2010 (12) TMI 784 - AT - Income Tax

Claim of credit on account of TDS - Section 199 - Assessee had stated before the Assessing Officer that he has received the amounts on account of sales made and no contractual receipts were received by the assessee - Assessee had also produced vouchers, bills in this regard - Assessing Officer has also accepted the fact that the assessee is a trader of sulpher and coal tar pitch - Thus, the additions of sales treated as contractual receipt by the Assessing Officer is not justifiable - Decided in favour of assessee. Rule 6DD read with section 40A(3)- he assessee s submissions that the payments were made to truck drivers at odd hours during non-banking hours - Moreover, the truck drivers have refused to accept the cheque payments - Thus, Ld. Commissioner of Income Tax (Appeals) is correct to hold that the payment made to truck drivers is covered under rule 6DD and accordingly, uphold the order of the Ld. Commissioner of Income Tax (Appeals) on this issue. borrowed money for acquisition of immovable assets - Note that the nature of asset which was purchased in this case has not been brought out either in the assessment order or in the Ld. Commissioner of Income Tax (Appeals) s order - Without examining the nature of asset, adjudication on this issue is not possible - Though the ld. counsel of the assessee submitted that all assets purchased were for business purposes. However, this fact is not emanating out of the records - Thus, remit this issue to the files of the Assessing Officer to examine the issue afresh in light of our direction as above. Vehicle running and maintenance expenses and depreciation on a car - Find that Assessing Officer has disallowed 10% of these expenses on estimate basis on the ground that necessary logbooks were not maintained to establish that vehicles were used exclusively for business purposes. Decided in favour o assessee. Telephone and travelling expenses - Find that disallowance on account of telephone has been made because telephone are also installed at residence of the assessee and travelling expenses also contains certain vouchers which were not proper - Hence, the appeal filed by the revenue is partly allowed for statistical purposes and cross objection filed by the assessee is dismissed.

Issues:
1. Addition under section 199 of the IT Act, 1961
2. Disallowance under section 40A(3) of the IT Act
3. Disallowance under section 36(1)(iii) of the IT Act
4. Disallowance of vehicle running and maintenance expenses and depreciation
5. Disallowance of telephone and traveling expenses

1. Addition under section 199 of the IT Act, 1961:
The appeal involved the issue of whether the Ld. Commissioner of Income Tax (Appeals) erred in granting relief to the assessee against the addition of Rs.1,72,489 under section 199 of the IT Act. The Assessing Officer added the amount to the total income of the assessee, considering it as contractual receipts. However, the assessee contended that the payments were received from sales and not as contractual payments. The Ld. Commissioner of Income Tax (Appeals) agreed with the assessee, noting that the receipts were properly accounted for, and deleted the addition. The ITAT upheld the Ld. Commissioner's order, emphasizing that the Assessing Officer failed to establish the receipts as contractual, as the assessee operated as a trader of specific goods.

2. Disallowance under section 40A(3) of the IT Act:
The issue revolved around the disallowance of 20% of certain payments made in cash for sulpher purchases under section 40A(3) of the IT Act. The Assessing Officer disallowed the payments, but the Ld. Commissioner of Income Tax (Appeals) found them justified under Rule 6DD and a Board's circular. The ITAT upheld the Ld. Commissioner's decision, noting that the payments to truck drivers during non-banking hours were covered under Rule 6DD, as the drivers refused cheque payments.

3. Disallowance under section 36(1)(iii) of the IT Act:
The dispute involved the disallowance of interest paid by the assessee amounting to Rs.7,38,478 under section 36(1)(iii) of the IT Act. The Ld. Commissioner of Income Tax (Appeals) deleted the disallowance, stating that the borrowed funds were not utilized for acquiring capital assets. However, the ITAT remitted the issue back to the Assessing Officer for re-examination due to insufficient details regarding the nature of the assets purchased.

4. Disallowance of vehicle running and maintenance expenses and depreciation:
The assessee's cross objection related to the disallowance of vehicle running and maintenance expenses along with depreciation on a car. The Assessing Officer disallowed a percentage of these expenses due to the lack of logbooks to prove exclusive business use. The Ld. Commissioner of Income Tax (Appeals) confirmed the disallowances, which the ITAT upheld, noting the absence of evidence for exclusive business use.

5. Disallowance of telephone and traveling expenses:
The cross objection also contested the disallowance of telephone and traveling expenses. The Assessing Officer disallowed a percentage of these expenses due to incomplete details and expenses related to personal use. The Ld. Commissioner of Income Tax (Appeals) reduced the disallowance percentages, which the ITAT upheld, citing the presence of expenses related to personal use and incomplete supporting details.

In conclusion, the ITAT partly allowed the revenue's appeal for statistical purposes and dismissed the assessee's cross objection, maintaining the decisions on various disallowances and additions made under different sections of the IT Act.

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