensuring that procedural fairness is maintained by providing the assessee an opportunity for a hearing.