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TMI Blog2009 (10) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... ales was allowed by the assessee to M/s Bergess Manning India Ltd. 5. After considering the assessee's explanation, and facts and circumstances of the case, the AO was of the view that only 5 per cent of the discount would be justified as in the asst. yr. 2001-02, discount to the extent of 5 per cent was found justified. The AO, therefore, allowed discount only to the extent of Rs. 9,05,000 and balance amount of Rs. 9,04,407 was disallowed under s. 40A(2)(b) of the Act. 6. On an appeal, the CIT(A) has deleted the addition by following the Tribunal's decision in the assessee's own case pertaining to the asst. yrs. 2000-01 and 2001-02. 7. For the asst. yr. 2000-01, it was noticed by the AO that the assessee paid trade discount to a sister concern ranging from 5 per cent to 30 per cent, which was considered to be very high by the AO, and thus, the AO allowed the discount only upto the extent of 5 per cent, and balance was disallowed by him. The disallowance was deleted by the CIT(A), and the order of the CIT(A) was upheld by the Tribunal, after holding that the Revenue has not proved that the trade discount was not made for business exigencies. Similarly, in the asst. yr. 2001-02 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis to support the same especially when in para 12 the Tribunal has accepted the contentions of the assessee that there was justification in allowing a higher discount than as given to other domestic customers. 11. Sec. 40A(2)(a) pertains to disallowance to an expenditure which is made by the assessee i.e., an amount actually spent by the assessee as an expenditure. The expression used in this provision is 'incurs any expenditure in respect of which payment has been or is to be made to any person'. This clearly shows that actual payment must be made and there has to be an expenditure incurred before the provision can be said to be applicable. A trade discount, and admittedly it is not in dispute that the subject-matter of the claim is a trade discount and not an expenditure, clearly therefore there does not arise the question of applicability of s. 40A(2)(a)." 8. We, therefore, uphold the order of the CIT(A) in deleting the addition of Rs. 9,04,407 made by the AO. 9. Ground No. 2 reads as under : On the facts and in the circumstances of the case, the learned CIT(A) has erred on facts and in law in deleting the addition of Rs. 46,753 and Rs. 1,34,900 made by the AO under s. 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was therefore correctly deducted. The contentions have been examined. It is an admitted position that M/s Unicon Constructions worked as a contractor for the assessee. It is contended that no TDS was deductible in respect of part of the contract relating to supply of material. The contention follows from a flawed premise that TDS is a deduction with reference to the income earned by the payee. As per provision of law, the contractee is not authorized to segregate the service part of the contract from the total value of the work performed and deduct TDS only with reference to it. The copies of the bills of to M/s Unicon Constructions confirm this wherein work tax @ 4 per cent has been charged with reference to the total values of the bills. Therefore, the contentions of the assessee is not in accordance with the provisions of law and are rejected. As the assessee has deducted less TDS of Rs. 2,699, with reference to contractual payment of Rs. 1,34,950, this amount is disallowed under s. 40(a). I am also satisfied that assessee has furnished inaccurate particulars of its income. Therefore, penalty proceedings under s. 271(1)(c) are initiated separately. (Disallowance : Rs. 1,34,900) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agency charges amounting to Rs. 1,01,219, the assessee has deducted tax amounting to Rs. 2,094 at source, and the said payment has not been disallowed by the AO. The other two payments are towards payment of customs duty, and other expenses paid by the agent for/on behalf of the assessee. These reimbursement expenses were not made towards any services rendered by the agent, but have been made to set off of the expenses incurred by the agent while clearing the imported goods from the customs for/on behalf of the assessee. Since no element of income is embedded in reimbursement of expenses incurred by agency for/on behalf of the assessee, the assessee was not obliged to deduct tax at source, and, therefore, the CIT(A) has rightly deleted the addition. 17. Now we come to the disallowance of Rs. 1,34,900 made by the AO, but deleted by the CIT(A). 18. In the course of assessment proceedings, it was noticed by the AO that assessee has paid an amount of Rs. 2,09,485 to M/s Unicorn Constructions against contract civil job carried out by it upon which the assessee was required to deduct tax amounting to Rs. 4,189 at source, but the assessee has deducted the tax at source only to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructions, the AO was very much justified in disallowing the deduction by invoking the provision of s. 40(a) of the Act. Therefore, the order of the CIT(A) on this issue is set aside, and that of the AO is restored, meaning thereby that the disallowance of Rs. 1,34,900 made by the AO is justified, and is to be added back to the total income of the assessee. 20. Ground No. 3 is against the CIT(A)'s order in deleting the addition of Rs. 53,070 made by the AO on account of late deposit of employees contribution to PF account. The aforesaid addition has been deleted by the CIT(A) in the light of the decision of Hon'ble Delhi High Court in the case of CIT v. P.M. Electronics Ltd. [2008] 15 DTR (Delhi) 258 : [2009] 177 Taxman 1 (Delhi) payment of PF and ESI were made by the assessee before due date of filing of return of income under s. 139(1) of the Act. 21. In the light of the decision referred to above by the CIT(A), and in the light of the decision of Hon'ble Delhi High Court in the case of CIT v. Dharmendra Sharma [2007] 213 CTR (Delhi) 609 : [2008] 297 ITR 320 (Delhi) and the decision of Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. [2007] 213 CTR (SC) 268, we do n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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