2012 (10) TMI 1224

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....rned CIT(A) has erred in confirming disallowance of Rs. 69,33,473/- under the cover of Section 40(a) (ia) on the ground that no tax has been deducted from the payments made for hire charges." 3. The assessee is an individual engaged in the business of travels conducting his business under the name and style of M/s. Gandhi Travels. The assessee filed his return of income for the assessment year 2004-05 on 26-10-2005 along with tax audit report etc. as per the provisions of section 44AB of the Act declaring total income of Rs. 11,43,700/-. Thereafter, the case was selected for scrutiny and assessment was completed u/s 143(3) of the Act on 13- 08-2007 wherein one of the disallowances made was u/s 40 (a) (ia) of the Act for failure to deduct....

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....herefore, failure to deduct TDS would not entitle the claim of expenditure and the A. O. was justified in disallowing the claim. For the reasons mentioned in Para 5.3 relating to ground No.2 below, the disallowance u/s. 40 (a) (ia) is reduced to Rs. 69,33,473/- (7549611 - 616138, already disallowed u/s. 40A (2) (b). The expenditure would be allowed in the year in which the TDS is paid. As of now, the ground No.1 is partly allowed." 5. The learned AR submitted before us various decisions listed herein below and prayed that the addition made on account of section 40(a) (ia) of the Act may be deleted: (i) Shakti Builders - ITA No.3145/Ahd/2009 dated 11.11.2011 (ii) Shri Prashant H. Shah Vs ACIT - ITA No.17/Ahd/2011 dated 8....

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.... of the assessee. The gist of the aforesaid decision is reproduced herein under: "Under section 194C of the Income-tax Act, 1961, the tax is to be deducted when a contact is entered into for carrying out any work in pursuance of a contract between the contractor and the entities mentioned in sub-section (1) of section 194C. The term "hire" is not defined in the Income-tax Act. So, we have to take the normal meaning of the word "hire". Normal hire is a contract by which one gives to another temporary possession and use of property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. The Explanation to section 194C was introduced with effect from Jul....