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2017 (5) TMI 362 - AT - Income TaxDisallowance of unpaid expenditure incurred under the head ‘machinery rents’ u/s 68 - failure to file confirmation letters from the parties - Held that:- ITAT has given a specific direction to the A.O. with a legal proposition that once the expenditure has been accepted as genuine, the creditors arised out of such expenditure cannot be considered as unexplained u/s 68 of the Act. The A.O. ignoring the above findings, went on to disallow the expenditure as unproved expenditure for the simple reason that the assessee has failed to furnish necessary details, ignoring all the evidences filed by the assessee in the form of confirmation letters from the party and also ledger extracts to prove the payment of such outstanding credits in the subsequent financial years. We further observed that the assessee has filed a paper book containing confirmation letters along with ledger extracts. On perusal of the details filed by the assessee, we find that the parties have confirmed the transactions and also outstanding balance at the end of the year. Therefore, we are of the view that the A.O. was erred in travel beyond the directions of the ITAT, while disallowing the entire expenditure incurred under the head ‘machinery rents’. - Additions deleted - Decided in favour of assessee. TDS u/s 194C - reimbursement of expenditure incurred by the parties towards cost of fuel and spare parts - Held that:- The provision of section 194C of the Act has no application, when the payment is made towards reimbursement of cost of fuel and spare parts. The A.O. never disputed the fact that the impugned expenditure is incurred is towards reimbursement of fuel and spare parts, but disallowed said expenditure for failure to produce contractual agreements to prove its claim. We do not find any merits in the findings of the A.O. for the reason that there is no necessity of written contractual agreement to prove the expenditure incurred towards reimbursement of cost of fuel and spare parts. The assessee is in the business of hiring of machinery and in the process it has hired out its machineries to M/s. ESSAR Constructions, Chennai. The assessee has instructed the party to incur expenditure towards cost of fuel and spare parts, which was adjusted against the machinery rents payable to the assessee. Since, the party has deducted amount towards cost of fuel and spare parts, there is no necessity for the assessee to deduct TDS u/s 194C of the Act. In so far as amount paid to M/s. Kishore Enterprises, the assessee has filed necessary proof to prove the said amount has been paid for supply of spare parts. Therefore, we are of the view that the A.O. was erred in disallowing machinery maintenance expenditure u/s 40(a)(ia) - Decided in favour of assessee.
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