2016 (6) TMI 691 - AT - Income Tax

TDS u/s 194J - Non deduction of Tax at Source on consultancy & accounting charges - genuineness of expenses - Held that - Expenditure claimed by the assessee under the head consultancy & accounting charges does not represent the professional services as explained under section 194J of the Act. Merely the assessee has claimed the nomenclature under the head consultancy will not amount to professional services. No doubt the services given by the CA firm to its clients in the instant case amounts to professional services but the services availed by the firm from outside for the physical verification of stock do not amount to professional services. Hence the payments made are covered under the provisions of section 194C of the Act. We also further find that in none of the case, the payment has exceeded ₹ 50,000/-, We also find that 28 persons had made representation before Income Tax Authority and the ld. AR has submitted the copies of income tax returns along with PAN of various persons. We accordingly, considering the totality of the facts of the present case, we are inclined to reverse the orders of Authorities Below. - Decided in favour of assessee Disallowance out of office expense - Held that - Assessee has shown reimbursement of expense for an amount of ₹ 8,39,858/- exactly as against the receipt of ₹ 8,39,858.00. The AO during the assessment proceeding observed that in support of the expenditure self-made vouchers were available and in some cases there was no voucher available. The AO accordingly opined that personal expense cannot be ruled out and he made the addition @ 20% at ₹ 8,39,858/- which was reduced by Ld. CIT(A) at 10%. From the facts of the case, we find that AO has not brought out any specific ground so as to disallowing the expense as claimed in assessee s profit and loss a/c. He has disallowed the expenses on ad hoc basis without appreciating the fact that income shown by assessee in the form of reimbursement of expense and expenditure claimed in the form of reimbursement expenses are equal. Therefore, in our considered view, the question of having any income out of reimbursement of expense does not arise. Therefore, we are inclined to reverse the orders of Authorities Below - Decided in favour of assessee

Issues Involved:
1. Confirmation of the addition of ?12,57,040/- for hiring charges.
2. Disallowance of ?12,57,040/- for the services taken.
3. Disallowance of ?9,71,000/- paid to 20 persons.
4. Disallowance of ?2,86,040/- without finding it non-genuine.
5. Disallowance of ?2,33,652/- for hiring charges to 7 parties.
6. Disallowance of 10% of pocket expenses amounting to ?8,39,858/-.

Issue-wise Detailed Analysis:

1. Confirmation of the addition of ?12,57,040/- for hiring charges:
The assessee, a Chartered Accountants firm, claimed an expense of ?15,12,750/- under "Consultancy & Accounting charges." The Assessing Officer (AO) disallowed ?12,57,040/- due to non-deduction of Tax at Source (TDS) under Section 194J of the Income Tax Act, 1961, and questioned the genuineness of expenses. The assessee argued that the payments were for clerical work, not professional services, and thus fell under Section 194C, not Section 194J. The CIT(A) upheld the AO's decision, doubting the genuineness of the expenses and the non-technical nature of the services.

2. Disallowance of ?12,57,040/- for the services taken:
The assessee contended that the payments were made to non-qualified personnel for clerical tasks like counting and recording stock, not requiring professional skills. The CIT(A) rejected this, stating that many recipients were CA/CS/ICWA students, thus professional services under Section 194J. The Tribunal found that the services rendered did not qualify as professional services under Section 194J and were instead covered under Section 194C. It was noted that no individual payment exceeded ?50,000/-.

3. Disallowance of ?9,71,000/- paid to 20 persons:
The AO disallowed ?9,71,000/- paid to 20 persons due to non-compliance with TDS provisions and lack of supporting documents. The Tribunal observed that 28 out of 30 persons had made representations before tax authorities, thus confirming the genuineness of transactions. The Tribunal reversed the disallowance, noting that the services were not professional under Section 194J.

4. Disallowance of ?2,86,040/- without finding it non-genuine:
The CIT(A) disallowed ?2,86,040/- without specific findings of non-genuineness. The Tribunal found that the possibility of non-submission of documents in a few cases does not justify the disallowance, given the overall genuineness of transactions.

5. Disallowance of ?2,33,652/- for hiring charges to 7 parties:
The CIT(A) disallowed ?2,33,652/- paid to 7 parties despite their appearance before tax authorities confirming receipt of hiring charges. The Tribunal reversed this disallowance, emphasizing the genuineness of transactions.

6. Disallowance of 10% of pocket expenses amounting to ?8,39,858/-:
The AO disallowed 20% of ?8,39,858/- claimed as reimbursement expenses, citing self-made vouchers and lack of supporting documents. The CIT(A) reduced this to 10%. The Tribunal found that the expenses matched the reimbursement income and were justified, reversing the disallowance entirely.

Conclusion:
The Tribunal allowed the appeal, reversing the disallowances made by the AO and CIT(A), and directed the AO accordingly. The Tribunal emphasized the non-professional nature of the services under Section 194C and the genuineness of the transactions based on representations made by the involved parties.

← Previous Next →