TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1613
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.... Rs. 1,22,440 2 Decent Lorry Services Rs. 6,38,664 3 Kranti Transport Rs. 13,09,535 4 Kumool Nandyal Transport. (Hyd) Rs. 2,78,658 5 Nagarjuna Transport Rs. 6,17,566 6 Navata Transport Rs. 11,63,417 Total transport charges Rs. 41,63,417 The Assessing Officer has asked the assessee as to why TDS was not deducted on the above payments. It was submitted before the Assessing Officer that the payments in question are made on behalf of the principals and the invoices raised in the name of the principals, hence, provisions of section 194C are not attracted. It was also submitted that the payments referred to above were not claimed as expenditure in the profit & loss account. However, the Assessing Officer has not agreed with the submissions made by the assessee and observed that as per section 194C, it is an obligation on the part of the assessee to deduct TDS on the payments made to the various transport companies. Therefore, the Assessing Officer has made an addition of Rs.41,63,417/- under section 40(a)(ia) of the Act. 3. On being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). Before the ld. CIT(A), it was submitted that the....
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....of section 40(a)(ia) does not arise in view of the following: In M/s Name Constructions (P) Ltd. in ITA'Nos. 1462 & 1463/ Hyd/ 2011, for AYs 2004-05 order dated 25/01/2012, IT AT, Hyderabad held: "10. We have heard both the parties on this issue. The contention of the assessee is that this item has not been debited to profit & loss a/c and this has been shown in the balance sheet and it cannot be considered for allowance or disallowances. We find force in the contention of the assessee's counsel that unless the assessee claims this item as expenditure, the AO cannot allow or disallow the same. In that circumstances, we set aside this issue to the file of the AO to examine whether this is, an expenditure claimed by the assessee in the profit & loss a/c or shown as an item in the balance sheet. In the event, if it is claimed as an expenditure, the AO could disturb the same and disallow an expenditure claimed in the P&L a/c to the extent of 10%, which, in our opinion, is reasonable. On the other hand, if it is balance-sheet item, the AO is precluded from doing so." In M/s. Godavari Developers Vs. ACIT, Circle-11(1), Hyderabad in ITA No. 918/HYD/2011 dated 31/10/2012, ITA....
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....cular No.5 of 2005, dated 15.07.2005, the Hon'ble Tribunal held that the purpose of introducing Section 40(a) (ia) was to augment TDS compliance and to curb bogus payments. Hence, the payments which have been made and not found to be bogus cannot be disallowed by invoking section 40(a)(ia) of the Act. 6. It is submitted that parties are locals; assessed to tax locally and filed Returns of Income duly disclosing these transport charges. Under these facts, the ratio of judgment of Hon'ble Supreme Court in the case of Hindustan Coca-Cola Beverages Pvt. Ltd. Vs. CIT 293 ITR 226 wherein it was held that "the liability of the deductor comes to an end once taxes have been paid by the deductee" applies to appellant's case. Once appellant is not liable to effect TDS, there cannot be any default warranting invoking of section 40(a) (ia). 7 Estimated addition towards interest on loans / advances. AO pointed out that appellant advanced Rs. 3,21,837/- to one J. Ravi Kumar and Rs. 20,842/- to another Tilda Rice Land Pvt. Ltd. but has not admitted any income from those advances. AO observed that appellant paid interest @ 8% on loans taken and therefore estimated income on advances made by cha....
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....mpany once in a month. (iii) At the end of every month, a statement for such expenditure is submitted along with original bills and vouchers to principal company for reimbursement. Simultaneously an entry is also passed by debiting their "Expenses account" and crediting to "Reimbursement account". When reimbursement is made by principal company then 'Reimbursement accounts' are credited to by reimbursed amount and TDS deducted thereon. 5.2.1 During the appellate proceedings, appellant has produced books of account, monthly expenditure statements for claim submitted to the principal company and bills raised by the service providers on behalf of principal company. The bills raised by the service providers like transporters, etc. are in fact, in the name of principal company. As and when assesses incurs any expenses on behalf of the principal company, their "Expenses Accounts" are debited. Assessee prepares a Monthly Expenditure statement and sends it to the principal company along with original bills for reimbursement. The Principal Company deducts TDS u/s 194C from such claim and only net amount is reimbursed to the appellant. The appellant, thus, credits the "Reimbursement Acco....
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....tion 40(a) cannot be lost sight of. The view that section 40(a)(ia) would have no application in respect of expenditure not falling under sections 30 to 38 has been taken by the Tribunal. In view of the non obstante clause under section 40(a)(ia) viz., "notwithstanding anything contained in the provisions of this Act", what are disallowed are only amounts covered by items of expenses referred to in section 30 to 38. In other words, only if there is default in respect of tax deduction viz., non-deduction or failure to deposit after deduction thereof in respect of sums referred in section 30 to 38, the provisions of section 40(a)(ia) could be invoked to disallow such sums in that year where default has occurred. 5.5 As the appellant has got only reimbursement from principal for the expenditure incurred by it, it had neither shown receipt nor claimed expenditure in its P&L A/c. Section 40(a)(ia) will come into play only in respect of expenses debited in P&L A/c that attract TDS provisions. Since the appellant has not claimed this expenditure / payments by debiting the P&L A/c, the question of disallowing this amount by invoking the provisions of Section 40(a)(ia) does not arise. R....