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2017 (5) TMI 362 - ITAT VISAKHAPATNAM

2017 (5) TMI 362 - ITAT VISAKHAPATNAM - TMI - Disallowance of unpaid expenditure incurred under the head ‘machinery rents’ u/s 68 - failure to file confirmation letters from the parties - Held that:- ITAT has given a specific direction to the A.O. with a legal proposition that once the expenditure has been accepted as genuine, the creditors arised out of such expenditure cannot be considered as unexplained u/s 68 of the Act. The A.O. ignoring the above findings, went on to disallow the expenditu .....

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the parties have confirmed the transactions and also outstanding balance at the end of the year. Therefore, we are of the view that the A.O. was erred in travel beyond the directions of the ITAT, while disallowing the entire expenditure incurred under the head ‘machinery rents’. - Additions deleted - Decided in favour of assessee. - TDS u/s 194C - reimbursement of expenditure incurred by the parties towards cost of fuel and spare parts - Held that:- The provision of section 194C of the Act h .....

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sement of cost of fuel and spare parts. The assessee is in the business of hiring of machinery and in the process it has hired out its machineries to M/s. ESSAR Constructions, Chennai. The assessee has instructed the party to incur expenditure towards cost of fuel and spare parts, which was adjusted against the machinery rents payable to the assessee. Since, the party has deducted amount towards cost of fuel and spare parts, there is no necessity for the assessee to deduct TDS u/s 194C of the Ac .....

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urthy Naik, DR ORDER PER Shri G. Manjunatha, Accountant Member: This appeal filed by the assessee is directed against order of the CIT(A)-11, Mumbai, Camp at Visakhapatnam dated 13.3.2013 and it pertains to the assessment year 2006-07. 2. The brief facts of the case are that the assessee is a firm engaged in the business of contract works filed its return of income for the assessment year 2006-07 on 4.12.2006 declaring total income of ₹ 1,54,136/-. The assessment was completed u/s 143(3) o .....

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e by the A.O. and dismissed appeal filed by the assessee. The assessee has filed further appeal before the ITAT. The ITAT has set aside the issue to the file of the A.O., with a direction to re-examine the issue in the light of the discussions in its order dated 25.10.2010. While doing so, the ITAT has observed that the A.O. was erred in making additions towards sundry creditors arised out of machinery rent payable, when the total expenditure debited by the assessee has not been doubted. The ITA .....

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uctions, Chennai and M/s. Kishore Enterprises, which cannot be considered service contract which attracts TDS provisions of section 194C of the Act. 3. Consequent to the directions of the ITAT, the A.O. had taken up the case for re-examination. During the course of re-examination proceedings, the A.O. asked the assessee to furnish necessary details of expenditure incurred under the head machinery rent including name and address of the payee, mode of payment and also confirmation letter from the .....

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rent as unproved expenditure and added back to the total income of the assessee. Similarly, in respect of disallowance of machinery maintenance expenditure u/s 40(a)(ia) of the Act, though the assessee stated that expenditure incurred under the head machinery maintenance expenditure is towards reimbursement of fuel and spare parts cost to M/s. Essar Constructions and M/s. Kishore Enterprises, failed to furnish necessary contractual agreements entered with the parties to prove that the same was a .....

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travel beyond the directions given by the ITAT, to make additions towards disallowance of total expenditure incurred under the head machinery rents ignoring the clear directions of the ITAT, wherein the ITAT as such set aside the issue for the limited purpose of verification of facts for the reason that the assessee has not furnished necessary details before the A.O. The assessee further submitted that the ITAT has considered the issue in detail and after analyzing the facts and also considering .....

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ies towards cost of fuel and spare parts, therefore, the A.O. was erred in treating the same as a service contract, which attracts TDS provisions u/s 194C of the Act. 5. The CIT(A) after considering the relevant submissions of the assessee and also by relied upon certain judicial precedents, including the decision of Hon ble High Court of Bombay in the case of Vodafone International Holdings BV Vs. CIT (311 ITR 46), observed that the assessee has not produced the details of payment, etc. as soug .....

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the A.O. towards disallowance of unproved expenditure. In so far as disallowance of machinery maintenance expenditure, the CIT(A) observed that the assessee failed to produce any agreement in support of payments or any documentary evidence in support of payments made and failed to substantiate that the said expenditure was not liable for TDS or the TDS has been done on the same, therefore, confirmed disallowance made by the A.O. u/s 40(a)(ia) of the Act. Aggrieved by the CIT(A) order, the assess .....

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failed to furnish the details of payees and also failed to prove the genuineness of payments. It is the contention of the assessee that the A.O. was erred in disallowing total expenditure, ignoring the specific directions of the ITAT, wherein the ITAT has given a categorical finding that the A.O. cannot make impugned disallowance u/s 68 of the Act, when the expenditure incurred under the head has been considered genuine, however, the ITAT has set aside the issue for the limited purpose of verifi .....

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first round of litigation, the A.O. disallowed unpaid expenditure incurred under the head machinery rents u/s 68 of the Act, for failure to file confirmation letters from the parties. The assessee has filed necessary ledger extract along with confirmation letters before the ITAT. The ITAT after considering the confirmation letters and ledger extracts observed that the action of the A.O. in accepting part of the expenditure was genuine and remaining part is non-genuine is not in accordance with t .....

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e simple reason that the assessee has failed to furnish necessary details, ignoring all the evidences filed by the assessee in the form of confirmation letters from the party and also ledger extracts to prove the payment of such outstanding credits in the subsequent financial years. We further observed that the assessee has filed a paper book containing confirmation letters along with ledger extracts. On perusal of the details filed by the assessee, we find that the parties have confirmed the tr .....

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chinery maintenance expenditure u/s 40(a)(ia) of the Act, for failure to deduct tax at source u/s 194C of the Act. The A.O. disallowed impugned expenditure on the ground that the assessee failed to deduct tax at source u/s 194C of the Act. It is the contention of the assessee that expenditure incurred under the head machinery maintenance is reimbursement of cost of fuel and spare parts to M/s. ESSAR Constructions and Kishore Enterprises for supply of spare parts for which the provisions of secti .....

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