2015 (7) TMI 1303 - AT - Income Tax

TDS u/s 194C - assessee s receipts were below audit limit u/s 44AB - tds liability - Held that - Because the provisions of section 194C as it stood prior to 01.06.2008 provided that in case of individual or HUF whose total sales, gross receipts or turnover from business or profession does not exist monetary limits specified u/s 44AB during the financial year immediately preceding the financial year in which such sums is credited or paid then he has no liability to deduct income tax u/s 194C(2). It is has not been rebutted that assessee s turnover in the immediately preceding financial year had not exceeded monetary limit specified u/s 44AB and this fact also gets strengthen by the order of the Tribunal as relied by the Ld. Counsel. Accordingly, the assessee was not liable to deduct TDS, therefore, no disallowance u/s 40(a)(ia) can be made. Thus Ground no. 1, as raised by the assessee is allowed. Ad-hoc disallowance on account of salary and various other expenses - Held that - We find that disallowances has been made on ad-hoc basis whereby 50% of the salary has been disallowed. The assessee in the paper book has filed details of employees giving their designations and addresses to whom the salary was paid during the year. If such details are on record which has not been rebutted, then no ad-hoc disallowance on account of salary can be made. Accordingly, the disallowance under the head salary stands deleted. Disallowance of depreciation - Held that - Disallowance made by the Assessing Officer and confirmed by the CIT(A) are slightly excessive looking to the nature of expenses, therefore, we restrict the disallowance at 10%. The assessee will get part relief on this score. 10. Regarding disallowance on depreciation on computers, we find that the same was made on the ground that computers were put to use after September, 2006 therefore, disallowance have been made for half of the year instead and full year as claimed by the assessee. This finding of fact as recorded by CIT(A) and AO has not been rebutted because, therefore, such a finding of the CIT(A) confirming the said disallowance is affirmed.

Summary

Issues involved:
1. Disallowance under section 40(a)(ia) for non-deduction of TDS.
2. Ad-hoc disallowance of salary and various expenses.
3. Disallowance of depreciation on computers.

Detailed Analysis:
1. Disallowance under section 40(a)(ia) for non-deduction of TDS:
The cross-appeals were filed against the order passed by CIT(A)-33, Mumbai, for the assessment year 2007-08. The assessee challenged three issues, including disallowance under section 40(a)(ia) of Rs. 1,28,09,141. The Assessing Officer noted that the assessee had not deducted tax on payments under "commission and freight income," which the assessee was liable to deduct under section 194C. The assessee argued that as their receipts in the previous year were below the audit limit under section 44AB, there was no default under section 194C. The Tribunal's previous order supported this argument. The ITAT found that the assessee was not liable to deduct TDS under section 194C due to turnover limits specified under section 44AB. Consequently, disallowance under section 40(a)(ia) was not applicable, and the ground raised by the assessee was allowed.

2. Ad-hoc disallowance of salary and various expenses:
The Assessing Officer had made ad-hoc disallowance on salary and other expenses, which was confirmed by CIT(A). The ITAT considered the details provided by the assessee, including employee details and addresses, and found that no ad-hoc disallowance on salary should be made if the details were on record and not rebutted. Therefore, the disallowance under the head of salary was deleted. Regarding ad-hoc disallowance on various expenses, the ITAT found the disallowances slightly excessive and restricted the disallowance to 10%, providing partial relief to the assessee.

3. Disallowance of depreciation on computers:
The disallowance of depreciation on computers was made as they were put to use after September 2006. The ITAT affirmed the finding of the CIT(A) and Assessing Officer, leading to the dismissal of the ground on this issue. The ITAT partially allowed the appeal of the assessee and dismissed the appeal of the revenue in the final judgment delivered on 24th July 2015.