2014 (11) TMI 1015 - AT - Income Tax

TDS u/s 194C - disallowance of payment made to C & F agent M/s Sachin Cargo Movers u/s 40 (a) (ia) - non deduction of TDS - Held that - In our considered view the nature of between assessee & M/s. Sachin Cargo Movers, C&F Agent, was for reimbursement of expenses. Besides, the TDS thereon has been deducted by the agent as mentioned above. By now, it has been settled by various Courts that reimbursement of expenses are not liable for deduction u/s 40(a)(ia) of the Act. In any case the agent has deducted the TDS a fact not disputed by revenue, in this eventuality also the case laws cited by the ld. AR supports this proposition. In view thereof, we hold that the expenses paid to M/s. Sachin Cargo Movers, C&F Agent, being for reimbursement of expenses cannot be disallowed u/s 40(a)(ia) of the Act. Computation of deduction u/s 10BA - Held that - In the earlier years assesses activities have been held to be eligible for deduction u/s 10BA. Respectfully following the ITAT judgement of this Bench in the case, we hold that the assessee entitled to deduction u/s 10BA of the Act. Deduction u/s 10BA is the eligible taxable profits from the industrial undertaking, if any disallowance of expenditure is made it increases the eligible undertakings taxable income. Ld. CIT(A) has rightly held that after any disallowance of expenditure the resultant income of the industrial undertaking will be eligible for deduction u/s 10BA. We find no infirmity in the order of ld. CIT(A) on this issue. Rejection of books of account u/s 145(3) - addition sales outside the books of account - CIT(A) deleted the addition - Held that - As no infirmity in the order of the ld. CIT(A) inasmuch much there is no evidence on record to suggest any sales outside the books of account. The books of account are rejected because of non-maintenance of detailed particulars of closing stock. Consequently, the assessee s gross profit rate declared at 14.11% is adopted at 17.20% by ld. CIT(A) which is commensurate to the past history of the assessee. In view thereof, we see no infirmity in the order of the ld. CIT(A) on this issue which is upheld. Disallowance of C&F Agent - CIT(A) allowed the claim - Held that - The C&F Agent expenditure is a controlled expenditure inasmuch as it is relatable to particular export consignments. The AO has not pointed out any particular item of expenditure or export consignments or any mismatch therein. In view thereof, we uphold the order of the ld. CIT(A) and hold that relief has been given just and proper consideration.

Summary

Issues Involved:
1. Rejection of books of account and gross profit rate.
2. Disallowance of payment to C & F agent under Section 40(a)(ia).
3. Deduction under Section 10BA of the Act.
4. Disallowance of C & F charges.
5. Disallowance of job work contract payments under Section 40(a)(ia).
6. Disallowance under Section 40A(3) for cash payments.
7. Eligibility of trading addition for deduction under Section 10BA.

Detailed Analysis:

1. Rejection of Books of Account and Gross Profit Rate:
The assessee did not press these grounds, so they were not adjudicated.

2. Disallowance of Payment to C & F Agent under Section 40(a)(ia):
The assessee contended that the payments to M/s Sachin Cargo Movers were reimbursements, not contractual payments, and thus not liable for TDS. The CIT(A) and ITAT both upheld this view, referencing case laws that support the non-applicability of Section 40(a)(ia) to reimbursements. Consequently, the disallowance of Rs. 27,03,977/- was deleted.

3. Deduction under Section 10BA of the Act:
The CIT(A) allowed the deduction under Section 10BA, following the ITAT's earlier judgments for the assessment years 2006-07 and 2007-08. The ITAT confirmed this, noting that the assessee fulfilled the conditions of Section 10BA(2) and that the jurisdictional Tribunal's decisions are binding. Therefore, the assessee was entitled to the claimed deduction of Rs. 1,13,07,214/-.

4. Disallowance of C & F Charges:
The AO disallowed Rs. 47,74,561/- of C & F charges based on a comparison with the previous year's expenses. The CIT(A) deleted this disallowance, stating that the AO's comparison was not a valid basis and that the expenses were properly vouched and verifiable. The ITAT upheld this deletion, finding no specific defects in the AO's assessment.

5. Disallowance of Job Work Contract Payments under Section 40(a)(ia):
The CIT(A) deleted the disallowance of Rs. 40,52,766/- for job work payments, noting that the TDS was paid before the due date of filing the return. The ITAT upheld this decision, referencing the retrospective amendment to Section 40(a)(ia) and supporting case laws.

6. Disallowance under Section 40A(3) for Cash Payments:
The AO disallowed Rs. 2,96,883/- for cash payments exceeding Rs. 20,000/- per day. The CIT(A) and ITAT both deleted this disallowance, following ITAT's earlier decisions that allowed multiple cash payments below Rs. 20,000/- to the same person on the same day.

7. Eligibility of Trading Addition for Deduction under Section 10BA:
The AO argued that the trading addition of Rs. 66,43,253/- was related to domestic sales and not eligible for Section 10BA deduction. The CIT(A) and ITAT both held that any disallowance of expenditure increases the eligible business income, which is deductible under Section 10BA. Thus, the trading addition was deemed eligible for the deduction.

Conclusion:
The ITAT dismissed the Revenue's appeal and allowed the assessee's appeal, confirming the CIT(A)'s decisions on all grounds. The order was pronounced on 21-11-2014.