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TMI Blog2018 (4) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... and unabsorbed depreciation of Rs. 4,63,021 in all a sum of Rs. 6,66,324/- has to be allowed to be carried forward for set off against income of subsequent Assessment year. 3. In the course of assessment proceedings, the AO noticed that assessee had paid a sum of Rs. 33,92,698/- to M/s Gangothri Water Supply in assessment year 2013-14 and a sum of Rs. 39,33,528/- in assessment year 2014-15. According to the AO, the aforesaid payment made by the assessee to M/s Gangothri Water Supply was payment to a contractor for carrying out work and therefore the assessee ought to have deducted tax at source on the aforesaid payment as per the provisions of Sec.194-C of the Act. According to the AO, the assessee did not deduct tax at source on such payment and therefore, the sum paid to M/s Gangothri Water Supply was liable to be added to the total income in view of the provisions of sec. 40(a)(ia) of the Act. As per the provision of sec. 40(a)(ia) of the Act, where tax is deductible on payment and if tax has not been deducted by an assessee, then the sum paid/payable, if it is claimed as an expenditure in computing income from business, it will not be allowed as deduction to an assessee. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any article or thing as per prescribed specifications only if it is a contract for work and not a contract for sale, the payment in question does not fall within the ambit of Sec.194C of the Act and therefore there was no obligation on the part of the Assessee to deduct tax at source. 5. The Assessing Officer however rejected the claim of the assessee as above and added sum paid to M/s Gangothri Water Supply to the total income of the assessee by invoking the provisions of sec. 40(a)(ia) of the Act. On appeal by the assessee, the CIT(A) upheld the order of the AO. The CIT(A) found that in AY 2013-14, the Assessee had collected more sum from its clients than what it had paid towards the water charges to Gangothri Water Supply and such excess was shown as income in its profit and loss account which proved that though the Assessee has not shown gross receipts and payments but has shown the net receipt on purchase of water. He therefore held that the Assessee had impliedly claimed water charges as deduction while computing its income from business. The CIT(A) held that the purpose of Section 40(a)(ia) is to ensure the recovery of tax. Therefore, the action of the Assessing Officer inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that there is no expense incurred by the appellant attracting the provisions of section 40(a) (ia) of the Act. The appellant denies that it collected any monies from the property occupants in excess of that defrayed Gangotri and made a surplus in the transaction as observed by the Commissioner of Income- Tax (Appeals). Your appellant seeks leave to add to, to amend any of the foregoing grounds as and when considered necessary/at the time of hearing." 9. The assessee has filed an application for admission of the following additional grounds:- "ADDITIONAL GROUNDS OF APPEAL 2.0 On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in not considering ground no.3 raised in respect of not setting of current year losses and depreciation allowance aggregating to Rs. 9,95,622/against the addition made, on the ground that the same is miscellaneous and general in nature and did not need separate adjudication." 10. In support of the plea for admission of additional ground, it has been submitted he assessee filed its return of income showing a loss of Rs. 9,95,622/- for the assessment year 2013-14. The Assessing Officer completed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t page No.92 to 116 of the assessee's paper book. As per this agreement, the assessee has to render various services to Philips Electronics India Ltd., as set out in exhibit A in the agreement. The assessee has to maintain adequate supply of water to the commercial establishment. Clause 4.2 of the agreement on supply of water reads as follows:- "4.2 Electricity and Water Charges a. The Client shall pay electricity charges levied by Bangalore Electricity Supply Company or any successor-in-interest or assign thereof ("BESCOM") at actuals, based on the connected load and in accordance with the relevant meter readings, or such other basis as agreed by the pares, to the Service Provider who shall, upon receipt, and in any event no later than the due date for payment, pay the monies received from the Client to BESCOM. b. The Client shall pay water charges levied by the Bangalore Water Supply and Sewerage Board or any successor-in-interest or assign thereof ("BWSSB")/ or any other parties supplying water at actuals, based on consumption and in accordance with the relevant meter readings, or such other basis as agreed by the parties, to the Set-vice Provider who shall, upon receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (iv) which defines 'work' for the sec. 194C of the Act specifically excludes supply of a product according to the requirements of the customers by using material purchased from a person other than such customers. Water in the present case was purchased by the assessee not from the customers but from a 3rd party and supplied to its clients. Therefore, the price paid for purchase of water in my view cannot be construed as a payment for payment to a contractor for carrying out any work. 17. I am therefore of the view even on this basis the impugned disallowance u/s 40a(ia) of the Act cannot be sustained. I, therefore, allow the appeals of the assessee for assessment year 2013-14 and 2014-15 also. 18. As far as additional ground of appeal raised by the assessee is concerned, I am of the view that the return of loss( business loss and unabsorbed depreciation) filed by the assessee had to be considered by the AO and if the return of loss is accepted, the same should be allowed to be carried forward in accordance with law. Since in the present case, the addition in the assessment was only on account of disallowance u/s 40a(ia) of the Act and since such disallowance has been deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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