2015 (8) TMI 50 - AT - Income Tax

Disallowance u/s.40(a)(ia) - assessee had neither deducted TDS nor paid the TDS in the current year - Held that - As before the lower authorities it was claimed that the expenditure were in the nature of reimbursement for the goods that were exported by the assessee. During the course of hearing a question was put to the Ld. A.R. and he was asked to demonstrate the crystallization of liability vis- -vis the date of exports of goods as it was claimed that the expenditure were with respect to export of goods and to which the Ld. A.R. could not place any evidence to demonstrate that the goods were exported in the year under consideration or even at the fag end of F.Y. 2006-07. Before us the Ld., A.R. has also not placed any material on record to demonstrate that the liability crystallized during the year nor has placed any material on record to controvert the findings of Ld.CIT (A). Further the case laws relied upon by Ld. A.R. are also distinguishable on facts and in view of the aforesaid facts, we find no reason to interfere with the order of the Ld. CIT (A) in conforming disallowance - Decided against assessee. Addition on account of non deduction of TDS for the payments for purchasing calendars - Held that - CIT (A) while upholding the disallowance has held that the contract for purchase of calendars was a works contract and therefore, the assessee was liable to deduct TDS. On the other hand before us Ld. A.R. submitted that the assessee had also purchased calendars in earlier and subsequent years and in those years, in the assessments framed u/s. 143(3), no disallowance on account of non deduction of TDS has been made by the Revenue Authorities. We however find that to support the contention of allowing the expenses in earlier and subsequent years, the relevant assessment orders are not on record. We therefore, are of the view that in the interest of justice, the issue needs to be re-examined at the end of A.O. and if no disallowance of similar expenditure has been made in earlier years and or subsequent years, the addition made by the A.O.in the year under consideration be deleted. - Decided in favour of assessee for statistical purposes. Addition on account of prior period expenses - Held that - CIT (A) while upholding the disallowance has noted that the assessee has not been able to prove that the liability of the expenses which has been claimed has crystallized during the year under consideration and the claim of assessee is not supported by documentary evidence and that there was no evidence to that effect was either placed before the A.O. or before Ld.CIT (A). Before us also the assessee has not placed any material on record to demonstrate the crystallization of liability in the year under consideration. Before us, Ld. A.R. has stated that the prior period expenses is below the line adjustment in the Profit and loss account and therefore it has not been claimed as expenses is contrary to the fact and is not correct because on perusing the computation of income that has been placed on record at page-2 of the paper book, it is seen that assessee has claimed expenses of ₹ 5,53,979/- as prior period expenses crystallized during the year - Decided against assessee. Addition u/s. 40A(3) - Held that - Before us it is assessee s submission that the payment was made to the representative of the foreign company, who was a foreigner and was not having Bank account and on the specific request to meet the expenses have not been controverted by the Revenue. Further the genuineness of the payment has also not been doubted by the A.O. In view of the aforesaid facts and considering the fact that the foreign currency was obtained from the foreign money changer registered with Reserve Bank of India and in view of any contrary material on record to controvert the submissions of the assessee, we are of the view that in the peculiar facts of the case the expenditure be allowed. - Decided in favour of assessee

Summary

Issues Involved:
1. Addition on account of disallowance under Section 40(a)(ia) of the Income Tax Act.
2. Addition on account of non-deduction of TDS under Section 194C for payment made for purchasing calendars.
3. Addition on account of prior period expenses.
4. Addition under Section 40A(3) for cash payments.

Issue-wise Detailed Analysis:

1. Addition on account of disallowance under Section 40(a)(ia) of the Income Tax Act:
The assessee claimed a deduction of Rs. 15,94,765/- for non-TDS expenses disallowed in earlier years. The Assessing Officer (A.O.) disallowed the claim, stating the expenses did not pertain to the current year and the assessee neither deducted nor paid TDS in the current year. The CIT (A) upheld the A.O.'s decision, emphasizing that the expenditure did not pertain to the current year and no TDS was deducted or paid. The Tribunal found no evidence that the liability crystallized during the year and upheld the CIT (A)'s decision, dismissing the assessee's ground.

2. Addition on account of non-deduction of TDS under Section 194C for payment made for purchasing calendars:
The A.O. disallowed Rs. 1,04,669/- for calendar printing work due to non-deduction of TDS, arguing it was a works contract. The CIT (A) upheld the disallowance, stating it was not a ready-made product but a works contract. The Tribunal noted the assessee's claim of similar expenses not being disallowed in other years and remanded the matter to the A.O. to verify this claim. If no disallowance was made in other years, the addition should be deleted.

3. Addition on account of prior period expenses:
The A.O. disallowed Rs. 1,69,023/- as prior period expenses, stating no evidence was provided to prove the expenses crystallized during the year. The CIT (A) upheld the disallowance, noting the assessee failed to demonstrate the liability crystallized during the year. The Tribunal found no evidence of crystallization of liability and upheld the CIT (A)'s decision, dismissing the assessee's ground.

4. Addition under Section 40A(3) for cash payments:
The A.O. disallowed Rs. 45,375/- for expenses paid in cash, stating the payment violated Section 40A(3). The CIT (A) upheld the disallowance, stating the payment was not covered under Rule 6DD. The Tribunal noted the payment was made to a foreign representative without a bank account in India and the genuineness of the payment was not questioned. Considering the peculiar facts, the Tribunal allowed the expenditure and directed the deletion of the addition.

Conclusion:
The Tribunal partly allowed the appeal, remanding the second issue for re-examination and allowing the fourth issue, while dismissing the first and third issues. The order was pronounced on 30th July 2015 at Ahmedabad.