2015 (9) TMI 125 - AT - Income Tax

TDS liability u/s 194C - expression work includes advertisement and the assessee has debited the expenditure under the head advertisement as held by AO - plea of the assessee that it was payment made to the principal from time to time and M/s. Hero Honda Motors is not an advertising agency and hence it cannot said to have been payment made to any advertising agency - Held that - Claim of the assessee that M/s. Hero Honda Motors having engaged a contractor for advertisement of motorcycle and on payments made to such contractor, tax was deducted at source under the provisions of sec.194C of the Act was not disputed by the learned Departmental Representative. It is also not in dispute that the assessee made reimbursement of its share to the principal company and it had not directly entered into advertisement contract with any the advertising agency. Under these circumstances, in the light of the decision of DLF Commercial Project Corporation 2015 (7) TMI 576 - DELHI HIGH COURT and also on the plain reading of the provisions of sec.194C of the Act, thus the provisions of sec.194C are not applicable in the instant case and consequently, the AO was not justified in making addition by applying the provisions of sec. 40(a)(ia) of the Act. In the result, the addition made by the AO is hereby deleted. - Decided in favour of assessee. Not accounting amount received from HDFC bank - assessee stated that he has received only commission of ₹ 45,348/- from the bank and the same has been credited to profit and loss account - Held that - AO, in the proposal dated 19/9/2011, specified that the assessee received ₹ 33,185/- u/s 194A of the Act, ₹ 13,333/- u/s 194C of the Act which was not accounted in the books of account whereas the assessee was referred to the commission of ₹ 45,348/-received from the bank and credited to the profit and loss account which is different from the amounts referable to 194A and 194C of the Act. Since no explanation was filed even before the CIT(A), the CIT(A) affirmed the action of the AO. Even before the Tribunal, assessee could not furnish proper explanation to highlight that it has not received any commission and whatever was offered to tax was only the amount received from HDFC referable to taxes u/s 194A and 194C of the Act. In fact, the total sum referred by the AO works out to ₹ 46,518/- whereas the assessee offered to tax commission amount of ₹ 45,348/-. Even at this stage, no satisfactory explanation was forthcoming. - Decided against assessee. Addition on excess credits in partners account - Held that - Since amount was credited in the name of Shri Sukhdev and the assessee could not furnish convincing explanation with regard to the same, it is of the view that the addition as made by the AO and confirmed by the CIT(A) is in accordance with law. - Decided against assessee.

Summary

Issues Involved:
1. Applicability of Section 194C on reimbursement of advertisement expenses.
2. Nature of expenditure on building maintenance - capital or revenue.
3. Addition of unaccounted income received from HDFC Bank.
4. Excess credits in the partner's account.

Issue-wise Detailed Analysis:

1. Applicability of Section 194C on Reimbursement of Advertisement Expenses:
The primary issue revolves around whether the reimbursement of advertisement expenses to M/s. Hero Honda Motors Ltd. attracts the provisions of Section 194C, which mandates the deduction of tax at source (TDS) on payments to contractors. The assessee argued that the payment was merely a reimbursement to the principal company, which had already deducted TDS on the advertisement expenses incurred. The Tribunal noted that the assessee did not directly engage any advertising agency and the reimbursement was made to the principal company. Citing the Delhi High Court's decision in DLF Commercial Project Corporation, it was held that since the principal company had already deducted TDS, the provisions of Section 194C were not applicable to the assessee. Consequently, the addition made by the AO under Section 40(a)(ia) was deleted.

2. Nature of Expenditure on Building Maintenance - Capital or Revenue:
The second issue pertained to the nature of the expenditure incurred on building maintenance. The AO and CIT(A) treated the expenditure as capital in nature since it included costs for materials and labor charges for construction. The assessee contended that the majority of the expenditure was for maintenance and should be treated as revenue. However, the Tribunal upheld the CIT(A)'s decision, noting the absence of any material evidence to contradict the findings. The expenditure was thus treated as capital, and the assessee was entitled to depreciation as per law.

3. Addition of Unaccounted Income Received from HDFC Bank:
The AO added an amount of Rs. 46,518/- received from HDFC Bank under Sections 194A and 194C, which was not accounted for in the books. The assessee claimed that the amount was credited to the bank interest and commission account. However, the CIT(A) and the Tribunal found no satisfactory explanation or evidence to support this claim. The Tribunal upheld the addition, noting the discrepancy between the amount received and the amount offered to tax.

4. Excess Credits in the Partner's Account:
The AO noticed an excess credit of Rs. 26,515/- in the partner's account, which the assessee could not satisfactorily explain. The CIT(A) affirmed the addition due to the lack of written submissions or convincing evidence. The Tribunal also upheld the addition, as the assessee failed to provide a convincing explanation for the excess credit.

Conclusion:
The appeals were partly allowed. The Tribunal deleted the addition related to the reimbursement of advertisement expenses but upheld the additions related to the building maintenance expenditure, unaccounted income from HDFC Bank, and excess credits in the partner's account. The judgment emphasized the importance of providing adequate evidence and explanations for claims made by the assessee.