2017 (5) TMI 790 - HC - Income Tax

Demurrage and warfage - Held that - ITAT correctly deleted the addition made by Assessing Officer holding that same was incurred by the assessee wholly or exclusively for the purpose of business. Shortage deduction - ITAT has deleted the addition holding that deduction is not covered under the penalty, but the expenses has been occurred during ordinary course of business. Addition of unloading charges - Held that - ITAT has deleted the addition stating that vouchers are self-contained, whereby, the vehicle trips have been entered and no further discrepancy has been pointed out by the Assessing Officer. Addition on account of vehicle maintenance expenses - Held that - ITAT has deleted the expenses holding that on perusal of copy of vehicle maintenance, ledger account filed in the paper book most of the expenses are on account of Tyres and Tubes of the Trucks and the assessee is involved in the business of material transportation services, therefore, expenses incurred on the vehicle kept for the business cannot be said to involve personal element. Addition of disallowances under section 40 (a) (ia) - TDS not deducted by the assessee under section 194 (I) - Held that - ITAT has deleted the addition holding that in the present case how the provisions of Section 194 (I) of the Act has been made applicable since the trucks hired by the assessee is not anyone of the components as provided under section 194 (I) of the Act. Section 194 (I) of the Act provides for deduction of Tax at source in case of payment towards rent. The rent can be that of land, building, machinery, plant, equipments, furniture or fittings. In the present case, the provision of 194 (I) of the Act is not applicable in view of the fact that trucks hired by the assessee is not anyone of the component as provided under section 194 (I) of the Act. Therefore, it was further held that addition is not permissible as provision of Section 40 (a)(ia) of the Act cannot be invoked. The findings of ITAT is based on due appreciation of documents and material available on record which cannot be found fault with.

Summary

Issues:
Appeal against ITAT order reversing findings on addition of ?80,70,861 for AY 2010-11.

Analysis:
The appellant, engaged in material transportation services, filed an income tax return for AY 2011-12 declaring total income of ?21,81,760. The Assessing Officer made additions totaling ?80,70,861, leading to a total income assessment of ?1,02,52,620. The additions included demurrage, warfage expenses, shortage deduction, unloading charges, vehicle maintenance expenses, and disallowance under section 40(a)(ia) for failure to deduct TDS. The Commissioner of Income Tax (Appeals) confirmed the assessment, prompting the appellant to appeal before the ITAT. The ITAT, in its order dated 08/08/2016, deleted the additions, leading to the present appeal before the High Court.

The ITAT, in its order, extensively addressed each issue raised by the Assessing Officer. It found that demurrage and warfage expenses were incurred wholly and exclusively for business purposes, hence not liable for addition. Similarly, shortage deductions were considered part of ordinary business expenses and not subject to penalty. The ITAT also noted that unloading charges were supported by self-contained vouchers, with no discrepancies identified by the Assessing Officer. Regarding vehicle maintenance expenses, the ITAT found most expenses related to business-related items like Tyres and Tubes, not involving personal elements. Additionally, the ITAT held that the provision of section 194(I) of the Act, requiring TDS deduction for rent payments, was not applicable to the trucks hired by the appellant. Consequently, the ITAT deleted the disallowance under section 40(a)(ia) of the Act.

Upon review, the High Court found that the ITAT's decision to delete the additions was based on a thorough evaluation of the available material and documents. The court noted that the appellant's counsel failed to identify any substantial question of law in the appeal. Consequently, the court dismissed the appeal, ruling it devoid of merit and not warranting interference. No costs were awarded in the judgment.