2014 (10) TMI 738 - AT - Income Tax

Non-deduction of TDS on consultancy charges Disallowance u/s 40(a)(ia) Whether the payment is purely for consultancy & not reimbursement of the expenses Held that - As decided in assessee s own case for the earlier assessment year, it has been held that as per the agreement entered into by this assessee with the concerned Authority it is a compulsory payment to be made as a reimbursement - On this amount, obviously Section 194J is not applicable the order of the CIT(A) is upheld Decided against revenue. Non-deduction of TDS on hire charges Held that - As decided in assessee s own case for the earlier assessment year, it has been held that the assessee made entire payment towards hiring of trucks for the shifting of plant from one place to another place - provisions of section 194C are not applicable as decided in Merilyn Shipping & Transports VS. ACIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM - provisions of section 40(a)(ia) of the Act are applicable only to amounts of expenditure which are payable as on 31st March of every year and it cannot be invoked to disallow expenses which have been actually paid during the previous year without deduction of TDS - the order of the CIT(A) is upheld Decided against revenue. Non-deduction of TDS on payments for Sign Boards - Whether the payment is towards a works-contract or not - Held that - s decided in assessee s own case for the earlier assessment year, it has been held that the CIT(A) has rightly observed that there is no evidence on record to show that these payments are not for contract for sale and are for contract for work - the finding of the CIT(A) is cursory and he has mainly relied on the narration on the bills but he has not gone into the real aspect of the controversy - this issue has not been correctly investigated into and examined by the AO thus, the matter is to be remitted back to the AO for fresh adjudication Decided in favour of revenue. Cancellation of order u/s 201(1) Held that - ITO (TDS), Udaipur created the demand u/s 201(1) of the Act only on the basis that the AO while passing the assessment orders for the assessment years held that the assessee was liable to deduct TDS on account of plant shifting charges, consultancy charges, hire charges etc. However, those disallowances made by the AO were deleted upto the level of ITAT and at present no such disallowances are in existence, therefore, CIT(A) was fully justified in deleting the demand created by the ITO (TDS), Udaipur u/s. 201(1) of the Act the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues Involved:
1. Deletion of disallowance made under Section 40(a)(ia) for non-deduction of TDS on consultancy charges.
2. Deletion of disallowance made under Section 40(a)(ia) for non-deduction of TDS on hire charges.
3. Deletion of disallowance made under Section 40(a)(ia) for non-deduction of TDS on payments for Sign Boards.
4. Cancellation of order under Section 201(1) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance on Consultancy Charges:
The Tribunal examined the deletion of disallowance made by the Assessing Officer under Section 40(a)(ia) for non-deduction of TDS on consultancy charges. The learned counsel for the assessee cited previous Tribunal decisions favoring the assessee for similar issues in earlier assessment years (2006-07, 2007-08, and 2008-09). The Tribunal found that the facts for the year under consideration were identical to those in previous years and upheld the deletion of disallowance, citing consistency with earlier rulings.

2. Deletion of Disallowance on Hire Charges:
The Tribunal addressed the deletion of disallowance of Rs. 25,36,788/- made by the Assessing Officer under Section 40(a)(ia) for non-deduction of TDS on hire charges. The Tribunal referred to its earlier decision for the A.Y. 2008-09, where it was held that the provisions of Section 40(a)(ia) are applicable only to amounts payable as of 31st March and not to expenses actually paid during the year. This decision was based on the Special Bench ruling in Merilyn Shipping & Transports vs. ACIT and was affirmed by the Hon'ble Allahabad High Court. Consequently, the Tribunal upheld the deletion of disallowance for the current year as well.

3. Deletion of Disallowance on Payments for Sign Boards:
The Tribunal reviewed the deletion of disallowance of Rs. 29,40,805/- made by the Assessing Officer under Section 40(a)(ia) for non-deduction of TDS on payments for Sign Boards. The Assessing Officer had treated these payments as contractual, requiring TDS deduction. However, the learned CIT(A) and the Tribunal found that the payments were for the purchase of goods, not for a work contract, and thus not subject to TDS provisions under Section 194C. The Tribunal noted that similar disallowances had been deleted in previous years (2006-07, 2007-08, and 2008-09) and upheld the deletion for the current year as well.

4. Cancellation of Order under Section 201(1):
The Tribunal examined the cancellation of the order under Section 201(1) of the Income Tax Act, which treated the assessee as in default for non-deduction of TDS on various payments. The learned CIT(A) had canceled the demand created under Section 201(1) on the grounds that the disallowances made under Section 40(a)(ia) were deleted by the first appellate authority and the ITAT. The Tribunal found that since the disallowances were deleted, there was no basis for treating the assessee as in default under Section 201(1). Thus, the Tribunal upheld the cancellation of the order.

Conclusion:
The Tribunal upheld the deletion of disallowances made under Section 40(a)(ia) for non-deduction of TDS on consultancy charges, hire charges, and payments for Sign Boards. It also confirmed the cancellation of the order under Section 201(1) of the Income Tax Act. The appeals of the Department were partly allowed for statistical purposes.