2015 (10) TMI 989

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....n'ble Tribunal, Assessee preferred M.A. (MA No.43/AHD/2012) dated 13.12.2013 and the order in ITA No. 2414/AHD/2006 was recalled only for deciding ground no. 2 of the appeal. The relevant ground of Assessee reads as under:- 2. That on facts and circumstances of the case, the learned CIT(A) has erred in sustaining the disallowance of following expenses u/s. 40(a)(ia) of the Act by wrongly treating those expenses as payment to contractors. Particulars Arbuda Textiles Natraj Synthetics Total Factory rent 78,000 78,000 156,000 Machinery rent 288,000 240,000 528,000 Reimbursement of wages and power expenses on actual basis 650,000 530,000 1,180,000 Total 1,016,000 848,000 1,864,000 ....

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....ircular No.715 dated 08-08-1995 which mentioned that tax was to be deducted at source only in cases where bills were raised for the gross amount inclusive of expenses. The AO did not accept the explanation and held that Shree Arbuda Textiles and Natraj Synthetics were clearly sub-contractors of the assessee during April. 04 to Nov.'04 and their owners were in full control of the factory premises and doing production for the assessee through their own machinery, staff etc., therefore the contention of the assessee in respect of rent payment was only any afterthought. The AO held that since the assessee had not deducted tax on credit of payments made to the parties and accordingly disallowed the claim of Rs. 18.64 lakh u/s.40(a)(ia) of th....

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....and as such the payment made for the same cannot be treated as rent. These two parties are clearly sub-contractee of the appellant for the first eight months of the year. Therefore, the so-called agreement entered into with these two parties is nothing but a document to mislead the revenue. The entire payment to these two parties is in the nature of payment to a sub-contractor on which tax had to be deducted at source and deposited in the Govt. account before the stipulated date. Since this has not been done, I am of the considered view that provisions of section 40(a)(ia) are clearly attracted in this case and disallowance has rightly been made by the A.O. The same is hereby confirmed. 4. Aggrieved by the order of CIT(A), Assessee is no....