TMI Blog2019 (3) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh consideration by the AO in the light of principles laid down in the case of Super Spinning Mills [2013 (9) TMI 88 - MADRAS HIGH COURT] in the decision cited supra. AO will afford opportunity of being heard to the assessee, before deciding the issue. The relevant grounds of appeal are decided accordingly. TDS u/s 194C - payment to transporters - benefit of section 194C(6) / 194C(7) - payment in question was a payment for carrying out of works for which assessee ought to have deducted tax at source on such payment - addition u/s. 40(a)(ia) - HELD THAT:- We find that identical issue had come up for consideration before the Calcutta Bench of the Tribunal in the case of Soma Rani Ghosh v. DCIT [2016 (10) TMI 55 - ITAT KOLKATA] as held authorities below are not justified in treating the expense incurred by the assessee for Carriage inward and carriage outward as disallowable under section 40(a)(ia) of the Act, and adding back claimed expense towards Carriage Inward and expense towards Carriage Outward, and such additions shall stand deleted. - Decided in favour of assessee. - ITA No.393/Bang/2016 - - - Dated:- 15-2-2019 - Shri N.V. Vasudevan, Vice President And Shri B.R. Bask ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 97,300 Claimed as Revenue expense 5 Machinery Spares (Outside Local Area) 2007-08 35,38,411 20,10,050 45,000 Claimed as Revenue expense 6 Machinery Spares (Outside Local Area) 2000-01 65,46,609 1,123,894 90,800 Claimed as Revenue expense 7 Machinery Spares (Outside Local Area) 2007-08 35,38,411 20,10,050 53,324 Claimed as Revenue expense 8 Machinery Spares (Outside Local Area) 2005-06 7,97,278 3,00,693 2,09,774 Claimed as Revenue expense 6. The AO on an examination of the above chart was of the view that the expenditure incurred on repairs by the assessee compared with the consideration paid for the purchase of machinery and the Written Down Value (WDV) as on 1.4.2011 was substantial. He wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA gave the following findings:- This machine is not a single unit but is made up of several parts. Thus, in the first year the assessee claimed depreciation of ₹ 1,51,31,700/- which consisted of several parts, in its first year of operation. Only then the assessee started deriving enduring benefit. During the accounting period 2011-2012 this machinery could not operate. The assessee found that one of the parts had to be replaced without which the machinery could not function. It is only after replacement that the machinery started functioning and an advantage was derived from this machine. This machine being congregation of several parts started functioning and enduring benefit was derived only after the replacement of particular part. Thus the expenditure incurred is no doubt a capital expenditure because the replacement of particular part maintained the status quo which is equivalent to a new part of the entire machinery. Thus, it is to be implied that the machinery parts, when replaced, started giving the desired benefit by making them in a working condition. Therefore the expenditure spent on such replacement is not revenue expenditure although there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies existence of a part of the machine which has malfunctioned, thereby requiring repair to that machinery, plant etc. Replacement cannot be a current repair, for, replacement and current repair do not go hand in hand. If one is to hold otherwise, it would only make Section 31(i) wholly redundant and absurd. Thus, replacement expenditure cannot be said to be `current repairs vide [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.) and 2009-TIOL- 86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited) (v) Expenditure is deductible under section 37 only if it (a) is not deductible under sections 30-36, (b) is of a revenue nature, (c) is incurred during the current accounting year and (d) is incurred wholly and exclusively for the purpose of the business. 2009- TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited); (vi) Expenditure is of a capital nature when it amounts to an enduring advantage for the business and repair is different from bringing a new asset for the business. Further, bringing into existence a new asset or an enduring benefit for the assessee amounts to capital expenditure vide Lakshmiji Sugar Mills (P) Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t- Sea) 15,70,513/- Sales by Sea Transport 71,76,751/- 13. Admittedly, the assessee did not deduct tax at source on the payments made to the transporters. The AO was of the view that under the provisions of section 194C of the Act, payment in question was a payment for carrying out of works for which assessee ought to have deducted tax at source on such payment. Since the assessee failed to deduct tax at source, the AO was of the view that the amount claimed as deduction while computing income on account of transport charges should be disallowed and added to total income of assessee u/s. 40(a)(ia) of the Act. 14. The assessee submitted that it had obtained declaration from all the transporters who were engaged for the purpose of transportation to the effect that the sum in question was paid to them in the course of their business of plying goods carriages along with their PAN. According to the provisions of section 194C(6) of the Act, if such a declaration is obtained, a person making payment need not deduct tax at source. After the amendment by Finance Act, 2015 w.e.f. 1.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer having noticed that assessee had not deducted tax at source on such payments disallowed same under section 40(a)(ia) - Assessee contended before Commissioner (Appeals) that because of provision of section 194C(6), she was not liable to effect TDS on payments to transporters who had submitted their PAN and those PAN and addresses of transporters were filed before Assessing Officer - Commissioner (Appeals) held that benefit under section 194C(6) was available only when assessee fulfilled conditions laid down in section 194C(7) and since assessee had not fulfilled conditions, Assessing Officer was justified in disallowing said payments - Whether from reading of provisions of section 194C it follows that if assessee complies with provisions of section 194C(6), no disallowance under section 40(a)(ia) is permissible, even though there is violation of provisions of section 194C(7) - Held, yes - Whether since assessee had submitted PAN and addresses of transporters before Assessing Officer and thus complied with provisions of section 194C(6), no disallowance under section 40(a)(ia) was permissible - Held, yes [Paras 34 and 35][In favour of assessee] 18. In the light ..... X X X X Extracts X X X X X X X X Extracts X X X X
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