2013 (5) TMI 949 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 40(a)(ia) for non-deduction of TDS on direct expenses.
2. Depreciation claim on vehicles.
3. Additional grounds raised by assessee.

Summary:

Issue 1: Disallowance u/s 40(a)(ia) for non-deduction of TDS on direct expenses

The main issue involved is the disallowance of Rs. 6,04,40,918/- u/s 40(a)(ia) for non-deduction of tax at source on payments made for bleaching, dyeing, embroidery, finishing, and printing charges. The Assessing Officer (AO) found that these expenses exceeded the threshold for TDS u/s 194C and disallowed the expenses for non-deduction of TDS. The CIT(A) partly allowed the appeal, holding that out of the total disallowance, Rs. 4,16,53,215/- had been paid during the year and only Rs. 1,87,87,703/- was payable at the end of the year, thus disallowing the latter amount. However, the ITAT overruled this, following the decision of the Hon'ble Calcutta High Court in the case of Commissioner of Income Tax, Kolkata-IV Vs. Crescent Export Syndicate, which held that the provisions of section 40(a)(ia) apply to all expenses whether paid or payable during the year.

Issue 2: Depreciation claim on vehicles

The AO disallowed the depreciation claim on two cars purchased for Rs. 8,50,000/- and Rs. 20,35,000/- due to lack of supporting bills/vouchers. The CIT(A) vacated this disallowance, noting that no depreciation was claimed in the return of income. The ITAT upheld this decision, directing the AO to allow the depreciation as per law after verifying the records.

Issue 3: Additional grounds raised by assessee

The assessee raised an additional ground before the CIT(A) for allowing depreciation on vehicles at 15% instead of 10%. The CIT(A) dismissed this ground, stating it did not arise from the assessment order. The ITAT, referencing the Supreme Court decision in the case of NTPC, held that the additional ground is a legal issue arising from the assessment record and needs to be adjudicated. The issue was remanded to the AO for fresh consideration.

Conclusion:

The appeal filed by the assessee is partly allowed for statistical purposes, and the appeal filed by the Revenue is allowed, upholding the AO's assessment order on the issue of disallowance u/s 40(a)(ia) for non-deduction of TDS.