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2016 (10) TMI 1297 - AT - Income TaxDisallowance of Freight expenses u/s. 40(a)(ia) - Scope of Amendment in section 40(a)(ia) - Tax not deposited before the end of the accounting year - HELD THAT:- Amendment in section 40(a)(ia) by Finance Act, 2010 has retrospective effect, meaning thereby, if the expenditure was incurred by the assessee in any month during the previous year and TDS was deducted, but such TDS was deposited after expiry of accounting year, but before due date of filing of the return, then disallowance under section 40(a)(ia) would not be made. DR was unable to controvert this contention of the ld.counsel for the assessee. On due consideration of the facts and circumstances, we are of the view that as far as ground no.1 in all these three appeals are concerned, they are devoid of any merit, because, the assessee has deducted TDS on these amounts and TDS was deposited before the due date of filing of the return. AO has made disallowance on the ground that TDS was not deposited before the end of the accounting year i.e. before 31.3.2005. Therefore, ground no.1 in all three years is rejected. TDS on the payments made to truck owners for hiring the trucks - Revenue authorities have assumed existence of either contractor-ship between the assessee and other truck owners, whose trucks were hired by the assessee for transport. There is no evidence on record. The assessee has ever entered into any contract or created any subcontract-ship with any of the truck owners. Assessee could be fastened with the obligations to deduct TDS, if it has entered into a contract with truck owners. The assessee has only availed services of the contractor for transporting the goods from point “A” to “B”. All risk and reward for transporting the goods remain with the assessee. Therefore, the ld.Revenue authorities have failed to appreciate that relationship of contractor and contractee was not existed between the assessee and the alleged truck owners. On this reason, amongst other, we are of the view that the orders of the CIT(A) are not deserve to be interfered with, though by way of different reasons. e assessee cannot be held in default for non-deducting the TDS on the payments made to truck owners for hiring the trucks. Section 40(a)(ia) was not applicable to the Asstt.Year 2005-06. Similarly, we have held that there is no contractor-contractee relationship exists between the assessee and the truck owners, therefore, no TDS is required to be deducted Expenditure under the head car expenses and depreciation - CIT(A) confirmed the disallowance at the rate of 1/5th of this expenses - HELD THAT:- As agreed that decision of the Hon’ble Gujarat High Court in the case of Sayaji Iron & Engg. Co. [2001 (7) TMI 70 - GUJARAT HIGH COURT] is not applicable to the case of the assessee, as the assessee is a registered and firm and not a company. Since assessee failed to submit complete details, therefore, adhoc disallowance is made. We do not find any merit in this ground of appeal. It is rejected. Disallowance in respect of bad debts - HELD THAT:- Revenue authorities have failed to appreciate the facts and circumstances. The explanation of the assessee was that it was given as advance to the staff for business purpose, i.e. it was to be incurred for hiring trucks. The ld.AO has considered as if it was given to the staff for their personal needs. The AO has considered it as advance to the staff. He has totally changed the meaning of the explanation of the assessee, and even if it is an advance to the staff during the course of employment and staff does not return it, then how it could be allowed as business loss, is not understandable. Similarly, the ld.CIT(A) has observed that the assessee failed to bring any evidence to demonstrate the fact that how it was incurred in day-to-day business activity. The assessee has submitted audited accounts and ledger accounts demonstrating the fact that the amount was given to the staff. What other evidence can be submitted ? Therefore, in our opinion, the ld.Revenue authorities have not appreciated the fact in right perspective. We allow this ground of appeal and delete disallowance. Disallowance at the rate of 10% of the total expenses out of telephone and vehicle expenses, 20% on car expenses and depreciation on car and 15% on travelling expenses confirmed
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