2011 (8) TMI 1299 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 40(a)(ia) for non-deduction of TDS on payments made to sub-contractors.
2. Disallowance u/s 40(a)(ia) for non-deduction of TDS on transportation charges.
3. Disallowance of expenses on running, maintenance, and depreciation of car.
4. Charging of interest u/s 234B.

Summary:

Issue 1: Disallowance u/s 40(a)(ia) for non-deduction of TDS on payments made to sub-contractors

The assessee, a civil contractor, disputed the disallowance of Rs. 30,05,398/- made by the Assessing Officer (AO) u/s 40(a)(ia) for non-deduction of TDS u/s 194C(2). The AO contended that payments to seven parties were for sub-contracts, requiring TDS deduction. The assessee argued these were rental payments for machinery, not sub-contracts, and thus not subject to TDS u/s 194C. The Tribunal found that the payments were indeed rent for machinery use, not sub-contracts, and since TDS on rent was required only from 01.06.2007, the disallowance was not justified. The Tribunal allowed the appeal, deleting the disallowance of Rs. 30,05,398/-.

Issue 2: Disallowance u/s 40(a)(ia) for non-deduction of TDS on transportation charges

The assessee contested the disallowance of Rs. 60,30,480/- for non-deduction of TDS on transportation charges. The AO viewed these as contractual payments requiring TDS. The assessee clarified that the payments were for materials delivered by suppliers using their own trucks, and no separate transportation charges were paid. The Tribunal, agreeing with the assessee, found no evidence of separate transportation payments and held that the provisions of section 194C(2) were not applicable. The disallowance of Rs. 60,30,480/- was deleted.

Issue 3: Disallowance of expenses on running, maintenance, and depreciation of car

The assessee challenged the disallowance of Rs. 75,000/- out of total car-related expenses of Rs. 2,64,862/-. The AO and CIT(A) suspected personal use of the car. The Tribunal acknowledged the business use of the car but agreed that personal use could not be ruled out. The disallowance was reduced to Rs. 40,000/-.

Issue 4: Charging of interest u/s 234B

The assessee disputed the charging of interest u/s 234B, arguing non-liability to advance tax. The Tribunal noted this issue as consequential and did not require specific adjudication.

Conclusion:

The appeal was allowed in part, with significant deletions in disallowances and a reduction in the disallowance for car expenses. The Tribunal's decision was pronounced in the open court on 12/08/2011.