2016 (6) TMI 324 - AT - Income Tax

TDS u/s 194C - payments on account of transportation expenses to the seven transporters w/o deduction on TDS - Held that - We find that this issue is covered by the decision of coordinate Bench of the Tribunal in the case of ITO vs. Bhadreh Yarh Traders 2014 (1) TMI 864 - ITAT AHMEDABAD wherein the Tribunal has decided the issue in favour of the assessee. Addition on account of household expenses - Held that - Looking to the cost inflation raised now a days for kitchen/domestic items, school fees for two children, book, copies and other incidental charges, clothing, social obligations/festivals etc., we are of the view that the ld. CIT (A) was fair enough to confirm the estimation of household expenses made by the AO. We, therefore, confirm the order of ld. CIT (A). - Decided against assessee Disallowances on account of Telephone/Mobile expenses - Held that - The assessee has not maintained any details for usage of telephone/mobile. Therefore, personal use of telephone cannot be ruled out. It will be reasonable to make disallowance @ 10% of the expenses. We therefore restrict the disallowance to ₹ 2833/- - Decided partly in favour of assessee Disallowance on account of shop expenses - Held that - Looking to the facts and nature of business of the assessee, we do not find it reasonable to make disallowance of this petty amount of ₹ 5124/- on account of shop expenses. We, therefore delete the addition. - Decided in favour of the assessee. Disallowance out of Vehicle expenses/depreciation on vehicles - Held that - Since the assessee has not maintained log book/details in maintenance of these vehicles, therefore, personal use of the vehicles/car cannot be ruled out. Therefore, we are of the view that it will be reasonable to restrict the disallowance @ 10% which comes to ₹ 17,358/-. Assessee will get relief of balance amount.- Decided partly in favour of assessee

Summary

Issues Involved:
1. Disallowance of Transport expenses under Section 40(a)(ia) of the IT Act.
2. Addition on account of Household expenses.
3. Addition on account of Telephone/Mobile expenses.
4. Addition on account of Shop expenses.
5. Addition on account of Vehicle expenses and depreciation.

Issue-wise Detailed Analysis:

1. Disallowance of Transport Expenses under Section 40(a)(ia):

The AO disallowed transport expenses amounting to ?13,97,070/- due to non-deduction of TDS on freight payments to various transporters. The assessee argued that as per Section 194C(6), no TDS was required if the transporter’s PAN was furnished. The AO rejected this argument, noting the absence of PANs at the time of payment. The CIT (A) partly allowed the claim, confirming the disallowance for payments to two transporters whose PANs were not furnished, reducing the disallowance to ?4,30,710/-. The Tribunal found the issue covered by the ITAT Ahmedabad Bench decision in the case of ITO vs. Bhadreh Yarh Traders, concluding that if PANs are furnished, Section 40(a)(ia) does not apply. Thus, the Tribunal allowed the assessee's ground and deleted the disallowance.

2. Addition on Account of Household Expenses:

The AO added ?29,000/- to the assessee’s household expenses, estimating total expenses at ?1,20,000/- for a family of four, against the declared ?91,000/-. The CIT (A) confirmed this addition, considering the estimation reasonable. The Tribunal upheld the CIT (A)’s decision, agreeing that the estimation was fair given the cost inflation and family size.

3. Addition on Account of Telephone/Mobile Expenses:

The AO disallowed 20% of telephone/mobile expenses amounting to ?5,666/- due to the absence of detailed usage records, assuming personal use. The CIT (A) upheld this disallowance. The Tribunal, acknowledging the lack of detailed records, found a 10% disallowance reasonable, reducing the disallowance to ?2,833/-.

4. Addition on Account of Shop Expenses:

The AO disallowed 20% of shop expenses, amounting to ?5,124/-, due to non-verifiable handwritten vouchers. The CIT (A) upheld this disallowance. The Tribunal, considering the nature and turnover of the business, found the disallowance unreasonable and deleted the addition.

5. Addition on Account of Vehicle Expenses and Depreciation:

The AO disallowed 20% of vehicle expenses and depreciation, amounting to ?34,716/-, assuming personal use. The CIT (A) upheld this disallowance. The Tribunal, noting the absence of log books, found a 10% disallowance reasonable, reducing the disallowance to ?17,358/-.

Conclusion:

The Tribunal partly allowed the appeal, providing relief on several grounds by reducing or deleting disallowances, while upholding others based on the reasonableness of the AO’s and CIT (A)’s estimations. The decision emphasized the importance of maintaining proper records to substantiate business expenses and deductions.