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2016 (9) TMI 712 - ITAT AMRITSAR

2016 (9) TMI 712 - ITAT AMRITSAR - TMI - Disallowance of Telephone expenses - Held that:- It is an undisputed fact that the personal use of these Telephones cannot be denied as the expenses related to Mobile Phones and Telephone installed at the residence of partners. In earlier years, similar disallowance was made for A.Y.2005-06 which was accepted by the assessee firm as noted by Assessing Officer in his order.The arguments of learned AR that a nominal disallowance was made in various decision .....

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ent of 10%. Disallowance for Car expenses - Held that:- We find that personal use by partners and their family members of assessee cannot be ruled out and Assessing Officer has made disallowance car allowance of car expenses @ 1/5th car expenses after recording a finding that similar disallowance made in Asst. Year: 2005-06 was not contested by assessee. However, we hold that the disallowance equal to 1/10th of total expenses in the case of assessee is a reasonable disallowance as has been he .....

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94C are not applicable to the assessee. - Not all kinds of advisory could qualify as technical services. For any consultancy to be treated as technical services, it would be necessary that a technical element is involved in such advisory. Thus, the consultancy should be rendered by someone who has special skills and expertise in rendering such advisory. Now in the present case we find that the liaisoning services are provided by deductee were neither managerial nor consultancy nor technical .....

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not been supplied by assessee the TDS was not applicable. In view of the above, we hold that assessee was not required to TDS on this. - Decided in favour of assessee - I.T.A No.392(Asr)/2015 - Dated:- 8-8-2016 - SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER For The Appellant : Sh. Sandeep Vijh (CA) For The Respondent : Sh. A.N. Misra (DR) ORDER PER T. S. KAPOOR (AM): This is an appeal filed by assessee against the order of learned CIT(A), Jalandhar, dated 05.05.2015 for A .....

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22,016/- u/s 40(a)(ia). The legal as well as the factual position on this issue has not been appreciated. (iii) That the learned Commissioner of Income tax (Appeals) has erred in sustaining disallowance out of Car expenses, Car depreciation & Car Insurance @ 1/5th of these expenses. The disallowance made is highly excessive. 3. The brief facts of the case as noted in the assessment order are that the assessee is engaged in the business of manufacturing and export of sports goods. The case of .....

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essional fees on which the assessee was required to deduct TDS and since assessee had not deducted TDS on such payment the disallowance u/s 40(a)(ia) was made. Similarly, the Assessing Officer made a disallowance u/s 40(a)(ia) on an amount of ₹ 22,016/- which was paid by assessee to M/s Hira Printers. The Assessing Officer held that since the amount was paid for advertisement charges, therefore, assessee was required to deduct TDS which it had failed to deduct and therefore, he made a disa .....

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the assessee was engaged in the manufacturing & exports of sports goods and the mobile phones and telephones installed at the residence of the partners were being used to communicate with the customers who are situated outside India. 7. Without prejudice it was submitted that the disallowance was on a higher side and cited a few cases to demonstrate that a nominal disallowance out of Telephone expenses was a reasonable disallowance. In view of the above, it was submitted that the disallowanc .....

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ed that for treating a transaction as covered by provisions of section 194C the initial requirement was that it should represent work which was not the case in the present case. The learned AR relied on the decision of Hon ble Madras High Court in the case of Madras Bar Association and Ors. vs. Central Board of Direct Taxes and Ors reported at 216 ITR 240, for the proposition that the words any work in section 194C take their colour from the words contractor and contract and the gamut of the wor .....

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tion 194C. It was further submitted that this activity was also not covered u/s 194J, therefore, no tax was required to be deducted in respect of payment made to this party for its services. The learned AR submitted that definition of professional services has been given in the explanation below. Sub-section (3) of Section 194J and the nature of service rendered by the above referred party is clearly not covered by Sec. 194J. Reliance in this respect was placed in the case of Siti Multimedia Net .....

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the decision of Allahabad High Court in the case of CIT vs. M/s Vector Shipping Services Pvt. Ltd. reported at 85 CCH 201 where it has been held that provisions of section 40(a)(ia) will be applicable only to the amounts outstanding. The learned AR submitted that the SLP filed by Revenue against the order of Allhabad High Court has already dismissed by Hon ble Supreme Court and a copy of such order was placed at (PB page-33). 10. Regarding the disallowance of ₹ 21016/-, it was submitted th .....

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that purchase of printed packing material for which raw material was not supplied by assessee was a contract for sale and was outside the purview of Sec.194C. 11. The learned DR, on the other hand, placed his reliance on the order of authorities below. 12. We have heard the rival parties and have gone through the material placed on record. We find as regards the disallowance out of Telephone expenses, it is an undisputed fact that the personal use of these Telephones cannot be denied as the expe .....

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. The observation of Assessing Officer in the case of assessee that in Asst. Year 2005-06, the assessee had accepted 1/5th as disallowance do not hold much force as every year is a different year & moreover the Assessing Officer has not discussed the disallowance if any made in Asst. Years: 2006-07 & 2007- 08, therefore, we restrict the disallowance to the extent of 10%. 13. As regards disallowance for Car expenses, we find that personal use by partners and their family members of assess .....

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No.2 regarding disallowance u/s 40(a)(ia), we find that the amount of ₹ 1,05,779/- has been paid to M/s Freight Link India as liaisoning charges. The authorities below has held that TDS was required to be deducted from such payment, however, we find that the provisions of Sec.194C relating to payment to Contractors is not applicable to the assessee as the payee had not carried out any work as Contractor as any work as contained in the provisions of Sec.194C necessarily involve carrying ou .....

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e provisions of Sec. 194C for the purpose of deduction of tax at source. Therefore, the provisions of Sec.194C are not applicable to the assessee. 15. As regards the applicability of Sec.194J, we find that the Section requires the assessee to deduct TDS for any payment made as fee for professional services, or fee for technical services and for making payments for royalty and or any sum referred to Clause V of Sec.28. The section vide explanation to section has explained the meaning of the profe .....

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f Section 9. As per the meaning of fee for technical services as defined in section 9, we find that vide explanation -2 fees for technical services means any consideration for rendering of any managerial, technical or consultancy services including the provisions of services. 16. The terms managerial, technical and consultancy do not find mention in the I.T. Act, 1961 and it is a settled law that they need to be interpreted based on their understating in common parlance. Hon ble Delhi High Court .....

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are judged to be less effective than they ought to be. Management thus pervades all organizations. Technical: In the case of Skycell Communications Ltd. Vs DCIT, the Hon'ble High Court had held that the popular meaning associated with the word technical is involving or concerning applied and industrial science. Consultancy: is generally understood to mean an advisory service. Further, it may be fair to state that not all kinds of advisory could qualify as technical services. For any consult .....

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