TaxTMI 
TaxTMI 
2021 (4) TMI 236
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade u/s.40(a)(ia) of Rs. 2,59,03,812/- without considering the findings given by the AO in the assessment order. 2. The ld.CIT(A) has erred in law and on the facts in deleting the disallowance of Rs. 5,48,921/- subject to verification without appreciating the fact that the additional discount given is by way of rent and TDS u/s.1941 is applicable in this case. 3. The ld.CIT(A) has erred in law and on facts in deleting the depreciation on car and car expenses of Rs. 34,63,547/- without appreciating the fact that the basic condition required for claim of depreciation are not fulfilled in this case. 3. The first issue raised by the Revenue is that the learned CIT (A) erred in deleting the disallowances of Rs. 2,59,03,812/- made by the AO under section 40(a)(ia) of the Act. 4. The fact in brief is that, during the assessment proceeding, the AO found that the assessee has not deducted tax under section 194C of the Act on certain payment made to the transporter, freight inward charges and clearing & forwarding charges amounting to Rs. 2,22,48,327/-, Rs. 36,55,545/- and Rs. 138,350/- respectively. 4.1 The assessee with regard to the payment to transporter and fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted to the appellant. Even if there is a failure to comply with section 194C(7)» the provisions of section 40(i)(ia) cannot be invoked, since there was no liability to deduct tax. Disallowance of the said sum is not in accordance with law. It is deleted. (2) Freight charges (Rs. 36,55,541/-) Appellant had purchased goods from Essar Steel Ltd.. The seller of the goods arranged for the transport. It paid the transportation charges and collected the same amount from the appellant. As contended by the AR this amount was only reimbursement of the transportation charges and therefore not liable for deduction of tax. Hence I am of the view that the disallowance is not sustainable. It is deleted. (3) Payment to M/s Trishul Trasnport Co. (Rs. 1,38,350/-) The written submission filed by the appellant is silent on the disallowance. A.O.'s observations remain uncontroverted. Disallowance of the said sum is upheld. 6. Being aggrieved by the order of the ld. CIT-A, both the Revenue and the Assessee are in appeal before us. The Revenue is in appeal for the deletion of Rs. 2,59,03,812/- and assessee is in appeal against the confirm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to note that the assessee was also under the obligation, after obtaining the PAN from the transporters, to furnish the same in the prescribed form to the prescribed authority within the prescribed time as provided under sub-section (7) to section 194C of the Act. The relevant provision of sub-section (7) to section 194C of the Act reads as under: (7) The person responsible for paying or crediting any sum to the person referred to in subsection (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. 10.3 At the threshold, we find that though there is provisions under the Act to file the necessary details to the prescribed authority but such prescribed authority has not been nominated under the provisions of law. Thus in the absence of such prescribed authority no fault can be attributed to the assessee for not filing the necessary details as discussed above. In our considered view in the absence of prescribed authority, the details filed by the assessee along with form 26Q should be considered as sufficient compliance on the part of the assessee. Accordingly, we ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the preceding paragraph. Hence the ground of appeal of the revenue is dismissed and the ground of appeal of the assessee is allowed. 11. The next issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition for Rs. 5,48,921/- made by the AO for the additional discount given on account of go-down rent and tax not deducted thereon under section 194I of the Act. 12. During the assessment proceeding it was found that the assessee has given additional discount to 5 parties on account of go-down rent paid by such parties. The details of the parties and the rent stand as under: SN Name of the concern Godown Rent paid (Rs.) 1 Shah Steel & Tubes, Mumbai 2,00,774 2 Puja Tube Corporation, Mumbai 53,617 3 Digar tubes Ltd., Mumbai 30,956 4 Bombay Hardware Pvt. Ltd., Mumbai Rs. 2,51,680 5 Vora Bros. & Co., Mumbai 5,48,921 12.1 The assessee's contention was that usually its customer don't take the delivery of the goods in their own go-down after the purchase but leave the good at the assessee's go-down until and unless the customer further sold the good to other parties. Thereafter the customers instru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e heard the rival contentions of both the parties and perused the materials available on record. From the foregoing discussion we find that the discount offered by the assessee to its parties has been disallowed on account of 2 reasons. Firstly, these parties own their own go-down in Mumbai and therefore there was no occasion/reason for the assessee to offer any discount for lifting the goods from the go-down of the assessee. Secondly, the assessee is paying the rent to those parties in the form of discounts extended to them and therefore such discount is subject to the provisions of section 194I of the Act being rent in the garb of discount. 17.1 For the 1st reasons, we note that it was the decision of the assessee to extend the discount or not to the parties. Similarly, there was no doubt on the correctness of the claim made by the assessee. The AO has no power to seat on the armchair of the assessee and direct to carry out its business affairs in a particular manner. Therefore we are of the view that such discount extended by the assessee cannot be denied. 17.2 For the 2nd reason, we note that the provisions of section 194I of the Act cannot be attracted on the discount....