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2016 (5) TMI 1105 - ITAT KOLKATA

2016 (5) TMI 1105 - ITAT KOLKATA - TMI - Disallowance of lorry operational expenses - Held that:- There was no scope for making adhoc disallowance. The learned CIT(A) observed that from the perusal of the balance sheet of the assessee from A.Yrs. 2006-07, 2007- 08 and 2008-09 the total lorry expenses was 80%, 81% and 83% respectively of lorry income. The learned CIT(A) also observed that the AO had not brought any comparable cases in the same line of business to justify his estimated disallowanc .....

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sallowance u/s 40(a)(ia) - finance charges paid to Tata Finance Limited - Held that:- The payments of hire charges to Tata Finance Limited under the hire purchase does not come within the ambit of commission or brokerage. Hence we hold that the provision of section 194H would not be applicable. With regard to the applicability of the provisions of section 194A of the Act the reliance placed by the assessee on the CBDT Instruction No.1425 F.No.275/9/80 IT (B) dated 16-11-81 is well founded - Deci .....

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erred to as the Act ). 2. The first issue to be decided in this appeal is as to whether, the learned CIT(A) is justified in restricting the disallowance of lorry operational expenses to ₹ 2,50,000/- as against ₹ 38,89,499/- disallowed by the learned AO. 3. The revenue has raised the following grounds :- 1. On the facts and in the circumstances, Ld. CIT(A) is not justified in considering the fact that the Assessing Officer has not pointed out any particular voucher in respect of such .....

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Whereas it is an admitted fact that his applicant had failed to produce the supporting bills/vouchers and whereas Ld. CIT(A) is also satisfied that the A.O. was not left with any option but to estimate the disallowance, Ld. CIT(A) is not justified in restricting the disallowance to a nominal amount of ₹ 2,50,000/- as against the disallowance of as much as of ₹ 38,89,499/-. 3. Ld. CIT(A) in respect of the applicant's claim of expenditure on account of Lorry operating expenses is n .....

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from lorries and income from financing. The learned AO during the course of assessment proceedings observed that the assessee had shown lorry income of ₹ 2,39,31,585/- and lorry operating expenses of ₹ 1,94,37,495/-. He observed that lorry operating expenses were huge in comparison to expenses incurred by similar industries and the said expenses were supported only with self made vouchers which were not verifiable. Accordingly he proceeded to disallow 20% of lorry expenses amounting .....

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Act, 1956 and also as per the provisions of section 44AB of the Income Tax Act. It was argued that in any case there was no scope for making adhoc disallowance. The learned CIT(A) observed that from the perusal of the balance sheet of the assessee from A.Yrs. 2006-07, 2007- 08 and 2008-09 the total lorry expenses was 80%, 81% and 83% respectively of lorry income. The learned CIT(A) also observed that the AO had not brought any comparable cases in the same line of business to justify his estimat .....

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in appeal before us. 6. None appeared on behalf of the assessee. We have heard the learned DR and we find that the learned DR was not able to controvert any of the findings recorded by the learned CIT(A) and vehemently relied on the order of the Learned AO. Hence we find no infirmity in the order passed by the learned CIT(A) on this ground. Accordingly ground nos. 1 to 4 raised by the revenue are dismissed. 7. The next issue to be decided in this appeal is as to whether the disallowance u/s 40(a .....

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and accordingly the applicability of TDS provision would not come into force. The learned AO however strangely observed that the said payment is in the nature of commission or brokerage and hence resorted to make disallowance u/s 40(a)(ia) of the Act for violation of the provisions of section 194H of the Act. Before the learned CIT(A) the assessee contended that the payment of finance charges under hire purchase contract to Tata Finance Limited does not come within the ambit of commission or br .....

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es to Tata Finance as a case pertaining to the payment of Hire Purchase instalment and observing that the case is covered by the CBDT's Instruction No. 1425 date - 16.11.81 of the CBDT and is not justified in deleting the addition made on account Finance charges of 1,60,563 by the A.O . 6. Ld. CIT(A) has failed to appreciate that the role of Tata Finance, with reference to the. amount provided by it on account of purchase made by his applicant, was in fact that of a financier and as such the .....

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