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Luxmi Rice Mills Versus Income-tax Officer, Ward-4, Karnal.

2015 (11) TMI 298 - ITAT DELHI

Disallowance of rent to Warehouse + contract payment to NBHC u/s 40(a)(ia) - non deduction of TDS - Held that:- In the present case, it is an admitted fact that the assessee reimbursed the salary to the guards of the bank and there was no contract in between the assessee and NBHC. Guards were deputed by the bank, but the expenses were reimbursed by the assessee. The assessee reimbursed the expenses to the bank and the bank ought to have deducted the TDS when there was a contract in between the b .....

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as asked to produce evidence that the Haryana Warehousing Corporation and Central Warehousing Corporation are entities which are government and statutory authorities or local authorities covered u/s 10(20) or 10(20A) of the Act, but the assessee was not in a position to produce any evidence.

It is well settled that when any assessee claims any benefit or exemption under any provision of the statute, it is for the assessee to produce the relevant documents or evidence, on the basis of .....

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ACCOUNTANT MEMBER For The Appellant : Shri Permil Goel Adv. For The Respondent : Shri K.K. Jaiswal, Sr. DR ORDER This is an appeal by the assessee against the order dated 13-03-2014 of ld. CIT(Appeals)-Karnal. Only effective ground raised in this appeal reads as under: AO erred in law & fact in disallowing rent ₹ 5,16,808/- to Warehouse + contract payment of ₹ 2,37,757/- to NBHC paid during year by applying section 40(a)(ia), which is applicable only to amounts payable as on 31/3 .....

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at the assessee had debited warehouse paddy rent to the tune of ₹ 5,76,808/-, which comprised of ₹ 60,000/- paid to M/s Hanuman Rice Mills on 28-11-2009 and ₹ 5,16,808/- paid to Haryana Warehousing Corporation and Central Warehousing Corporation. The AO was of the view that the assessee was under obligation to deduct the tax on the rent payment of ₹ 5,16,808/- u/s 194-I of the Act, which had not been done by the assessee. He asked the assessee to explain as to why the TDS .....

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r the provisions of section 194C of the Act. The said amount was also disallowed u/s 40a(ia) of the Act and added to the income of the assessee. 3. Being aggrieved, the assessee carried the matter to the ld. CIT(A) and furnished the written submissions, which read as under: "The Ld.ITO made an addition of ₹ 516808/ - which was rent paid for Godowns as warehousing charges. The godowns are owned and controlled exclusively by the Sate Govt. and Central Govt. in the interest of the nation .....

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nd Central Warehousing Corporation were entities, which were government and statutory authorities or local authorities covered u/s 10(20) or 10(20A) of the Act. 6. In response, the assessee furnished the written submissions, which read as under: That for non deduction of TDS from rent paid to Central Warehousing Corporation of ₹ 206452/- and ₹ 310356/- to State Warehousing Corporation the expenses have been disallowed and added as Income. The bare reading of Section 194-I is clear- T .....

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tificate of Tax exemption status of these Govt. Deptt. and these days no officer likes to write any such letter or certificate. The same can be obtained at your honours level." 7. Ld. CIT(A) after considering the submissions of the assessee observed that the assessee failed to produce any document in support of its contention that it is covered u/s 10(20) or 10(20A) of the Act, on the basis of which it is claiming exemption from the provisions of section 194-I of the Act. Accordingly, the d .....

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n of ₹ 237757/- made u/s 194-C of the Act by disallowing u/ s 40 a(ia) of the Act, paid to NBHC for guarding and supervisory work. The contract is effected between the bank and NBHC. The bank also makes certain payments out of the interest earned to the NBHC(National Bulk Handling Corporation)The assessee has to pay as per bank directions. As there no contract between the appellant and NBHC no TDS was made. Further payment of salary to two guards and supervisor are finalized by the bank an .....

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was considered to be futile and baseless. According to ld. CIT(A), the assessee was liable to deduct TDS u/s 194C of the Act, as the payment was contractual in nature. He, therefore, held that the AO rightly made the disallowance u/s 40a(ia) of the Act. Now, the assessee is in appeal. 11. Ld. counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee paid warehouse rent to Central Warehousing Corporation and Haryana Warehousing C .....

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itor had mentioned Yes in response to the query of TDS compliance and had also mentioned in clause (b) Nil in response to query of TDS non-compliance. It was further submitted that nothing was payable as on 31st March, therefore, disallowance u/s 40a(ia), made by the AO, was not justified. Reliance was placed on the decision of the ITAT Visakhapatnam, Special Bench in the case of Merilyn Shipping & Transport Vs. JCIT and the judgment of the Hon ble Allahabad High court in the case of CIT vs. .....

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hat payable does not mean payable at the end of the year and that the amount can be payable on day to day basis. He strongly supported the impugned order passed by the ld. CIT(A). 13. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee reimbursed the salary to the guards of the bank and there was no contract in between the assessee and NBHC. Guards were deputed by the .....

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rges paid by it to M/s DLF Land Ltd. According to the AO, TDS ought to have been deducted under the amount paid by the assessee towards reimbursement expenses to M/s DLF Land Ltd. This Court holds that the CIT(A) and the ITAT rightly set aside the AO s order, ruling that the assessee was not required to deduct TDS on reimbursement expenses paid to M/s DLF Land Ltd. 18. The assessee has correctly relied upon this Court s ruling in Industrial Engineering Projects Pvt. Ltd., (supra). A Division Ben .....

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td. (supra) has also held that amount received towards reimbursement of expenses is not taxable under the Act. 19. In the instant case, it is undisputed that M/s DLF Land Ltd. had deducted TDS on the payments made by it under various heads on behalf of the assessee. Further, it is also not disputed that the assessee deducted TDS on the service charge paid by it to M/s DLF Land Ltd. on the reimbursement expenses. In such circumstances, this Court holds that the entire amount paid by the assessee .....

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of such reimbursement expenditure. The Court noted that the payee therein had already deducted tax on the various payments made by it to third parties (such as towards transport charges and other charges). Since the payments made by the assessee therein were only for the reimbursement of expenses incurred by the payee on behalf of the assessee, the Court held that no TDS was required to be deducted by the assessee. A special leave petition preferred by the revenue against the High Court's de .....

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what is defined as "income". The law thus obliges only amounts which fulfill the character of "income" to be subject to TDS in such cases; for other payments towards expenses, the deduction to those entitled (to be made by the payeee) the obligation to carry out TDS is upon the recipient or payee of the amounts. 21. The facts of this case are identical to those in Gujarat Narmada Valley (supra) and for the reasons stated above, this Court does not find any compelling ground .....

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