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M/s. P.S.R. Associates Versus Addl. CIT, Kakinada Range, Kakinada and DCIT, Circle-1, Kakinada Versus M/s. P.S.R. Associates

2016 (2) TMI 239 - ITAT VISAKHAPATNAM

Disallowance of hire charges under sec. 40(a)(ia) - non deduction of tds - CIT(A) deleted the addition - Held that:- The assessee has deducted TDS and deposited the same with the Central Govt. account as prescribed under the Act. The provisions of sec. 40(a)(ia) of the Act is applicable, in case there is a failure on the part of the assessee to deduct TDS and remit the same to the government account. There is nothing in the said section to treat inter alia that the assessee is defaulter where th .....

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reject the ground raised by 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 .....

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is 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, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari - Adv. For The Respondent : Shri P. Srinivasa Murthy - DR ORDER PER G. MANJUNATHA, Accountant Member: These are the appeals filed by the assessee as well as Revenue are directed against the order of CIT(A), Visakhapatnam, d .....

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nd accordingly, notices under sec. 143(2) and 142(1) of the Income Tax Act, 1961 were issued. In response to the notices, the assessee s Authorized Representative appeared from time to time and furnished books of accounts, bills and vouchers. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has incurred hire charges of ₹ 1,20,40,586/-, on which TDS @ 1.33% under sec. 194C of the Act was deducted. On examination of the details furnished by the ass .....

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of the Act. Similarly, the Assessing Officer noticed that the assessee has paid an amount of ₹ 59,87,134/- to subcontractors without deducting tax at source and which was disallowed under sec. 40(a)(ia) of the Act. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has debited expenditure under the heads soil purchase, tractor maintenance and other expenses like dredged work expenses, NMR labour expenses, repairs & maintenance, site maintenanc .....

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ed 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 .....

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2. Alternatively, the assessee contended that the expenditure incurred under the head hire charges already has been paid during the financial year and nothing is remain payable at the end of the year. Therefore, in view of the Special Bench decision of the Hon'ble Visakhapatnam ITAT, in the case of Merilyn Shipping and Transports vs. Add. CIT (2012) 136 ITD 23, the provisions of sec. 40(a)(ia) are not applicable for the amounts already paid during the year. Therefore, requested to delete the .....

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ancial year. Therefore, additions made by the Assessing Officer should be deleted. As far as disallowance of various expenditure are concerned, the assessee submitted that the expenditure disallowed by the Assessing Officer is on higher side therefore, the disallowance made by the Assessing Officer may kindly be scaled down. 6. The CIT(A), after considering the explanations offered by the assessee and also applying the ratio of the Hon'ble Calcutta High Court judgment in the case of S.K. Tek .....

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ontractors payment is concerned, the CIT(A) upheld the disallowance under sec. 40(a)(ia) of the Act, by holding that the Hon'ble Andhra Pradesh High Court has stayed the operation of the Special Bench decision 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 pu .....

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7; 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 provisions of sec. 40(a)(ia) of the Act. The A.R. further submitted that disallowance under sec. 40 .....

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ntative submitted that the assessee has failed to deduct TDS under the appropriate provisions of the Act, therefore, the disallowance provided under sec. 40(a)(ia) of the Act is applicable even for the short deduction of TDS. The Departmental Representative further argued that the Hon'ble Kerala High Court has examined the issue in the case of CIT vs. M/s. P.V.S. Memorial Hospital Ltd. in ITA No. 16/2014, wherein the Hon'ble Kerala High Court upheld the action of the Assessing Officer, d .....

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en the assessee deducted TDS, but fails to deduct TDS under the appropriate provisions of the Act. The CIT(A) deleted the additions made by the Assessing Officer by relying upon the judgment of Hon'ble Calcutta High Court in the case of S.K. Tekriwal (supra). During the course of hearing, the Authorized Representative of the assessee argued that the issue involved in this appeal is squarely covered by the decision of Hon'ble Calcutta High Court in the case of S.K. Tekriwal (supra). We ha .....

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cted 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 de .....

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s not refer to genuineness of the payment or otherwise but addition u/s. 40(a)(ia) can be made even though payments are genuine but tax is not deducted as required u/s.40(a)(ia) of the Act. We are of the view that the conditions laid down u/s.40(a)(ia) of the Act for making addition is that tax is deductible at source and such tax has not been deducted. If both the conditions are satisfied then such payment can be disallowed u/s. 40(a)(ia) of the Act but where tax is deducted by the assessee, ev .....

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ter deducting tax, inter alia, the assessee has to pay into Government Account. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is a shortfall in deduction. With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act, but the facts is that this expression, 'on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has n .....

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the Act. 10. The Departmental Representative relied upon the Hon'ble Kerala High Court judgment in the case of M/s. P.V.S. Memorial Hospital Ltd. (supra) and argued that the provisions of section 40(a)(ia) is applicable even for short deduction of TDS. The Hon ble Kerala High Court has upheld the disallowance of expenditure under sec. 40(a)(ia) of the Act, for short deduction of TDS. With due respect to the Hon'ble Kerala High Court, we prefer to follow the judgment referred by the Auth .....

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on'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)(i .....

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r sec. 201 of the Act and no disallowance can be made by invoking the provisions of sec. 40(a)(ia) of the Act. Therefore, we do not find any error or infirmity in the CIT(A) s order, hence, we inclined to uphold the order of the CIT(A) and reject the ground raised by the Revenue. 12. The next issue emanates from the assessee appeal, is whether the CIT(A) is right in confirming the disallowance of ₹ 59,87,134/- under sec. 40(a)(ia) of the Act. During the course of hearing, the Authorized Re .....

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n payment of sub-contractors. The Assessing Officer was of the opinion that the assessee has made payment without deducting tax at source, which attracts disallowance under sec. 40(a)(ia) of the Act. The CIT(A) confirming the additions made by the Assessing Officer, held that the operation of Special Bench decision was stayed by the Hon'ble Andhra Pradesh High Court, therefore, the additions made by the Assessing Officer should sustain. We have gone through the case-laws referred by the Auth .....

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stitute 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 .....

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isions 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 an amount of ₹ 1,78,025/- which remained payable as on 31.3.2005. The claim of the assessee was rejected by the revenue resulting in an appeal before us by the assessee. Following the majority view of the special bench, the provisions of section 40a(ia) cannot be invoked with respect to the aforesaid payments which were actual .....

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