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2016 (1) TMI 749 - ITAT CHENNAI

2016 (1) TMI 749 - ITAT CHENNAI - TMI - Disallowance made u/s.40(a)(ia) - disallowance on the reason that the expenditure is covered u/s.28 and not covered under sections 30 to 38 - CIT(A) deleted the disallowance - Held that:- The provisions of sec.194C of the Act cannot come into play when the payments have been made to agents of a non-resident company and relied on the order of the Kolkata Bench of the Tribunal in the case of Taj Leather Works v. ACIT (2012 (7) TMI 300 - ITAT KOLKATA ). To up .....

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sions of sec.40(a)(ia) cannot be invoked. Considering the judgment of the Special Bench of the Tribunal, in the case of Merilyn Shipping and Transports v. ACIT (supra), we are inclined to remit the issue for fresh consideration. - Decided in favour of revenue for statistical purposes.

Disallowance u/s 43B - addition made in respect of employees contribution to PF and ESI - whether the sum were remitted within the due date of filing the return of income? - CIT(A) deleted the addition - .....

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appeals are allowed and the impugned judgement and orders passed by the CIT(A) in deleting the disallowances made by the AO are hereby quashed and set aside and the disallowances of the respective sums with respect to the Provident Fund / ESI Fund made by the AO is hereby restored. - Decided against assessee - ITA No. 1220/Mds/2013, CO No.107/Mds/2013 - Dated:- 6-11-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER For The Appellant : Shri A.B.Koli, JCIT F .....

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t covered under sections 30 to 38. 3. The cross-objection filed by the assessee is in supportive of the order of the Commissioner of Income-tax(Appeals) . 4. The facts of the case are that the assessee has made the payments to M/s. Vasantham Cargo Agencies of ₹ 14,90,640/- towards freight charges, M/s. S.K.Leathers of ₹ 12,72,881/- and to M/s. Vignesh Leathers of ₹ 61,980/-, totalling ₹ 3,34,861/- towards machinery charges. The AO disallowed the above expenditure citing t .....

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the case of Teja Construction v. ACIT 39 SOT 13 (Hyd.) and Chennai C Bench in the case of ACIT v. Lakshmi Jewellery in ITA No.2005/Mds/2010 dated 6.9.2011 and directed the AO to delete the addition. 6. We have heard both the parties and perused the material on record. The ld. AR, relied on the order of the Tribunal in the case of ACIT v. M/s. Shri Balaji Communications in ITA 1744/Mds/2011 dated 20.12.2012, wherein it was observed vide para 9 & 10 as under: 9. Now coming to the cross-object .....

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on by which it is stated that Section 40(a)(ia) would apply only on amounts standing payable at the end of relevant previous year and not on the amounts paid during the relevant year. Learned D.R. did not raise any objection to the additional ground. Such additional ground is admitted being a pure question of law. 10. We have considered both the averments of the assessee. Insofar as reliance placed on the decision of Teja Constructions (supra) is concerned, there the books of accounts of the ass .....

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tion of the Tribunal cannot be seen divorced from the facts of that case. Here, books of the assessee were not rejected. Therefore, in our opinion, the said case would not help the assessee in any manner. Though Section 40 starts with nonobstante clause Notwithstanding anything to the contrary in sections 30 to 38….. , in our opinion, this would not mean that said section is not applicable on a deduction claimed under Section 28. We cannot say computation of business income will not be su .....

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(Trib.) 1(SB). However, we make it clear that the CIT(Appeals) has given relief to the assessee that the amounts are direct expenses incurred by the assessee in its business activity and are allowable u/s.28. There is no basis for such conclusion and it is not based on the examination of financial statement of the assessee to hold that the charges are direct expenses. We vacate that finding. 7. To support the deletion of addition by the CIT(Appeals), the ld. AR submitted that in view of the jud .....

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ed as a person in default. Considering this argument also, we find that there is no material before us to show that the payee has filed its return of income and offered the sum received to tax. Being so, this argument cannot be upheld. Finally, the ld. AR, submitted that the provisions of sec.194C of the Act cannot come into play when the payments have been made to agents of a non-resident company and relied on the order of the Kolkata Bench of the Tribunal in the case of Taj Leather Works v. AC .....

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the provisions of sec.40(a)(ia) cannot be invoked. Considering the judgment of the Special Bench of the Tribunal, in the case of Merilyn Shipping and Transports v. ACIT (supra), we are inclined to remit the issue for fresh consideration. This ground is allowed for statistical purposes. 8. Next ground in the appeal of the Revenue is with regard to deletion of addition made in respect of employees contribution to PF and ESI remitted within the due date of filing the return of income. In this case .....

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onsidered by the Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation (265 CTR 65), wherein their Lord-ships distinguished the decision of the Supreme Court in the case of CIT v. Alom Extrusions Ltd. (319 ITR 306) cited by the ld. AR, before us and observed as under: 7.07. Now so far as the reliance placed upon the decision of the Hon blee Supreme Court in the case of Alom Extrusions Ltd. (supra), by the learned ITAT as well as learned advocates appearing on behalf o .....

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titled to the deduction of such amount, is concerned, on considering the controversy before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra), the said decision would not be applicable to the facts of the present case. In the said case before Alom Extrusions Ltd., the controversy was whether the amendment in section 43B of the Act, vide Finance Act, 2003 would operate retrospectively w.e.f. 1/4/1988 or not. It is also required to be noted that in the case before the Hon&# .....

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respect to amendment (deletion) of the Second Proviso to section 43(B) of the Income Tax Act, 1961 by the Finance Act, 1963 operates w.e.f. 1/4/2004 or whether it operates retrospectively w.e.f. 1/4/1988. Under the circumstances, the learned tribunal has committed an error in relying upon the decision of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra) while passing the impugned judgement and order and deleting disallowance of the respective sums being employees contribu .....

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1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees account in the relevant fund or funds on or before the due date mentioned in explanation to section 36(1)(va). Co .....

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