2016 (12) TMI 1665 - AT - Income Tax

TDS u/s 194C - disallowance made u/s 40(a)(ia) - non deduction of tds to payment paid to National Trading Co. - Held that - If the payee has disclosed the said receipt in his return and paid taxes thereon the assessee should not be invited with disallowance u/s. 40(a)(ia) of the Act by treating him as the assessee in default. We direct the AO to verify the same and dispose of the issue accordingly. Ground No.1 of appeal of assessee is allowed for statistical purposes. Disallowance towards petty freight warehousing and transportation expenses - Held that - The details have been duly filed by the assessee duly complying with the provisions of TDS with due remittance thereon. In respect of the balance sum of Rs. 43, 978/- the ld AR argued that the same only represents petty freight and transportation expenses incurred on various dates throughout the year by making payments to various parties which do not warrant any deduction of tax at source in view of the limit prescribed u/s 194C of the Act. We find that the assessee had furnished the details of various expenses as and when called for by the ld AO during the course of assessment proceedings. We find lot of force in the argument of the ld AR that this is a general routine business expenditure incurred by the assessee and accordingly have no hesitation in directing the ld AO to delete this disallowance. Accordingly the Ground No. 2 raised by the assessee is allowed.

Summary

Issues Involved:
1. Disallowance made under section 40(a)(ia) of the Income Tax Act, 1961.
2. Disallowance of expenses towards petty freight, warehousing, and transportation charges.

Analysis:

Issue 1: Disallowance under section 40(a)(ia) of the Act
- The appellant challenged the disallowance of Rs. 2,10,000 paid to National Trading Co. under section 40(a)(ia) by the CIT(A).
- The appellant claimed the payment was for office expenses, salary, and maintenance charges, not subject to TDS under section 194C.
- The appellant cited recent decisions by the Delhi and Calcutta High Courts regarding the retrospective operation of the second proviso to section 40(a)(ia).
- The Appellate Tribunal directed the AO to verify if the payee disclosed the receipt and paid taxes, granting relief to the appellant based on the above decisions.

Issue 2: Disallowance of petty expenses
- The appellant contested the disallowance of Rs. 72,832 for petty freight, warehousing, and transportation charges.
- The AO disallowed the amount as a bogus claim, upheld by the CIT(A).
- The appellant argued that they had submitted details totaling Rs. 3,25,104, with TDS of Rs. 2,96,250, and the remaining Rs. 43,978 represented routine freight expenses not requiring TDS under section 194C.
- The Tribunal found the appellant had complied with TDS provisions for the disclosed amount and allowed the deduction for the balance of Rs. 43,978 as routine business expenditure.

General:
- The Tribunal allowed the appeal for statistical purposes, directing the AO to delete the disallowance of Rs. 43,978.
- The general ground raised did not require adjudication.
- The order was pronounced on 09.12.2016 in the open court.