2015 (4) TMI 715 - AT - Income Tax

Disallowance under section 40(a)(ia) - Short deduction of TDS - CIT(A) has deleted the additions made by the Assessing Officer by admitting fresh evidence namely the revised TDS return wherein the figures have been reconciled with the expenditure debited in the profit and loss account - Held that - instant case the Commissioner of Income-tax (Appeals) has deleted the additions made by the Assessing Officer by admitting fresh evidence namely the revised TDS return wherein the figures have been reconciled with the expenditure debited in the profit and loss account. - Decided in favour of revenue for statistical purposes. Disallowance of Building grants given to Milk Producer's Society - CIT(A) allowed the claim - Held that - The grant of ₹ 10,000 to each of the 50 milk producing co-operative societies was given by the assessee-society for the purpose of constructing their own building for milk collection and testing. The payment was permitted as per the byelaws of the society and was approved by the board of directors and ratified by the Joint Registrar of the Co-operative Societies, Government of Karnataka. The expenditure incurred did not bring into existence any capital asset to the assessee. We find that the said grant has been given by the assessee to milk producers' co-operative societies in order to put up a building to facilitate the collection of milk and testing it. The milk so collected is handed over to the assessee-society. In this context it helps the assessee to carry out its business objects more effectively and hence the Commissioner of Income-tax (Appeals) has rightly held that the expenditure of ₹ 5 lakhs is deductible as revenue expenditure. Therefore, we uphold the Commissioner of Income-tax (Appeals) order. - Decided against revenue.

Issues Involved:
1. Legality of the order of the Commissioner of Income-tax (Appeals), Hubli.
2. Deletion of addition made under section 40(a)(ia) of the Income-tax Act.
3. Violation of rule 46A of the Income-tax Rules.
4. Deletion of addition for grants given to milk producers of a co-operative society.

Detailed Analysis:

Issue 1: Legality of the Order of the Commissioner of Income-tax (Appeals), Hubli
The Revenue contended that the order of the Commissioner of Income-tax (Appeals), Hubli was "bad in law" and "opposed to law and not on the facts and circumstances of the case." The Tribunal did not provide specific adjudication on these grounds, implying that they were general in nature and did not warrant separate consideration.

Issue 2: Deletion of Addition Made Under Section 40(a)(ia)
The Assessing Officer (AO) disallowed Rs. 1,59,80,975 under section 40(a)(ia) due to non-compliance with TDS provisions. The assessee argued that there was a computational error in the original TDS return, which was later rectified by filing a revised TDS return. The Commissioner of Income-tax (Appeals) accepted the revised return and deleted the disallowance, considering it a human error.

The Tribunal noted that the revised TDS return was filed after the assessment order, and the AO did not have the opportunity to examine this new evidence. The Tribunal emphasized the importance of rule 46A, which mandates that the AO should be given a reasonable opportunity to examine any additional evidence. Consequently, the Tribunal restored the issue to the AO for de novo consideration to ensure justice and equity.

Issue 3: Violation of Rule 46A of the Income-tax Rules
The Revenue argued that the Commissioner of Income-tax (Appeals) violated rule 46A by admitting additional evidence (revised TDS return) without giving the AO an opportunity to examine it. The Tribunal concurred, highlighting that the Commissioner of Income-tax (Appeals) should not have taken into account the revised TDS return without allowing the AO to review it. The Tribunal restored the matter to the AO for reconsideration, thus allowing the Revenue's ground for statistical purposes.

Issue 4: Deletion of Addition for Grants Given to Milk Producers of a Co-operative Society
The AO disallowed Rs. 5,00,000 given as grants to milk producers' co-operative societies, considering it a capital expenditure. The assessee argued that the grants were for constructing buildings for milk collection and testing, which furthered the business objectives of the assessee and should be treated as revenue expenditure.

The Commissioner of Income-tax (Appeals) accepted this argument, noting that the expenditure did not create any capital asset for the assessee and was permitted by the society's bye-laws. The Tribunal upheld this decision, agreeing that the expenditure was indeed revenue in nature and deductible, as it facilitated the assessee's business operations.

General Grounds
Grounds 1, 2, 6, and 7 raised by the Revenue were considered general in nature and did not require specific adjudication. Therefore, these grounds were dismissed.

Conclusion
The Tribunal's decision resulted in a partial allowance of the Revenue's appeal for statistical purposes. The issue of disallowance under section 40(a)(ia) was restored to the AO for re-examination, while the deletion of the addition for grants to milk producers' societies was upheld. The general grounds raised by the Revenue were dismissed.

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