2016 (4) TMI 825

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....40(a)(ia) of the Act amounting to Rs. 56,96,615/- by not appreciating the contention of the Assessing Officer that the assessee has paid hire charges for hiring of various equipments as per narrations in the said accounts and it has nowhere been mentioned that it is pursuant to contract agreement and payment has been paid to contractor, sub-contractor. 2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in not considering the fact that the assessee did not produce any contract/subcontract agreement which evidenced that the said payments were in fact for contractual work and not just for hiring of equipment. 3. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in not ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

...., the ld. CIT(A) has erred in ignoring the fact that any compensation paid by a person for breach/non fulf illment of contract, the compensation/damages amount so paid is a penalty within the provisions of the Contract Act vis-à-vis Income Tax Act. 7. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in ignoring the fact that expenses on liquidated damages paid on the breach of a contract comes within the purview of explanation to section 37(1) of the IT Act, 1961, which states that any expenditure incurred for any purpose which is an offence or which is prohibited by law shall not be deemed to have incurred for the purpose of business or profession and no deduction or allowance shall be made in r....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....essing Officer. 2.3. The ld. CIT(A) also deleted the addition made by the Assessing Officer under the head "liquidated damages". The ld. CIT(A) observed as under: "The 'liquidated damages' paid by the appellant are neither capital expenditure nor these expenditure are incurred by the assessee for any purpose which is an offence or which is prohibited by law. These "liquidated damages" are not in the nature of fine or penalty for infraction of any law. The Assessing Officer in the assessment order has nowhere brought out any infraction of law or breach of any statutory obligation by the appellant. The Assessing Officer has not mentioned under what provision of law the liquidated damages paid to different purchasers are an offence or pr....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... tax u/s 194C of the Act instead of section 194I of the Act. There is no allegation against the assessee that the TDS so deducted have not been deposited with the Government account. We are of the view that the provisions of section 40(a)(ia) of the Act has two limbs; first is a situation where the assessee has not deducted TDS; and the other is a situation where the assessee deducts TDS and does not deposit it into the Government Account or deposit the same beyond the prescribed prices. There is nothing in the section which say that disallowance could be made u/s 40(a)(ia) of the Act for short deduction of tax at source. The Hon'ble Calcutta High Court in the case of 46 Taxmann 499 (Cal.) held as follows: "We are of the view th....