2018 (11) TMI 1738 - AT - Income Tax

Bogus remuneration paid - disallowance u/s.40(a)(ia) of the Act as the payment was made to contractors or to the supervisors - HELD THAT - We find that the CIT(A) while dealing with the disputed issue has observed that even if income has not been shown by the Directors is considered, the addition should have been resorted in respective hands of Directors and not in the hands of assessee's company and deleted the addition. Payment made to labour without deducting TDS - HELD THAT - Do not find in disallowance made by the AO as the payment has not been made to any contractors but to Supervisor to monitor the work and to make labour payment. Hence section 194C does not attract in this case and therefore consequential disallowance u/s 40(a)(ia) is also not attracted. Disallowance under the head Architect Drawing MAP Approval - HELD THAT - AO has observed that ₹ 3,80,000/- has been debited by the assessee under the head Architect Drawing MAP approval, and disallowed same, however, on calculation of 10% disallowance of the total expenditure of ₹ 6,10,410/-, the AO has wrongly mentioned as ₹ 3,38,000/- instead of ₹ 3,80,000/-. The CIT(A) has also overlooked the same. Therefore, we restore this disputed issue to the file of Assessing Officer for a limited purpose and direct the Assessing Officer to consider the actual expenses. Interest u/s. 234B - HELD THAT - As relying on AJAY PRAKASH VERMA 2013 (1) TMI 140 - JHARKHAND HIGH COURT direct the AO to recomputed the interest u/s.234B on the basis of total income declared by the assessee in the return filed.

Issues Involved:
1. Deletion of addition of ?15,76,180/- for remuneration paid.
2. Deletion of addition of ?2,15,01,768/- for labor payment without TDS.
3. Deletion of addition of ?6,89,541/- for material purchase.
4. Relief of ?71,128/- out of addition of ?6,10,411/-.
5. Deletion of addition for Architect & MAP approval expenses.
6. Charging of interest u/s 234A & 234B.

Detailed Analysis:

1. Deletion of Addition of ?15,76,180/- for Remuneration Paid:
The Revenue contended that the remuneration paid was excessive and that the CIT(A) overlooked the findings of the Assessing Officer (AO). The CIT(A) observed that even if the directors did not show the income under the head salary, the addition should have been made in the hands of the directors and not the assessee company. The CIT(A) stated, "So far section 40(a)(ia) is concerned, the same is not applicable. Hence the assessee's explanation on the line of section 40(a)(ia) is not proper."

2. Deletion of Addition of ?2,15,01,768/- for Labor Payment Without TDS:
The AO inferred that certain individuals were contractors and not supervisors, thus requiring TDS. The CIT(A) found that the individuals were supervisors, not contractors, and thus, section 194C did not apply. The CIT(A) stated, "Based on above, I do not find in disallowance made by the AO as the payment has not been made to any contractors but to Supervisor to monitor the work and to make labour payment."

3. Deletion of Addition of ?6,89,541/- for Material Purchase:
The CIT(A) granted partial relief of ?71,128/- out of the total addition of ?6,10,411/-. The CIT(A) noted, "So far disallowance of ?3,80,000/- and ?2,01,282/- is concerned, the AO has inferred is correct. So far disallowance of 10% of expenses of ?7,11,280/- at ?71,128/- is concerned is not proper."

4. Relief of ?71,128/- Out of Addition of ?6,10,411/-:
The CIT(A) found that the disallowance of 10% of expenses amounting to ?71,128/- was not proper and granted relief accordingly.

5. Deletion of Addition for Architect & MAP Approval Expenses:
The AO disallowed certain expenses under the head Architect Drawing & MAP Approval, finding discrepancies in the ledger. The CIT(A) overlooked the discrepancies and sustained the addition. The Tribunal restored the issue to the AO for reconsideration, stating, "Therefore, we restore this disputed issue to the file of Assessing Officer for a limited purpose and direct the Assessing Officer to consider the actual expenses."

6. Charging of Interest u/s 234A & 234B:
The assessee challenged the charging of interest on the assessed income. The Tribunal referred to the jurisdictional High Court's decision, which held that interest u/s 234A and 234B should be charged on the returned income, not the assessed income. The Tribunal directed the AO to recompute the interest accordingly, stating, "We respectfully following the decision of the jurisdictional High Court and the decision of coordinate bench of the Tribunal direct the AO to recomputed the interest u/s.234B on the basis of total income declared by the assessee in the return filed."

Conclusion:
The Tribunal upheld the CIT(A)'s order on most grounds, dismissing the Revenue's appeal. The cross-objection by the assessee was allowed for statistical purposes, directing the AO to reconsider specific issues and recompute interest as per the jurisdictional High Court's decision. The appeal of the Revenue was dismissed, and the cross-objection of the assessee was allowed for statistical purposes.

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