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2016 (11) TMI 1009 - ITAT HYDERABAD

2016 (11) TMI 1009 - ITAT HYDERABAD - TMI - Addition u/s 40(a)(ia) - disallowance of finance charges for non deduction of tds - Held that:- The amount paid by the assessee towards the finance charges include both interest and principle amount and the entire amount has been paid during the relevant previous year. As decided in case of Merilyn Shipping & Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) held that no disallowance u/s 40(a)(ia) can be made if the entire amount is paid during the rel .....

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Ramakotaiah, Accountant Member For the Assessee : Shri K.C. Devdas For the Revenue : Shri K.J. Rao, DR ORDER Per Smt. P. Madhavi Devi, J. M. This is assessee s appeal for the A.Y 2013-14. In this appeal, the assessee is aggrieved by the order of the CIT (A) in confirming the disallowances of payments made without making TDS and the consequential additions of (i) ₹ 34,91,410/-, (ii) ₹ 5,05,61,850/- u/s 40(a)(ia) of the Act. 2. Brief facts of the case are that the assessee firm, engage .....

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served that the assessee has debited finance charges of ₹ 34,91,410 and transportation charges of ₹ 5,05,61,850 to its P&L a/c. AO therefore, asked the assessee to furnish the details of the payments made and also indicate the compliance of TDS thereon. The assessee produced the details which are reproduced in page 2 of the assessment order. On perusal of the details of finance charges paid by the assessee, the AO observed that the assessee has made payments to various non-bankin .....

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ribed form are necessary to be filed under the proviso to section 40(a)(ia) and since the assessee has not filed these documents and further since the return of income for the A.Y 2013-14 would be filed during financial year 2014-15, the AO disallowed the finance charges of ₹ 34,91,410 u/s 40(a)(ia) of the Act and brought it to tax. 3. As regards the transportation charges, the AO observed that the assessee has hired vehicles for the purpose of transportation and before making payments for .....

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t of transporters to the extent of ₹ 4,36,55,230. With regard to the balance of ₹ 69,06,620/- there were no PAN Nos. at all. The AO observed that the assessee has to obtain the PAN Nos. of the payees before the credit or payment but since the assessee has failed to obtain the same, even after a lapse of 2 years, the same is not allowable. He therefore, disallowed the entire sum of ₹ 5,01,61,850 u/s 40(a)(ia) and brought it to tax. Aggrieved, the assessee preferred an appeal bef .....

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t of the installment, whereas the AO has disallowed the entire amount u/s 40(a)(ia) of the Act. Since the bifurcation is not available and further since the amount has already been paid and nothing remained payable at the end of the relevant previous year, the disallowance is not sustainable. In support of this contention, the assessee has relied upon the following decisions wherein the decision of the Visakhapatnam Special Bench in the case of Merilyn Shipping & Transport (146 TTJ (1) has b .....

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td reported in 357 ITR 647 which has approved the above decision of the Special Bench and submitted that the Hon'ble Supreme Court has dismissed the SLP filed by the Revenue against the said decision as reported in (2013) 262 CTR (All) 545. 6. The learned DR however, supported the orders of the authorities below. 7. Having regard to the rival contentions and the material on record, we find that the Coordinate Bench of this Tribunal in the case of KLR Industries Ltd (Supra) was also consideri .....

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lusions. Coming to the facts of the case before us, it is seen that the amount paid by the assessee towards the finance charges include both interest and principle amount and the entire amount has been paid during the relevant previous year. In view of the same, the decision of the Coordinate Bench of this Tribunal is very much applicable to the facts of the case and respectfully following the same, we allow the Ground of Appeal No.2. 8. As regards the disallowance of transportation charges, we .....

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the vehicle owners owned more than 10 vehicles at the time when the assessee has hired the vehicles and therefore the provision of subsection 6 of section 194C of the Act is applicable and therefore, the TDS is not to be made. Further, he submitted that the assessee has given PAN Nos. of the owners of the vehicles for a total payment of ₹ 4,36,55,230 and at least in respect of these payments, the TDS provisions cannot be invoked. He further submitted that under the proviso to sub section 5 .....

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es are paid less than ₹ 75,000 in aggregate during the relevant previous year. Further, he also relied upon the decision of Merilyn Shipping & Transport Ltd (cited Supra) in support of this contention that all the payments have been made by the end of the relevant previous year and therefore, the provisions of section 40(a)(ia) are not applicable. 9. The learned DR, on the other hand, supported the orders of the authorities below. 10. Having regard to the rival contentions and the mate .....

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ore us, it is not disputed that the assessee has not collected the PAN Nos. of the parties to whom assessee had made payment without making the TDS. It is the case of the AO that the assessee has filed such details such as PAN Nos. etc. only after notices have been issued. The assessee has relied upon the decision of the Coordinate Bench of this Tribunal in the case of Shri Pawan Kumar Gupta vs. Add. CIT in ITA No.718/Hyd/2013 dated 3.5.2014 wherein after following the Hon'ble Madras High Co .....

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fore the CIT (A). It was in these circumstances that the Tribunal has held that it is a procedural lapse and therefore, should have been considered. In the case before us, we find that the assessee has furnished PAN nos. etc before the AO during the assessment proceedings but not Form No.15J as required under the section. Therefore, there is no compliance on the part of the assessee for non deduction of tax at source. As per the provisions, the assessee is required to obtain PAN No. from the Tru .....

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e AO nor the CIT (A) has examined the applicability of this provision. 11. Further, it is also the case of the assessee that the assessee has not entered into any contract for hiring of vehicles and therefore, provisions of section 194C are not applicable. In support of this contention, he placed reliance upon the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Valibhai Khanbhai Mankar reported in (2013) 211 Taxman 18(Guj.) wherein it was held that if the conditions prescri .....

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es not attract the liability created in section 194C of the Act. Further, he also placed reliance upon the decision of the Coordinate Bench of the Tribunal in the case of ACIT vs. Sri Sai Road Ways in ITA Nos 819 & 820/Hyd/2010 wherein by order dated 30.11.2010 it has been held that the reasoning of the AO to hold that the payment made for hire charges is a sub contract payment is not correct and is not based on relevant evidence and hence cannot be said that the payments made for hiring of .....

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ord. We find that in a sub contract, a prudent contractor would include all the liability clauses in the agreement entered into by him with the sub contractor. The assessee has also claimed before the tax authorities that the responsibility in the whole process lies with it only. Though the passing of liability is not the only criteria to decide about the existence of sub contract, yet this contention of the assessee read with the liability clauses of the work supports its submission that the in .....

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