Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (10) TMI 1274 - AT - Income TaxAd-hoc disallowance @20% on Labour, Lodging & Site Expenses - Held that - Although vouchers and details have been provided by the assessee but some of these details and evidences are not found to be fully authentic and there was no support of third party evidences in some of the cases. This fact has not been denied by Ld. Counsel that expenses were incurred in cash. Keeping in view, totality of the facts of the case, we feel that ends of justice will be met if the disallowance is reduced to 10%. - Decided partly in favour of assessee. Disallowance of Interest paid on account of delayed Service Tax and M Vat paid - compensatory nature OR penal nature? - Held that - There are provisions for late payment in the respective legislations pertaining to service tax and M-vat, allowing the taxpayers for delayed payment of the dues if interest is paid. Thus, the interest is paid by the taxpayers within framework of provisions of law. These payments cannot said to be arising out infringement of law. These payments cannot said to be incurred by the assessee for any purpose which is offence or which is prohibited by law. Under these circumstances this expenditure can be said to be compensatory in nature. We can also take support from various judgments available on this issue. Hon ble Supreme Court in the case of Mahalakshmi Sugar Mills Co. vs. CIT (1980 (4) TMI 1 - SUPREME Court) has held that interest for delayed payment of statutory dues is an allowable deduction u/s.37(1) of the Act. - Decided in favour of assessee Disallowance made on account of labour charges - CIT(A) deleted the addition - Held that - CIT(A), himself examined this register in the appellate proceedings and found that Provident Fund, ESI, Professional Tax etc. were deducted from the salaries of the workers and this register gave complete information. It was further found by Ld. CIT(A) that the salary paid to each worker was not more than ₹ 10,000/- and that s why most of the salaried workers were having income below taxable limit. It was further found by Ld. CIT(A) that salary register contained signatures of all the labourers and it was very much before the AO when he had impounded one of the registers. It was finally concluded by the Ld. CIT(A) that nothing adverse could be pointed out by the AO and accordingly disallowance was deleted. We have further noticed that Ld. CIT(A) has passed very reasoned order after personally examining all the facts which were furnished before the AO by assessee. The reasons and findings given by the Ld. CIT(A) are based upon the evidences and decision taken by the Ld. CIT(A) is in accordance with facts and circumstances of the case.- Decided in favour of assessee Disallowance on account of interest paid on secured loans - CIT(A) deleted the addition - Held that - CIT(A) observed that the assessee firm was having interest free funds of ₹ 1,19,27,831/- in the form of credit balance of the partners as on 31.03.2008. The loans on which no interest had been charged is ₹ 30,50,000/- only and therefore, disallowance made by the AO was deleted. It is noted by us that factual findings have been given by the Ld. CIT(A) that ample amount of funds of the partners were lying with the assesee firm, on which no interest has been paid by the assessee firm to its partners. These factual findings have not been rebutted by the Ld. DR. The findings of the Ld. CIT(A) are justified and the order of the Ld. CIT(A) on this issue is confirmed. - Decided in favour of assessee
Issues Involved:
1. Ad-hoc disallowance of Rs. 1,95,854 on Labour, Lodging & Site Expenses. 2. Disallowance of Rs. 4,28,014 on account of interest paid on delayed Service Tax and M-VAT. 3. Disallowance of Rs. 4,29,514 on Motor Car Expenses. 4. Deletion of disallowance of Rs. 49,47,023 on account of labour charges. 5. Deletion of disallowance of Rs. 2,48,866 on account of interest paid on secured loans. Issue-wise Detailed Analysis: 1. Ad-hoc Disallowance of Rs. 1,95,854 on Labour, Lodging & Site Expenses: The assessee challenged the disallowance made by the AO and confirmed by the CIT(A) on the grounds that the expenses were necessary for the business and incurred for workers staying at various sites. The CIT(A) upheld the disallowance due to lack of third-party evidence and the fact that expenses were incurred in cash. The Tribunal, after reviewing the submissions and evidence, found that although some details were provided, they were not fully authentic. Therefore, the Tribunal directed the AO to reduce the disallowance to 10% of Rs. 9,79,271, providing partial relief to the assessee. 2. Disallowance of Rs. 4,28,014 on Account of Interest Paid on Delayed Service Tax and M-VAT: The AO disallowed the interest paid on delayed Service Tax and M-VAT, considering it penal in nature. The assessee argued that the interest was compensatory and not penal. The Tribunal noted that the interest was paid within the framework of the law and was compensatory. Citing various judicial pronouncements, including Lachmandas Mathuradas vs. CIT, the Tribunal held that the interest on late payment of Service Tax and M-VAT is an allowable deduction under Section 37(1). Thus, the disallowance was deleted, and the ground was allowed in favor of the assessee. 3. Disallowance of Rs. 4,29,514 on Motor Car Expenses: This ground was not pressed by the assessee and was subsequently dismissed by the Tribunal. 4. Deletion of Disallowance of Rs. 49,47,023 on Account of Labour Charges: The AO made an ad-hoc disallowance of 10% of the labour charges, citing lack of documentary evidence and payments made in cash. The CIT(A) deleted the disallowance after verifying the labour registers, which included details of Provident Fund, ESI, and Professional Tax deductions. The Tribunal upheld the CIT(A)'s decision, noting that the AO had impounded and verified the labour registers and found no discrepancies. The Tribunal found no reason to interfere with the CIT(A)'s findings and confirmed the deletion of the disallowance. 5. Deletion of Disallowance of Rs. 2,48,866 on Account of Interest Paid on Secured Loans: The AO disallowed the interest on the grounds that the assessee had given interest-free loans while having interest-bearing loans. The CIT(A) deleted the disallowance, noting that the assessee had sufficient interest-free funds from partners' capital accounts. The Tribunal upheld the CIT(A)'s decision, finding that the assessee had ample interest-free funds and the disallowance was not justified. The Tribunal confirmed the deletion of the disallowance. Conclusion: The assessee's appeal was partly allowed, providing partial relief on the ad-hoc disallowance and full relief on the interest paid on delayed Service Tax and M-VAT. The revenue's appeal was dismissed, upholding the deletions made by the CIT(A) on labour charges and interest on secured loans.
|