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2015 (6) TMI 457 - ITAT HYDERABAD

2015 (6) TMI 457 - ITAT HYDERABAD - TMI - Disallowance under section 40(a)(ia) - non deduction of TDS on payments made by the assessee on account of consultancy charges to anesthetist and architect/contractor - CIT(A) deleted disallowance - Held that:- Both the amounts in question on account of consultancy charges and construction expenses were fully paid by the assessee during the year under consideration and there being no amount payable on these accounts, the Ld. CIT(A), in our opinion, was f .....

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which was not claimed by the assessee as deduction and the same therefore even otherwise could not be disallowed by invoking the provisions of section 40(a)(ia) - Decided against revenue.

Unexplained investment in the construction of hospital building - CIT(A) restricted part addition - Held that:- In the present case, the books of accounts reflecting the construction expenses regularly maintained by the assessee were produced for verification before the A.O. and since the same were .....

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en preferred by the assessee before the Tribunal contesting this issue, Rule-27 of the Appellate Tribunal Rules, 1963 allows the assessee as a respondent, though he is not appealed, to support the order appealed on any of the grounds decided against him. Accordingly, relying on the said Rule, we uphold the impugned order of the Ld. CIT(A) restricting the addition of ₹ 25,38,893 made by the A.O. on account of unexplained investment allegedly made by the assessee in the construction of hospi .....

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ny specific adjudication. Ground No.2 (as revised) and ground No.3 involve a common issue relating to the deletion by the Ld. CIT(A) of the addition made by the A.O. by way of disallowance under section 40(a)(ia) on account of payments made by the assessee on account of consultancy charges to anesthetist and architect/contractor. 3. The assessee in the present case is an individual who is in the business of running a hospital under the name Shamshabad, R.R. Dist., and style of her proprietary co .....

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ding to the A.O., assessee was liable to deduct tax at source from the payment of such consultancy charges made to various Doctors as per the provisions of section 194J of the Act and since no such tax was deducted by the assessee, he disallowed the consultancy charges of ₹ 75,800 claimed by the assessee by invoking the provisions of section 40(a)(ia). 3.1. As found during the course of survey, the hospital building was being constructed by the assessee and in this connection, a sum of  .....

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by the A.O. He also overlooked the contention raised on behalf of the assessee that the amount in question being in the nature of capital expenditure not charged to P & L account, the same could not be disallowed by invoking the provisions of section 40(a)(ia). He Shamshabad, R.R. Dist., accordingly proceeded to make a disallowance under section 40(a)(ia) on account of payment of ₹ 4 lakhs made by the assessee to Mr. R. Srinivas for the failure of the assessee to deduct tax at source .....

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A.O. submitted his remand report to the Ld. CIT(A) offering his comments and after considering the same as well as the other material available on record, the Ld. CIT(A) deleted the disallowance made by the A.O. under section 40(a)(ia) on account of consultancy charges and construction expenses for the following reasons given in his impugned order. The contention of the learned A.R. is that the consultancy charges are mostly paid to the anesthetists. The entire amount so collected from the pati .....

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ts collected were paid to them. The contract is between the patients and anesthetist. Further, the actual payment of this amount was made to the anesthetists. In view of the decision of the Visakhapatnam Special Bench of the Hon ble ITAT in the case of Merilyn Shipping and Shamshabad, R.R. Dist., Transports vs. ACIT in ITA.No.477/Viz/2008 and in view of the fact that this amount does not represent the expenditure of the appellant, the addition made of ₹ 75,800 is directed to be deleted. Th .....

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amount so paid is not debited to the profit and loss account. The amount does not represent the amount paid towards contract and, therefore, the provisions of section 40(a)(ia) have no application. In any case, the addition made by the A.O. was not sustainable and the same is accordingly deleted. 5. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that both the amounts in question on account of consultancy charges and construction ex .....

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of the assessee before the authorities below as well as before us, the amount of ₹ 4 lakhs paid towards construction expenses constituted capital expenditure which was not claimed by the assessee as deduction and the same therefore even otherwise could not be disallowed by invoking the provisions of section 40(a)(ia). We Shamshabad, R.R. Dist., therefore find no merit in ground Nos. 2 and 3 raised by the Revenue in this appeal and dismiss the same. 6. In Ground Nos. 4 and 5, the Revenue h .....

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the A.O. in the assessment order, construction of second floor of the hospital building was completed by the assessee during the year under consideration and the cost of construction of the said floor as estimated by the DVO was ₹ 38,08,340. According to the A.O., expenditure on construction of hospital building to the extent of ₹ 25,38,893 was not disclosed by the assessee and he therefore required the assessee to show cause as to why the same should not be added to her total incom .....

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000 and ₹ 7,23,463 was incurred by him during the previous years relevant to A.Ys. 2004-05, 2005- 06, 2008-09 and 2009-10 respectively. It was submitted that the total expenditure of ₹ 60,16,463 thus was incurred on the construction of building and the same was duly reflected in the books of accounts of the assessee regularly maintained. It was contended that there was thus no basis to say that any unexplained investment was made by the assessee in the construction of hospital buildi .....

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he appeal filed before the Ld. CIT(A) and after considering the submissions made by the assessee, the remand report submitted by the A.O. and the counter comments offered by the assessee, the Ld. CIT(A) restricted the addition of ₹ 25,38,897 made by the A.O. on this issue to ₹ 3,67,387 for the following reasons given in his impugned order. The Assessing Officer mentioned that the matter of cost of construction was referred to the Valuation Cell and the Valuation Officer fixed the tot .....

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the value of the property for both the phases together at ₹ 1,34,45,607/-. The contentions of the learned AR are as under: a) The provisions of Sec.142A can be made applicable only when the Assessing Officer rejects the books of account. It is the contention of the learned AR that the books are not rejected and, therefore, the reference to the Valuation Cell is not validly made b) As an alternate submission, the learned AR furnished various details and submitted that the valuation is not .....

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ch details are furnished by the appellant. The Assessing Officer also did not mention the manner in which he arrived at the addition of ₹ 25,38,893/-. Even in the remand report, the Assessing Officer did not clarify as to how such an addition is arrived at. The appellant brought to my notice that according to the DVO the cost is ₹ 51,31,267/- according to the rates applicable to R&B, the cost of construction would be ₹ 27,05,429/-; as per the rates published by the Commissi .....

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when the books are not rejected. The only other remaining method of valuation is adopting the rates of R&B. The Hon'ble ITAT, Chennai Bench in the case of M. Selvaraj vs. ITO reported in 2 SOT 330 held that where the PWD rates are available, the said rates are to be applied instead of CPWD rates. Taking into account, the rates as per the R & B, the total cost during the previous year works out to ₹ 27,05,429/- . The amount for self-supervision in the case of the appellant can .....

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by the Ld. CIT(A) to restrict the addition of ₹ 25,38,893 made by the A.O. under section 69 on account of unexplained investment allegedly made by the assessee in the construction of building, which have remained un-rebutted or uncontroverted by the learned D.R., we find that a preliminary issue was raised by the assessee before the Ld. CIT(A) by contending that the expenses incurred on construction of hospital building having been duly recorded in the books of account and the said books o .....

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