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2013 (11) TMI 281 - ITAT MUMBAIDisallowance out of sub-contracting charges u/s 40A(3) being paid in Cash - AO made disallowance of Rs. 63,69,540/- by considering the cash payment of Rs. 50,00,000/- with narration “CPCL Paramount cash payment-Head Office” and the cash payment of Rs. 13,69,540/- to various persons – Held that:- apparent from the record that the cash payments of Rs. 50,00,000/- is not a payment made by the assessee to the parties on account of sub-contract payments but the said amount represents the remittance of various amounts made by the assessee to its branch office at Chennai for the purpose of work carried out at various sites. Therefore, no error in the order of the CIT(A) in deleting the said addition of Rs. 50,00,000/- because it was not a payment to the third party but only a remittance by the head office to the branch office. As regards the disallowance of cash payments of Rs. 13,69,540/-, no dispute that the work was being carried out at about 80 sites and details of which have been given by the assessee - Out of the total payments of Rs. 2,19,02,968/- the payment of Rs. 2,06,96,216/- was made through cheques therefore, about 95% of the payments on account of expenditure at the contract sites were made through cheques and only 5% of the payments was made in cash. Keeping in view of the number of sites and the locations of the sites as well as nature of work it cannot be ruled out that the cash payment was inevitable in such circumstances. Therefore, the disallowance of the total payment of Rs. 13,69,540/- by the AO is not justified in the facts and circumstances of the case when the majority of payments were subjected to TDS. Since, the assessee failed to furnish necessary bills/vouchers therefore, the CIT(A) has restricted the addition to 10% of the said amount of Rs. 13,69,540/- which is just and proper – Decided in favor of Assessee.
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