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2016 (4) TMI 825 - ITAT DELHI

2016 (4) TMI 825 - ITAT DELHI - TMI - TDS u/s 194C OR 194I - disallowance u/s 40(a)(ia) - Held that:- There is nothing in the section which say that disallowance could be made u/s 40(a)(ia) of the Act for short deduction of tax at source. - Decided in favour of assessee

Addition being liquidated damages paid on the breach of a contract - Held that:- CIT(A) has recorded his observation in detail in respect of deletion of the addition made by the ld. Assessing Officer by recording a cle .....

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f assessee - ITA No. 3950/Del/2013 - Dated:- 19-4-2016 - Sh. J. S. Reddy, AM And Smt. Beena A Pillai, JM For the Petitioner : Sh. Mohit Gupta, CA For the Respondent : Dev Jyoti Das, CIT-DR ORDER Per Beena A. Pillai, JM The present appeal has been filed by the Revenue against the order of the ld. CIT(A)-XVI, Delhi vide order dated 19.03.2012 for A.Y. 2009-10 on the following grounds of appeal: 1. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the a .....

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ed in not considering the fact that the assessee did not produce any contract/subcontract agreement which evidenced that the said payments were in fact for contractual work and not just for hiring of equipment. 3. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in not considering the fact that explanation (i) to section 194I of the IT Act states that rent means any payment, by whatever name called under any lease, sublease, tenancy or any other agreement or ar .....

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/s 194I does not depend upon nomenclature the tax is to be deducted from rent paid by whatever name called. Also as per explanation (i) to section 194I of the Act, the incidence of deduction of tax at source (TDS) does not depend upon the nomenclature but on the contents of the agreement. 5. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred not considering the observance of the Assessing Officer that the assessee itself had contradicted its claim by submitting t .....

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the Contract Act vis-à-vis Income Tax Act. 7. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in ignoring the fact that expenses on liquidated damages paid on the breach of a contract comes within the purview of explanation to section 37(1) of the IT Act, 1961, which states that any expenditure incurred for any purpose which is an offence or which is prohibited by law shall not be deemed to have incurred for the purpose of business or profession and no .....

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proceedings the ld. Assessing Officer observed that assessee is engaged in the business of civil construction, civil engineers, steel structure, plumbing and electric work on contract basis. As per the details filed by the assessee it was observed by the ld. Assessing Officer that TDS was deducted u/s 194C of the Act. The ld. Assessing Officer was of the opinion that the assessee should have deducted TDS u/s 194I of the Act on the payments made to the parties. The ld. Assessing Officer, therefor .....

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the addition made by the ld. Assessing Officer. 2.3. The ld. CIT(A) also deleted the addition made by the Assessing Officer under the head liquidated damages . The ld. CIT(A) observed as under: The liquidated damages paid by the appellant are neither capital expenditure nor these expenditure are incurred by the assessee for any purpose which is an offence or which is prohibited by law. These liquidated damages are not in the nature of fine or penalty for infraction of any law. The Assessing Offi .....

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ny or all of the goods or to perform the specified terms and conditions within the period specified in the contract. The damages paid to the purchaser for failure to deliver any or all of the goods or to perform the specified terms and conditions within the period specified in the contract are nothing but compensation for failure to complete specific terms of contract. Failure of completion of specific terms of contract is incidental to the business and liability of compensation arising because .....

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om.); IV. CIT vs. Murari Lal Ahuja & Sons, (1989) 177 ITR 228 (P&H). 3. Aggrieved by the order of the ld. CIT(A) the Revenue is in appeal before us on these two issues. 3.1. We have perused the order of the authorities below. The assessee deducted tax u/s 194C of the Act instead of section 194I of the Act. There is no allegation against the assessee that the TDS so deducted have not been deposited with the Government account. We are of the view that the provisions of section 40(a)(ia) of .....

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rovisions of section 40 (a) (ia)of the Act has two limbs one is where, inter alia, assessee has to deduct tax and the second where after 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 short fall of deduction. With regard to short fall, it cannot be assumed that there is a default as deduction is not required by or under the Act, but the facts is that this expression, .....

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