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2015 (7) TMI 700 - AT - Income TaxDisallowance u/s 40(a)(ia) - Non deduction of TDS - payments made by assessee to third parties for supply of vehicles the assessees - Commissioner of Income Tax (Appeals) after holding that the assessees are contractors for supplying vehicles to the contractee companies has held that the assessees entered into sub-contract with third parties/owner of vehicles for supply of vehicles on behalf of the assessees to contractee companies. However, in coming to such a conclusion no document has been brought on record to show that the assessees have passed on the strings of responsibility and liability to vehicle owners from whom vehicles are hired. The Revenue has not brought on record any document to show that the assessees have entered into a sub-contract with the vehicle owners for providing such service. The assessees simply hired the vehicles on payment of hire charges and provided the same to the contractee companies in pursuance of contract agreement. For invoking the provisions of section 194C(2), the essential condition is that there should be a sub-contract for carrying out the whole or any part of the work undertaken by the contractor and the payment should be made for carrying out the whole or any part of such work. It is a well accepted principle of law that the contract can either be oral or written. In the present case, the Revenue has not been able to establish the existence of any contract between the assessees and the individual vehicle owners. Therefore, in the facts of the case we hold that the assessees have not entered into any subcontract with individual vehicle owners for supplying vehicles to the contractee companies. Since, the first question has been answered in negative, the payments made by the assessees to the third parties/individual vehicle owners do not fall within the ambit of section 194C. Thus, we hold that the payments made by the assessees are not subject to TDS provisions. Hence, the assessees have not violated the provisions of section 194C. - Decided in favour of assessee. Disallowance on vehicle expenses - CIT(A)restricted addition - Held that:- Ad-hoc disallowance of ₹ 17,930/- @ 20% of total vehicles expenses. The Commissioner of Income Tax (Appeals) has restricted the same to ₹ 10,000/-. In the absence of any cogent material, we find no reason to disturb this finding of the Commissioner of Income Tax (Appeals)- Decided against revenue. Addition on account of fall in net profit - CIT(A) deleted addition - Held that:- The Assessing Officer has made addition of ₹ 50,453/- merely on ground that there has been fall in net profit in the current assessment year as compared to previous assessment year. The Assessing Officer in an arbitrary manner increased the net profit by 0.25% on gross receipts. The Commissioner of Income Tax (Appeals) correctly deleted the same as AO has made the addition on adhoc basis (increased NP by 0.25%) without going into merits of the case. He has failed to bring any material on record which could warrant increase in NP by 0.25%. AO was not justified in disturbing the book results without assigning any specific defect - Decided against revenue.
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