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2016 (4) TMI 643 - ITAT JAIPUR

2016 (4) TMI 643 - ITAT JAIPUR - TMI - Disallowance of expenses - Held that:- The lower authorities had not pointed out specific defects in claiming of expenses under all the heads. They made general observations. It is also a fact that under these heads, full bills cannot be obtained from the service provider, which is not verifiable. Therefore, in the interest of the justice, we restrict this addition @ 5%. - Decided in favour of assessee partly

Disallowance u/s 40(a)(ia) - Held th .....

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e by : Shri Manish Agarwal (CA) For The Revenue : Shri O.P. Bhateja (Addl.CIT) ORDER PER T.R. MEENA, A.M. This is an appeal filed by the assessee against the order dated 04/04/2014 of the learned CIT(A)-II, Jaipur for A.Y. 2009-10.The effective grounds of appeal are as under:- 1. On the facts and in the circumstances of the case, the ld CIT(A) has grossly erred in sustaining disallowance of ₹ 1,74,575/- (Being 10%) out of following expenses, arbitrarily: Nature of Expenses Expenses claimed .....

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ere accepted. 2. On the facts and in the circumstances of the case the ld CIT(A) has grossly erred in confirming the disallowance of interest amounting ₹ 15,79,723/- U/s 40(a)(ia) without appreciating the submission/facts produced before him, thus the same deserves to be deleted. 2. The ld Assessing Officer observed that the assessee is a government contractor. He filed return on 27/09/2009 declaring total income of ₹ 3,36,94,940/-. The case was scrutinized U/s 143(3) of the Income T .....

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ion was made under the head vehicle running and maintenance expenses at ₹ 59,543/-, office and staff welfare expenses at ₹ 59,527/- and in the site expenses at ₹ 2,30,079, which was challenged by the assessee before the ld CIT(A), who had partly allowed by the appeal by restricting the addition @ 10%. 3. Now the assessee is in appeal before us. It is submitted by the ld AR of the assessee that during the course of assessment proceedings, the assessee had produced books of accou .....

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to restricting the expenses @ 10%. He further relied on the decisions of Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs CIT(A) 288 ITR 1 (SC) and Empire Jute Co. Ltd. Vs. CIT 124 ITR 1 (SC) and further argued that the Assessing Officer cannot put step in the shoes of the business man and direct to the assessee to how conduct the business. Therefore, he prayed to delete all the additions. 4. At the outset, the ld DR has vehemently supported the order of the ld CIT(A) and argued th .....

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e heads, full bills cannot be obtained from the service provider, which is not verifiable. Therefore, in the interest of the justice, we restrict this addition @ 5%. The Assessing Officer is directed to calculate the disallowances accordingly. 6. The 2nd ground of the appeal is against confirming the disallowance of ₹ 15,79,723/- U/s 40(a)(ia) of the Act. The ld Assessing Officer observed that the assessee made payments on account of interest to the following NBFCs on which TDS was not ded .....

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00,314/- 8. Tata Capital Ltd.- Loan against Dumper 1,25,152/- 9. Tata Capital Ltd.- Loan against Dumper 2,88,867/- 10. Tata Capital Ltd.- Loan against Earth Compactor 85,001/- 11. TML Financial Services Ltd.- Loan against Hitachi 2,22,427/- Total ₹ 15,79,723/- The ld Assessing Officer gave reasonable opportunity of being heard. The assessee had not deducted TDS on it. There was a violation of Section 40(a)(ia) of the Act on payment of ₹ 15,79,723/-. The Assessing Officer provided opp .....

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and from the date he takes the loan and thus invoking two separate of the provisions of Section 40(a)(ia). Thus, he made addition of ₹ 15,79,723/- 7. Being aggrieved by the order of the ld Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing as under:- 3.3 I have considered the facts of the case; assessment order and appellant s written submission. Assessing officer disallowed interest paid by the appellant under section 40(a) .....

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he disallowance is that interest was paid and not payable and therefore provisions of section 40 (a) (ia) are not applicable. However after the decision of jurisdictional ITAT in the case of Jaipur Vidhyut Vitran Nigam Ltd, several decisions have come. ITAT Special bench decision in the case of Merlyn shipping held that disallowance under section 40 (a)(ia) is applicable only if amount is payable at the year end. However operation of this decision is stayed by AP High Court. Subsequently decisio .....

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justified. Accordingly, the disallowance made by the AO is confirmed. 8. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the assessee had paid ₹ 15,79,723/- to various NBFCs as on 31/3/2009, no amount of interest was payable. The Special Bench of ITAT in the case of Merilyn Shipping & Transport Vs. ACIT 16 ITR (Trib) 1 wherein it has been held that Section 40(a)(ia) is applicable only on payable amount not paid during the year. This view has been u .....

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