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2014 (1) TMI 742 - AT - Income TaxAddition made u/s 40(a)(ia) of the Act Payment made to sub-contractors TDS not deducted Held that - The Assessee was not required to deduct TDS as he was a sub- contractor and the payment made by him was to a sub sub-contractor - whether the assessee is a sub-contractor or main contractor has not been examined either by Assessing Officer or CIT(A) as there is no finding to this effect in their orders Thus, the issue needs to be examined the matter remitted back to the CIT(A) for verification Decided in favour of Assessee. Addition restricted u/s 40(a)(ia) of the Act Held that - The Assessing Officer had disallowed the payment made to sub-contractors on which the assessee had not deducted TDS - The total disallowance worked out under 40(a) (ia) was Rs. 33,76,994 - CIT(A) after considering the submissions of the Assessee noted that the amended provisions of section 194C with effect from 01.10.2004 applied to the transactions entered into on or after that date and hence the aggregate limit of contractual amount of Rs. 50,000/- for application of TDS provisions has to be calculated for the period 1.10.2004 onwards the relief granted to the assessee of Rs. 19,27,931 being the payment made in excess of Rs. 50,000 reckoned from 01.10.2004 Revenue could not controvert the findings of CIT(A) There was no reason to interfere with the order of CIT(A) Decided against Revenue. Addition on account of disallowances of various expenses - Held that - CIT(A) while deleting the addition has noted that the Assessee had submitted the details of expenses before Assessing Officer - He also noted that financial and other similar expenses to be properly - the disallowance restricted to Rs. 65,166 - Revenue could not controvert the findings of CIT(A) or bring any material in its support there was no necessity A.Y. 2005-06 to interfere with the order of CIT(A) Decided against Revenue.
Issues involved:
1. Appeal against order of ld. CIT(A)-IV, Surat dated 24.05.2010 for assessment year 2005-06. 2. Disallowance of expenses and addition of payment to sub-contractors under Section 40(a)(ia) of the Income Tax Act. 3. Dispute regarding whether the Assessee is a sub-contractor or main contractor. 4. Ad-hoc disallowance of various expenses by the Assessing Officer. Issue 1: Appeal against order of ld. CIT(A)-IV, Surat dated 24.05.2010 for assessment year 2005-06: The Assessee filed an appeal against the order of the ld. CIT(A)-IV, Surat for the assessment year 2005-06. The case was reopened by issuing a notice under Section 148, leading to the assessment being framed under Section 143(3) read with Section 147. Both the Assessee and Revenue were aggrieved by the order of the CIT(A) and appealed before the ITAT Ahmedabad. Issue 2: Disallowance of expenses and addition of payment to sub-contractors under Section 40(a)(ia) of the Income Tax Act: The Assessing Officer disallowed payments made to sub-contractors under Section 40(a)(ia) due to non-deduction of TDS on freight expenses. The CIT(A) partially granted relief to the Assessee by considering the applicability of Section 194C and the amendment effective from 01-10-2004. The ITAT remitted the issue to the CIT(A) for further examination to determine if the Assessee was a sub-contractor or main contractor. Issue 3: Dispute regarding whether the Assessee is a sub-contractor or main contractor: The Assessee argued that as a sub-contractor, TDS deduction was not required under Section 194C(2). The ITAT found that this crucial aspect had not been examined by the Assessing Officer or CIT(A), leading to a remittance of the issue to the CIT(A for proper verification and decision. Issue 4: Ad-hoc disallowance of various expenses by the Assessing Officer: The Assessing Officer disallowed a portion of expenses claimed by the Assessee, citing lack of substantiation. The CIT(A reduced the disallowance percentage after considering the details submitted by the Assessee. The ITAT upheld the decision of the CIT(A), noting the lack of material brought by the Revenue to support their appeal. In conclusion, the ITAT partially allowed the Assessee's appeal and dismissed the Revenue's appeal. The judgment highlighted the importance of proper examination of whether the Assessee was a sub-contractor or main contractor, leading to a remittance of the issue for further scrutiny. The ITAT emphasized the need for adequate evidence and substantiation of expenses to avoid ad-hoc disallowances by the Assessing Officer.
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