2016 (4) TMI 643 - AT - Income Tax

Disallowance of expenses - Held that - The lower authorities had not pointed out specific defects in claiming of expenses under all the heads. They made general observations. It is also a fact that under these heads, full bills cannot be obtained from the service provider, which is not verifiable. Therefore, in the interest of the justice, we restrict this addition @ 5%. - Decided in favour of assessee partly Disallowance u/s 40(a)(ia) - Held that - It is undisputed fact that the assessee paid all the interest during the year, which was not payable on 31st March, 2007, therefore, by following the Hon ble Allahabad High Court decision in the case CIT Vs. M/s Vector Shipping Services Pvt. Ltd.(2013 (7) TMI 622 - ALLAHABAD HIGH COURT ) and this Bench decision in various cases we delete the disallowance - Decided in favour of assessee

Summary

Issues:
1. Disallowance of expenses under different heads.
2. Disallowance of interest under Section 40(a)(ia) of the Income Tax Act.

Issue 1 - Disallowance of Expenses:
The appeal concerns the disallowance of expenses amounting to &8377; 1,74,575, being 10% of total expenses, by the Assessing Officer. The disallowance was based on the grounds of self-made vouchers and personal expenses not being verifiable. The CIT(A) partially allowed the appeal by restricting the addition to 10%. The appellant argued that all expenses were incurred for business purposes, and the Assessing Officer did not point out any specific defects. The Tribunal noted that full bills could not be obtained for these expenses and restricted the addition to 5%, directing the Assessing Officer to recalculate the disallowances.

Issue 2 - Disallowance of Interest under Section 40(a)(ia):
The second ground of appeal pertains to the disallowance of &8377; 15,79,723 under Section 40(a)(ia) for non-deduction of TDS on interest payments to NBFCs. The Assessing Officer held that the disallowance was justified as TDS was not deducted on the interest paid. The CIT(A) confirmed the addition, citing various judicial decisions that supported the disallowance. However, the appellant contended that the interest was paid and not payable, relying on specific case laws and arguing that the disallowance should not apply. The Tribunal, considering precedents and the specific facts of the case, deleted the disallowance of &8377; 15,79,723 under Section 40(a)(ia) of the Act.

In conclusion, the Tribunal partly allowed the assessee's appeal, deleting the disallowance of interest under Section 40(a)(ia) while restricting the disallowance of expenses under different heads to 5%.