2015 (1) TMI 316 - AT - Income Tax

TDS u/s 194C - reimbursement of expenses - non deduction of TDS against clearing charges paid to clearing and forwarding agent - Held that - assessee did not deduct any TDS on the said amount. Before the Assessing Officer the assessee has not given the convincing explanation for non deduction of TDS. However, before the CIT(A), the assessee has submitted that the major part of this amount is for reimbursement of expenses incurred by the Clearing Agent regarding payment of Octori, Custom duty and other charges. We find that neither the Assessing Officer nor the CIT(A) has examined or verified the nature of actual payment made by the assessee. - matter remanded back to the Assessing Officer for proper verification regarding the nature of the payment made by the assessee and then decide the issue afresh as per law. Depreciation - Car was a business asset and depreciation was allowed in the earlier years then any loss on account of sale of the said asset has to be adjusted as per provisions of section 32 because the block of assets did not cease to exist when the assessee purchased a new car during the year. Accordingly, we set aside this issue for limited purpose for allowing the claim u/s 32 on account of loss on sale of car. As regards the loss on account of furniture, cellular phone and water filter, since the block of assets ceased to exist, therefore, the same is not allowable as per provisions of section 32. Accordingly, this ground of the assessee s appeal is partly allowed for statistical purpose - Decided partly in favour of assessee.

Summary

Issues:
1. Disallowance under section 40(a)(ia) of the Income Tax Act for non-deduction of TDS.
2. Treatment of loss on Car and Furniture as business expenses.

Analysis:

*Issue 1: Disallowance under section 40(a)(ia) of the Income Tax Act for non-deduction of TDS*

The appeal by the revenue was against the disallowance made by the Assessing Officer under section 40(a)(ia) for non-deduction of TDS on an expenditure claimed under Clearing Charges. The Assessing Officer disallowed the amount as TDS was not deducted. The assessee contended that the payment was reimbursement of expenses to various parties and not entirely to the Clearing Agent. However, the CIT(A) upheld the disallowance. During the appeal, the Authorized Representative provided details showing the nature of payments made. The Tribunal noted that the authorities below did not verify the nature of the payment and set aside the issue for proper verification by the Assessing Officer.

*Issue 2: Treatment of loss on Car and Furniture as business expenses*

The Assessing Officer disallowed the claimed loss on Car and Furniture as business expenses. The assessee argued that the loss was due to the sale of the old car and purchase of a new one, making it an allowable claim. The CIT(A) disagreed and confirmed the disallowance. In the appeal, the Authorized Representative detailed the losses on various assets and argued for the allowance of the loss on the sale of the car under section 32. The Tribunal agreed that the loss on the sale of the car, being a business asset, should be adjusted as per section 32. However, losses on furniture, cellular phone, and water filter were not allowable as the block of assets ceased to exist. The appeal was partly allowed for statistical purposes.

In conclusion, the Tribunal set aside both issues for further examination by the Assessing Officer and allowed the appeal partly for statistical purposes, adjusting the loss on the sale of the car as per section 32 while denying the losses on other assets due to the block of assets ceasing to exist.