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2015 (7) TMI 1067 - AT - Income TaxApplicability of provisions of section 40(a)(ia) - Held that - Consistent with the view taken by the ITAT Special Bench Visakhapatnam in the case of Merilyn Shipping (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) and also in the light of the view expressed by the Hon ble A.P. High Court in the case of Janapriya Engineering Syndicate 2015 (5) TMI 309 - ANDHRA PRADESH HIGH COURT we are of the opinion that the provisions of section 40(a)(ia) of the Act cannot be made applicable in respect of the amounts already paid before 31st March. In other words, the A.O. is directed to restrict the disallowance to the amounts payable after 31st March. - Decided partly in favour of assessee Addition to the claim of payment of wages - Held that - The assessee debited a total amount of ₹ 2.29 crores towards wages under different heads such as wages, casual labour charges, civil work labour charges, etc., which is more than 57% of the gross receipts of the assessee. The assessee has not maintained proper registers and most of the payments are made in cash. Since the claim is not verifiable, the assessing officer was of the opinion that expenditure should be reasonable with reference to the gross receipts of the assessee. Having regard to the circumstances of the case he disallowed only 10% of the total claim of the assessee, which was also upheld by the Ld. CIT(A). Even before us, no material was placed to indicate that the expenditure incurred by the assessee was reasonable and not excessive. Having regard to the circumstances of the case, we are of the view that the disallowance made by the A.O. and confirmed by the CIT(A) is reasonable - Decided against assessee
Issues:
1. Applicability of section 40(a)(ia) of the Income-Tax Act on TDS payments. 2. Interpretation of judgments by ITAT Special Bench Visakhapatnam and Hon'ble A.P. High Court. 3. Binding nature of Special Bench decisions on smaller benches and coordinate benches of the Tribunal. 4. Disallowance of expenses related to wages. Analysis: Issue 1 - Applicability of section 40(a)(ia) of the Income-Tax Act on TDS payments: The case involved the question of whether section 40(a)(ia) of the Income-Tax Act is applicable to TDS payments not furnished by the assessee. The assessing officer contended that the provisions of section 40(a)(ia) apply even if the amounts were paid before 31st March. However, the assessee argued that based on the decision of the ITAT Special Bench Visakhapatnam, the provisions should not be applied as the payments were made before the deadline. The CIT(A) referred to a circular by CBDT and a decision by the ITAT Lucknow Bench to support the disallowance under section 40(a)(ia). Issue 2 - Interpretation of judgments by ITAT Special Bench Visakhapatnam and Hon'ble A.P. High Court: The counsel for the assessee highlighted the binding nature of the ITAT Special Bench decision on smaller benches and coordinate benches of the Tribunal unless overturned by the jurisdictional High Court. The counsel emphasized that the decision of the Special Bench should be followed unless a different view is taken by the High Court. The Tribunal, in line with the view expressed by the Hon'ble A.P. High Court in the case of Janapriya Engineering Syndicate, directed the assessing officer to restrict the disallowance to amounts payable after 31st March, partially allowing the assessee's appeal. Issue 3 - Binding nature of Special Bench decisions on smaller benches and coordinate benches of the Tribunal: The Tribunal recognized the binding nature of the Special Bench decisions on smaller benches and coordinate benches unless overturned by the jurisdictional High Court. The Tribunal upheld the decision of the Special Bench Visakhapatnam and the observation made by the Hon'ble A.P. High Court, emphasizing the adherence to quasi-judicial discipline in following precedents. Issue 4 - Disallowance of expenses related to wages: Regarding the disallowance of expenses related to wages, the assessing officer and CIT(A) upheld the disallowance of 10% of the total claim by the assessee due to lack of verifiable evidence and excessive payments made in cash. The Tribunal found the disallowance reasonable and declined to interfere with the decision, rejecting the assessee's appeal on this ground. In conclusion, the Tribunal's judgment addressed the applicability of section 40(a)(ia) of the Income-Tax Act, the interpretation of relevant judgments, the binding nature of Special Bench decisions, and the disallowance of expenses related to wages, providing a comprehensive analysis of each issue involved in the case.
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