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Mukundara Engineers & Contractors Versus. ACIT Circle-5 (1)

2015 (7) TMI 1067 - ITAT VISAKHAPATNAM

Applicability of provisions of section 40(a)(ia) - Held that:- Consistent with the view taken by the ITAT Special Bench Visakhapatnam in the case of Merilyn Shipping (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) and also in the light of the view expressed by the Hon’ble A.P. High Court in the case of Janapriya Engineering Syndicate [2015 (5) TMI 309 - ANDHRA PRADESH HIGH COURT] we are of the opinion that the provisions of section 40(a)(ia) of the Act cannot be made applicable in respect of the amounts .....

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ained proper registers and most of the payments are made in cash. Since the claim is not verifiable, the assessing officer was of the opinion that expenditure should be reasonable with reference to the gross receipts of the assessee. Having regard to the circumstances of the case he disallowed only 10% of the total claim of the assessee, which was also upheld by the Ld. CIT(A). Even before us, no material was placed to indicate that the expenditure incurred by the assessee was reasonable and not .....

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sakhapatnam and it pertains to the assessment year 2010-11. The assessee firm is engaged in the business of Engineering and Contract works. For the year under consideration, it declared total income of ₹ 19,17,040/-. The case was selected for scrutiny under CASS. During the course of assessment proceedings, the A.O. noticed that the assessee debited a sum of ₹ 13,88,500/- towards Proclaine hire charges and an amount of ₹ 9,80,000/- was debited towards Proclaine rent charges. Bu .....

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n the instant case, the assessee submitted that only a sum of ₹ 3,70,000/- is payable at the end of the year referable to proclaine hire charges and balance amount was paid before 31st March; Hence provisions of section 40(a)(ia) of the Act cannot be made applicable in view of the decision of the ITAT Special Bench Visakhapatnam in the case of Merilyn Shipping (136 ITD 23). Similarly with regard to the crane hire charges, it was submitted that a sum of ₹ 32,000/- is outstanding/payab .....

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erefore, the provisions of section 40(a)(ia) of the Act are applicable even with regard to the amount paid. He accordingly completed the assessment. 3. Ld. CIT(A) observed that though the decision of the ITAT Special Bench is in favour of the assessee, the circular issued by CBDT clarified that the provisions of section 40(a)(ia) would cover not only the amounts which are payable as on 31st March of the previous year but also amounts which are payable at any time during the year. He also relied .....

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g Syndicate wherein the court observed as under:- We are of the view that until and unless the decision of the Special Bench is upset by this Court, it binds smaller Bench and coordinate Bench of the Tribunal. Under the circumstances, it is not open to the Tribunal, as rightly contended by Mr. Narasimha Sarma, learned counsel, to remand on the ground of pendency on the same issue before this Court, overlooking and overruling, by necessary implication, the decision of the Special Bench. We simply .....

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inding on the Division bench of Vizag unless the Special Bench order is upset by the jurisdictional High Court. He also submitted that an identical view was taken by the Hon ble Allahabad High Court in the case of Vector Shipping Services and the same was confirmed by the apex court by not admitting the Special Leave Petition and thus the view taken by the Special Bench can atleast be said to be one possible view on the matter in which event a view which is in favour of the assessee should be ta .....

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at though in ground no.3 the assessee contends that the entire proclaine hire charges and crane hire charges are allowable as deduction but as per the decision of the special bench, the assessee is entitled to the benefit to the extent of payments actually made before 31st March. It was submitted that in the instant case, the disallowance can be restricted to ₹ 3,70,000/- (proclaine hire charges) ₹ 32,000/- (crane hire charges). 7. Ld. D.R. on the other hand strongly relied upon the .....

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