2015 (3) TMI 530 - AT - Income Tax

Disallowance u/s 40(a)(ia) - payment to various truck owners towards freight charges of the trucks and had not deducted TDS u/s. 194C - Held that - Amendment with effect from 01.06.2007 whereby an individual or HUF whose total sales exceeded the monetary limit prescribed u/s. 44AB was made liable to deduct TDS have also been included vide sub clause (K) in Section 194C (1) of the Act. As far as present case is concerned, the relevant assessment year is A.Y. 2007-08 and therefore the amendment made to Section 194C(1)(K) of the Act which has been introduced with effect from 01.06.2007 has no applicability. Similar view has been taken by the Co-ordinate Bench in the case of Prasant Shah vs. ACIT 2012 (6) TMI 535 - ITAT AHMEDABAD upheld by Hon ble Gujarat High Court 2013 (1) TMI 592 - GUJARAT HIGH COURT - Decided in favor of assessee. Disallowance of depreciation on trucks - AO disallowed the depreciation on 5 trucks for the reason that the same were purchased in the month of March, 2007 and the Registration with the Motor Vehicle Authorities was completed in the month of April, 2007 and till the time the registration was completed, Assessee could not have been said to have put to use the trucks for the purpose of business - Held that - A commercial vehicle like a truck can be said to be ready for us only after the body fitting has been done on the chassis of the truck and thereafter the vehicle is registered with the prescribed Motor Vehicle Authorities. Before us, ld. A.R. has not placed any material on record to demonstrate that all the trucks were ready for use in all. aspects or even had obtained temporary registration of the vehicles or used for the business of the Assessee. The reliance placed by the assessee on the decisions are distinguishable on facts and are therefore not applicable to the present case. We therefore find that A.O was justified in denying the depreciation of ₹ 10,53,800/- on the 5 trucks. With respect to Truck No. 5056 it is Assessee s submission that it had purchased the second hand truck on 07.04.2006 and the evidence of transfer of ownership in favour of Assessee was also furnished to the A.O. On the other hand we find that that A.O while disallowing the claim of depreciation of ₹ 1,05,000/- on the aforesaid truck has noted that Assessee did not produce evidence about the ownership of the truck. In view of the contradictory submissions of the Assessee and the A.O., we are of the view that in the interest of justice one more opportunity be granted to the Assessee to demonstrate the ownership of the truck before the A.O. - Decided in favour of assessee for statistical purposes. Addition on account of difference as per the return and TDS certificates - Held that - It is Assessee s submission that the difference of ₹ 11,72,036/- between the amount shown in TDS certificates and reflected in the Profit and Loss Account is on account of the mistake of the persons who had issued the TDS certificate. It was further submitted before us that Assessee would be able to reconcile the difference. Considering the aforesaid submissions of the Assessee we are of the view that Assessee be granted an opportunity to reconcile the difference before the AO. We therefore remit the issue to the file of A.O to verify the contentions of the Assessee and thereafter if the Assessee s contention are found correct, the addition made be deleted.- Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS under Section 194C.
2. Disallowance of depreciation on trucks.
3. Addition on account of difference between income as per return and TDS certificates.

Issue-wise Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for non-deduction of TDS under Section 194C:
The Assessee made payments of Rs. 4,99,03,878 to various truck owners without deducting TDS under Section 194C. The Assessee argued that the provisions of Section 194C were not applicable as there was no contract. However, the A.O. and CIT(A) held that the Assessee acted as a contractor and was liable to deduct TDS. The Tribunal noted that the amendment to Section 194C(1)(k) was effective from 01.06.2007 and not applicable to A.Y. 2007-08. Citing the case of Prasant Shah, the Tribunal concluded that no disallowance under Section 40(a)(ia) was warranted for the relevant year and allowed the Assessee's ground.

2. Disallowance of depreciation on trucks:
The A.O. disallowed depreciation of Rs. 10,58,800 on trucks registered after the financial year, arguing they were not used for business. The CIT(A) upheld this view, stating that unregistered trucks could not have been used on roads. The Tribunal agreed, noting that trucks must be registered to be considered in use. However, for Truck No. 5056, the Tribunal remitted the issue back to the A.O. to verify ownership evidence provided by the Assessee. Thus, the Tribunal partly allowed the Assessee's ground for statistical purposes.

3. Addition on account of difference between income as per return and TDS certificates:
The A.O. added Rs. 11,72,036 due to discrepancies between TDS certificates and the Assessee's income declaration, which the Assessee attributed to calculation errors by the parties issuing the TDS certificates. The CIT(A) upheld the addition, considering the entire amount as suppressed income. The Tribunal remitted the issue to the A.O. for verification, allowing the Assessee an opportunity to reconcile the differences. Thus, this ground was allowed for statistical purposes.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific issues remitted back to the A.O. for further verification and consideration. The Tribunal emphasized the need for proper application of law and verification of facts before making disallowances or additions.