TMI Blog2016 (2) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Revenue. - Decided in favour of assessee Disallowance of expenditure under the head soil purchase, tractor maintenance and other expenses - Held that:-Assessing Officer disallowed 5% under the head soil expenses, 5% under the head tractor maintenance and 10% under the head other expenses. The Assessing Officer was of the opinion that the assessee has not furnished the supporting bills and vouchers for the expenditure debited in the profit & loss account and all the expenditure incurred are supported by self made vouchers, therefore made adhoc disallowance. The CIT(A), confirmed the additions made by the Assessing Officer. Even before us, the assessee has failed to prove the expenditure incurred was reasonable and not excessive. Having regard to the facts and circumstances of the case, we are of the view that the disallowance made by the Assessing Officer and confirmed by the CIT(A) is reasonable, hence, does not call for any interference at this stage. Therefore, we reject the ground raised by the assessee. - Decided against assessee - I.T.A.No.241/VIZ/2013, I.T.A.No.345/VIZ/2013 - - - Dated:- 6-1-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure debited in profit loss account. In response to the notice, the assessee furnished bills and vouchers in support of the expenditure debited in profit loss account. On verification of the bills and vouchers furnished by the assessee, the Assessing Officer noticed that the assessee has incurred the said expenditure without any supporting bills and all the expenses are supported by self-made vouchers. Therefore, the Assessing Officer was of the opinion that the assessee has not furnished satisfactory evidences in support of the expenditure debited in profit loss account, hence, disallowed 5% under the head soil purchase and tractor maintenance and 10% under other expenses. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee contended that the assessee had deducted TDS @1% on mistaken of facts and bonafide belief that these payments are falls under sec. 194C of the Act and the applicable rate of TDS is 1%. The assessee further submitted that the Assessing Officer disallowed the amount, even though the assessee has deducted TDS on such payments, on the ground that the assessee has not deducted TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of Merilyn Shipping and Transports (supra), therefore, the expenditure claimed without deducting tax at source, are liable for disallowance under sec. 40(a)(ia) of the Act. Similarly, the CIT(A) upheld the disallowance of expenditure made by the Assessing Officer under the head soil purchase, tractor maintenance and other expenses on the ground that the assessee has not made any submissions on merits of the issue, instead the assessee has requested for scaling down the disallowance made by the Assessing Officer. Aggrieved by the CIT(A) s order, the assessee as well as the Revenue are in appeal before us. 7. The Authorized Representative of the assessee submitted that the CIT(A) rightly deleted the additions made by the Assessing Officer towards hire charges amounting to ₹ 1,03,65,405/-. The Authorized Representative of the assessee further submitted that the assessee has deducted TDS by mistaken of facts and also on the bonafide belief that section 194C is applicable for the impugned payments, but, the Assessing Officer was of the opinion that the assessee should have deducted TDS under sec. 194I of the Act. It is not a case of non deduction of TDS to invoke the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Calcutta High Court in the case of S.K. Tekriwal (supra) under similar circumstances held the issue in favour of the assessee which reads as under:- In the present case before us the assessee has deducted tax u/s. 194C(2) of the Act being payments made to sub-contractors and it is not a case of non-deduction of tax or no deduction of tax as is the import of section 40a(ia) of the Act. But the revenue's contention is that the payments- are in the nature of machinery hire charges falling under the head 'rent' and the previous provisions of section 1941 of the Act are applicable. According to revenue, the assessee has deducted tax @ 1% u/s.194C(2) of the Act as against the actual deduction to be made at 10% u/s. 194I of the Act, thereby lesser deduction of tax. The revenue has made out a case of lesser deduction of tax and that also under different head and accordingly disallowed the payments proportionately' by invoking the provisions of section 40(a)(ia) of the Act. The Ld. CIT, DR also argued that there is no word like failure used in section 40(a)(ia) of the Act and it referred to only non-deduction of tax and disallowance of such payments. According to him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS. With due respect to the Hon'ble Kerala High Court, we prefer to follow the judgment referred by the Authorized Representative of the assessee in the case of S.K. Tekriwal (supra), for the reason that when there are two reasonable constructions are possible on similar issue i.e. one in favour of the assessee and another in favour of the Revenue, the decision in favour of the assessee should be followed as held by the Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192. 11. Considering the facts and circumstances of the case and also applying the ratio of the Hon'ble Calcutta High Court judgment in the case of S.K. Tekriwal (supra), we are of the opinion that the CIT(A) rightly deleted the addition made under sec. 40(a)(ia) of the Act. In the present case on hand, the assessee has deducted TDS and deposited the same with the Central Govt. account as prescribed under the Act. The allegation of the A.O. is that the assessee failed to deduct TDS under appropriate provisions of the Act. Therefore, we are of the view that the provisions of sec. 40(a)(ia) of the Act is applicable, in case there is a failure on the part of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble President to constitute a special bench to adjudicate an issue whether section 40a(ia) of the Income tax Act can be invoked only to disallow expenditure of the nature referred to therein which is shown as payable as on the date of balance sheet or it can be invoked also to disallow such expenditure which becomes payable at any time during the relevant previous year and was actually paid within the previous year? Consequently, special bench was constituted and the aforesaid question was answered in favour of the assessee. According to the majority view, it was held that section 40a(ia) of the Act is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which have already been paid during the year without deducting tax at source. 2. Issue involved in this appeal is with regard to the disallowance of payments of ₹ 38,75,000/- towards brokerage and ₹ 2,43,253/- towards commission on non-deduction of TDS by invoking the provisions of section 40a(ia) of the Act. The assessee s case was that the entire brokerage in commission payments were actually paid during the financial year excepting a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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