2014 (4) TMI 242 - HC - Income Tax

Payments made to sub-contractors Genuineness could not prove - there was a report of the inspector stating that the premises had been vacant and some of the persons had never worked from their residential premises nor was it possible to recognise these persons in the vicinity, concluded that these were bogus parties. The Assessing Officer also noted that the address given was identical and they were registered from a single place. - AO deemed it fit to disallow a sum of Rs. 3.40 crores made towards expenses claimed - Tribunal deleted the additions Held that - The Tribunal exhaustively noted the details furnished by both the sides and also quoted the CIT(A) to conclude that on due opportunity afforded to both the sides, the CIT(A) had approached the issue properly - the Tribunal noted that it did not find any reason to disbelieve the evidence - the entire issue is based on factual matrix - From the sufficiency of evidence, when the Tribunal has held in favour of the assessee and when no question of law much less substantial question of law has arisen thus, there is no need for interference. Deletion u/s 40(a)(ia) of the Act - Whether the Tribunal is right in deleting the addition made u/s 40(a)(ia) of the Income-tax Act on account of payment of transportation charges Held that - The decision in CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. 2014 (4) TMI 235 - GUJARAT HIGH COURT followed - the amendment in section 40(a)(ia) of the Income-tax Act by the Finance Act of 2010 has retrospective effect Decided against Revenue.

Summary

Issues:
1. Addition of payment made to sub-contractors - genuineness of payments.
2. Addition made under section 40(a)(ia) for payment of transportation charges.

Analysis:

Issue 1: Addition of payment made to sub-contractors - genuineness of payments
The case involves an appeal regarding the addition of Rs. 3.40 crores made on account of disallowance of payments to sub-contractors due to failure in proving the genuineness of the payments. The Assessing Officer conducted a detailed inquiry involving information from seventy-six parties. The report indicated that some parties were bogus as their premises were vacant, and they could not be identified in the vicinity. The parties had identical addresses registered from a single place. Due to non-production of witnesses, the Assessing Officer disallowed the claimed expenses. The Commissioner of Income-tax (Appeals) partially confirmed the disallowance, but the Tribunal later deleted the entire addition. The Tribunal considered the evidence and arguments presented, including the fact that TDS was deducted on payments to sub-contractors. The Tribunal found no reason to doubt the evidence and concluded that the address similarity was due to the sub-contractors' mobile nature. The court upheld the Tribunal's decision, emphasizing the factual basis of the issue and the sufficiency of evidence supporting the deletion of the addition.

Issue 2: Addition made under section 40(a)(ia) for payment of transportation charges
The second issue pertains to the addition made under section 40(a)(ia) for payment of transportation charges. The court referred to previous judgments, including CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd., where it was held that the amendment in section 40(a)(ia) of the Income-tax Act by the Finance Act of 2010 has retrospective effect. Additionally, the court cited a decision in Tax Appeal No. 706 of 2010 (CIT v. J. K. Construction Co.), supporting the retrospective application of the amendment. As the issue had already been addressed in previous judgments, the court found no need for further consideration. Consequently, the tax appeals were dismissed, and no costs were awarded.

In conclusion, the High Court of Gujarat dismissed the tax appeal, upholding the Tribunal's decision to delete the addition related to payments made to sub-contractors and affirming the retrospective application of the amendment under section 40(a)(ia) for payment of transportation charges based on previous judgments.