2013 (5) TMI 894 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition u/s 40(a)(ia) for non-deduction of TDS.
2. Validity of Revenue's appeal.
3. Application of section 194I vs. section 194C.
4. Liability to deduct TDS for crushing charges.
5. Balance addition of Rs. 26,244.

Summary:

1. Deletion of Addition u/s 40(a)(ia) for Non-Deduction of TDS:
The Revenue challenged the CIT(A)'s decision to delete the addition of Rs. 14,35,040/- made by the AO on account of non-deduction of TDS u/s 40(a)(ia). The CIT(A) held that the crushing charges were part of the trading/manufacturing account and fell under section 28, which is not covered by section 40(a)(ia). The ITAT, however, disagreed, citing the judgments of various High Courts, including the Hon'ble Calcutta High Court in CIT vs. Crescent Export Syndicate, which held that section 40(a)(ia) applies to all expenditures, whether paid or payable, if TDS is not deducted.

2. Validity of Revenue's Appeal:
The assessee argued that the appeal by the Revenue was not maintainable as the CIT(A) had already given a clear finding in favor of the assessee. The ITAT found this argument unconvincing, stating that the law must be read as an integrated code and not selectively.

3. Application of Section 194I vs. Section 194C:
The assessee contended that the payment for crushing charges should fall under section 194I (rent) and not section 194C (contractor). The ITAT rejected this argument, emphasizing that the nature of the payment was for services rendered, thus falling under section 194C.

4. Liability to Deduct TDS for Crushing Charges:
The assessee claimed that they were not liable to deduct TDS as M/s. Shri Balaji Oil Mills was not a contractor in relation to the assessee. The ITAT dismissed this claim, noting that the assessee had taken the factory on rent and the payments were for crushing services, making them liable to deduct TDS u/s 194C.

5. Balance Addition of Rs. 26,244:
The CIT(A) had sustained the disallowance of Rs. 26,244/- out of the total crushing charges. The ITAT upheld this decision, agreeing with the CIT(A)'s interpretation that only the amount payable at the end of the year should be disallowed u/s 40(a)(ia).

Conclusion:
The ITAT allowed the Revenue's appeal, reinstating the addition of Rs. 14,35,040/- and dismissed the assessee's cross-objection. The ITAT emphasized the integrated reading of the Income Tax Act and upheld the applicability of section 40(a)(ia) to all expenditures where TDS was not deducted, irrespective of whether the amount was paid or payable.