TaxTMI 
TaxTMI 
2015 (7) TMI 518
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....In the course of assessment proceedings, the Assessing Officer noticed that while in the profit and loss account the assessee had claimed expenditure of Rs. 55,30,572 as 'Collection Commission', but on verification of the books of account, it was seen that the assessee had debited a sum of only Rs. 42,83,604. Since the expenses as per books of account was Rs. 42,83,604 as against the assessee's claim of Rs. 55,30,572, the difference of Rs. 12,46,968 was disallowed on account of excess claim of expenditure. Similarly the Assessing Officer on examination of the assessee's claim of expenditure on account of 'sales commission' found that as against expenditure of Rs. 40,42,000 claimed in the assessee's profit and loss account, the amount debited in the books of account was Rs. 36,76,400 and therefore the excess expenditure claimed i.e. of Rs. 3,66,000 was disallowed. Apart from this, the Assessing Officer invoked the provisions of Section 40(a)(ia) of the Act and proceeded to disallow Rs. 30,62,689 in respect of 'collection commission' and disallowance of Rs. 35,75,500 in respect of 'sales commission' for failure to deduct tax at source thereon. Thus, the Assessing Officer ....
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....diture both at the time of assessment and remand proceedings and the fact intimated to the learned CIT (Appeals) vide remand report submitted. 5. The appellant craves for permission to add, modify or delete the grounds of appeal at the time of hearing the case with a prayer to restore the order of A.O." 5. The Grounds at S.Nos.1 and 5 of Revenue's appeal are general in nature and therefore no adjudication is called for thereon. 6.1 Grounds 2 to 4 of Revenue's appeal relate to the disallowances of Rs. 12,46,968 and Rs. 3,65,500 on account of 'commission on collection' and 'commission on sales' respectively that have been deleted by the learned CIT(A) in the impugned order. In respect of these grounds, the learned Departmental Representative contended that the disallowances were made by the Assessing Officer as there were discrepancies detected between the amount claimed in the profit and loss account and the books of account produced before the Assessing Officer. It was submitted that, on appeal before the learned CIT(A), the assessee contended that the Assessing Officer had only partially considered/examined the books of account as he had not verified the entire claim with reg....
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....ich are evident from the separate audited Profit & Loss Account submitted for each proprietorship concern, are summarized below : M/s. Sanforce M/s. Tracers Total Claim debited As per A.O. Collection commission Rs.47,85,800 Rs.7,44,772 Rs.55,30,572 Rs.42,83,604 being entries upto Feb.2008 only. Sales commission Rs.36,76,400 Rs.3,65,500 Rs.40,42,400 Rs.36,76,400. 3.2 The A.O. was asked to comment on the above during remand proceedings but replied that in the absence of books of account he was unable to do so. I find from assessment record that the books of account had been produced before him on 9.11.2010 and during remand proceedings the extract of ledger accounts were once again filed. A ledger is clearly included in the definition of books of account. The A.O.'s remarks, therefore, do not convey an intention to arrive at factual accuracy and appear to be dilatory in nature. 3.3 The evidences in the form of audited financial statements of the two proprietorship concerns and the ledger extracts clearly indicate that as far as collection commission is concerned the figure adopted by the Assessing Officer is incomplete and has missed out the ....
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....erence at all. In this factual matrix, we are of the considered view that the deletion of the disallowances of Rs. 12,46,968 and Rs. 3,65,500 made on account of excess claim of expenditure of 'commission on collection' and 'commission on sales', by the learned CIT(A) cannot be faulted, calls for no interference therein by us and is consequently upheld. Accordingly, grounds raised by Revenue at S.Nos.2 to 4 are dismissed. 7. In the result, Revenue's appeal for Assessment Year 2008-09 is dismissed. Assessee's Appeal for A.Y. 2008-09 in ITA No.845/Bang/2014. 8. The Grounds raised in the assessee's appeal are as under :- " 1. The orders of the authorities below in so far s they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and in the circumstances of the case. 2. The learned CIT (Appeals) is not justified in sustaining the disallowance of a sum of Rs. 30,62,689 under Section 40(a)(ia) of the Act, on collection commission under the facts and in the circumstances of the appellant's case. 3. The learned CIT (Appeals) is not justified in sustaining the disallowance of a sum of Rs. 35,75,500 under Section 40(a)(ia) of the Ac....
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....the year viz. as on 31st March. It was also submitted that on merits, there was no requirement to deduct tax at source under Section 194C or 194H of the Act and therefore, the disallowance made under Section 40(a)(ia) of the Act was not called for. The learned Authorised Representative pleaded that, in view of the judicial decisions cited, these disallowances require to be deleted. 11.2 The learned Departmental Representative supported the impugned order of the learned CIT(A) who has chosen not to follow the decision of the co-ordinate bench of this Tribunal in the case of Ananda Markala (supra). 11.3.1 We have heard the rival submissions and perused and carefully considered the material on record. The co-ordinate bench of this Tribunal in its decision in the case of Ananda Markala (supra) has considered the applicability of the provisions of section 40(a)(ia) of the Act and followed the order of the Hon'ble Allahabad High Court in the vase of Vector Shipping Services Pvt. Ltd. in ITA No.122/2013 dt.9.7.2013, which upheld the finding of the Special Bench of the ITAT, Visakhapatnam in the case of Merilyn Shipping (2012) 16 ITR (Trib) 1, Visakhapatnam (SB). The relevant portion....
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....ch is intended from the replacement of the words in the proposed and enacted provision from the words 'amount credited or paid' to 'payable' has held that it has to be concluded that provisions of Section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow expenditure which has been actually paid during the previous year, without deduction of TDS. 28. In CIT Vs. Sikandarkhan N.Tunvar & Others, TAX APPEAL NO. 905 of 2012 & others Dated02/05/2013, the Hon'ble Gujarat High Court held that in Merilyn Shipping 146 TTJ 1 (Viz) (SB,) the majority held that as the Finance Bill proposed the words "amount credited or paid" and as the Finance Act used the words "amounts payable", s. 40(a)(ia) could only apply to amounts that are outstanding as of 31st March and not to amounts already paid during the year. This view is not correct for two reasons. Firstly, a strict reading of s. 40(a)(ia) shows that all that it requires is that there should be an amount payable of the nature described, which is such on which tax is deductible at source but such tax has not been deducted or if deducted not pa....
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....duction at source. This provision was brought on statute to disallow the claim of even genuine and admissible expenses of the assessee under the head 'Income from Business and Profession' in case the assessee does not deduct TDS on such expenses. The default in deduction of TDS would result in disallowance of expenditure on which such TDS was deductible. In the present case tax was deducted as TDS from the salaries of the employees paid by M/s Mercator Lines Ltd., and the circumstances in which such salaries were paid by M/s Mercator Lines Ltd., for M/s Vector Shipping Services, the assessee were sufficiently explained. It is to be noted that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year. We do not find that the Tribunal has committed any error in recording the finding on the facts, which were not controverted by the department and thus the question of law as framed does not arise for consideration in the appeal. The income tax appeal is dismissed." 30. Thus there are two views on the issue, one in favour of the assessee expressed by the Hon'....