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed the depreciation of Rs. 28,93,859/- RTO expenses for Rs. 1,37,210/- and insurance charges of Rs. 2,30,037/- on such 3 cars. The AO further disallowed car running expenses of 202441/- on proportionate basis. 20. Aggrieved assessee preferred an appeal before the learned CIT (A) who allowed the appeal of the assessee by observing as under: Having considered the facts of the case I am inclined to accept the contentions of the Ld. A.R. As admitted by the A.O himself the funds for purchase of the cars were provided by the appellant. The Hon'ble Supreme Court in the case of Mysore Minerals Ltd. Vs. C.I.T. 239 ITR 775 (S.C) has held that the section of the I.T. Act, 1961, confers a benefit of the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the Legislature to the assessee. It was further held by the Hon'ble Supreme Court that the term owned as occurring in section 32(1) of the Income-tax Act must be assigned a wider meaning. The Hon'ble Supreme Court has held as under: "It is well-settled that there cannot be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be inferred that the assessee owns the cars in the capacity of beneficial owner. Thus, in our considered view the assessee is entitled for the depreciation on the car. In holding so we draw support and guidance from the order of this Tribunal in case of ITO vs. Electro Ferro Alloys Ltd. in ITA no 2773/Ahd/2009 reported in 25 taxmann.com 458 where the relevant finding of the coordinate bench reads as under: 5. 2. On consideration of the facts of the appellant's case it is noticed that the motor car was purchased, though in the name of the appellant's director, it was purchased out of the funds of the appellant-company and it is also not in dispute that the motor car was purchased for the purpose of business of the appellant. Thus the motor car being, business asset of the appellant and purchased for the purpose of business and used as such by the appellant, in view of the decision in the case of Mysore Minerals Ltd. [1999] 239 ITR 775 (SC) referred to above and other decisions cited by the learned authorised representative, I hold that the disallowance made by the Assessing Officer on this ground is not justified and hence the same is directed to be deleted. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....venue bearing ITA No. 1531/Ahd/2015. As such the ground of appeal of the assessee has been allowed. For the detailed discussion, please refer the relevant paragraph. Hence the ground of appeal of the assessee is allowed. 27. The 2nd issue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by sustaining the disallowance of the commission expenses amounting to Rs. 55,14,372/- only. 28. The assessee in the year under consideration has claimed an expense of Rs. 74,37,729/- under the head commission which were paid to 15 parties. Out of such 15 parties, one party namely M/s C.M. Smith & Sons Ltd was paid the commission by the assessee for an amount of Rs. 55,14,372/- only. The assessee to establish the genuineness of the commission paid to such party has filed the copy of the income tax return of the party, confirmation from party and the copy of agreement. The assessee also filed the details of the sales generated through the involvement of such commission agent namely M/s C.M. Smith & Sons Ltd. 28.1 However, the AO found certain defects in the agreement filed by the assessee. It was pointed out by the AO that this agreement was made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Pvt. Ltd. and M/s Surinder Engg. Co. Ltd were already known to the appellant and therefore the commission paid was being disallowed, as it was not for business purposes. As seen from the written submission filed appellant has not been able to demonstrate the nature and scale of services rendered by Smith and Sons Ltd. The submission is beside the point. Judicial Opinion is well settled that the payment of commission is allowable only on the assessee furnishing evidence in support of the services rendered. Therefore impugned disallowance of commission is upheld. This ground of appeal is dismissed. 30. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 31. The learned AR before us submitted that the assessee has incurred commission expenses in the regular course of its business and therefore the same is eligible for deduction under section 37 (1) of the Act. 32. On the other hand the learned DR before us submitted that the services rendered by the commission agent have not been brought on record by the assessee. Therefore, it can be inferred that the commission expenses has not been incurred in the course of the business. The learned DR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te having powers under the provisions of section 131/133(6) of the Act. 33.3 The provisions for allowing the deduction of the commission expenses are governed under the provisions of section 37 of the Act which requires the fulfilment of the following ingredients: i. Expenditure should not be covered under the specific sections, i.e., 30 to 36; ii. Expenditure should not be of capital nature; iii. Expenditure should have been incurred during the previous year; iv. Expenditure should not be of a personal nature; v. Expenditure should have been incurred wholly or exclusively for the purpose of the business or profession. 33.4 All of the five conditions mentioned above are to be satisfied before one can claim any expense as a deduction under this section. The last condition requires for allowing the claim of the expenses that the expenditure should have been incurred wholly or exclusively for the purpose of the business. This is a very vexed question, and a lot of litigation revolves around this issue. In fact, once the assessee has furnished the details for the deduction of commission expenses, the onus is shifted upon the AO to reje....