9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (4) TMI 666 - AT - Income TaxDisallowance of freight expenses u/s 40(a)(ia) - non-deduction of TDS u/s 194C - non-furnishing of the PAN to the prescribed income tax authority within the prescribed time - as per assessee transporters had furnished their PAN Nos, therefore the TDS was not deducted - HELD THAT - We note that the assessee has furnished the PAN of all the transport contractors before the ld. CIT-A. This fact can be verified from the submission of the assessee before the Ld. CIT (A) which is recorded on pages 6 and 7 of the order. Thus we are of the view that there is sufficient compliance of sub-section 6 of the section 194C. We note that the ITAT Ahmedabad in INCOME-TAX OFFICER, WARD 9 (4) , AHMEDABAD VERSUS ANDHRA ROADWAYS 2015 (7) TMI 1317 - ITAT AHMEDABAD has held that the non-furnishing of the PAN to the prescribed income tax authority within the prescribed time as per the provision of sub section 7 of the section 194C of the Act does not require to make the disallowance of the expenses The assessee has not furnished the copies of the PAN of the transport contractors to the AO during the assessment proceedings, we note that the Revenue has not challenged this fact/issue by filing an appeal to the tribunal. Thus it appears that the Revenue is not aggrieved on account of non-furnishing of PAN to the AO during the assessment proceedings. Therefore, we are not inclined to entertain the argument of the DR as discussed above. We are not impressed with the finding of the CIT-A. Accordingly, we reverse the same and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Addition u/s 14A - HELD THAT - There is no dispute about the fact that the own fund of the assessee exceeds the amount of investment. Therefore in our considered view presumption can be drawn that there was no investment in the shares out of the borrowed fund. Therefore there cannot be any question for any disallowance on account of interest expenses. In holding so, we find support and guidance from case of Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT . We hold that no disallowance of interest expense claimed by the assessee can be made on account of investments as discussed above. Hence, we reverse the order of the authorities below. The AO is directed to delete the addition made by him. Regarding the administrative expenses, we note that the AO has derived his satisfaction for making the disallowance under the provisions of section 14A read with rule 8D - the assessee has not furnished any details suggesting that it has not incurred any expense in relation to such income. Thus in the absence of any working from the side of the assessee, the AO had no alternative except to resort to the provisions of section 14A read with rule 8D of Income Tax Rules. Thus we confirm the disallowance of the administrative expenses made by the authorities below. Hence the ground of appeal of the assessee is partly allowed. Disallowance of repairing expenses - nature of expenditure - revenue or capital expenditure - HELD THAT - The authorities below have not brought anything on record suggesting that there were some new assets formed out of such expenses or the assessee derived some benefit of enduring nature. Thus, we are of the view that such expenditure cannot be termed as capital in nature merely on the ground that it will generate enduring benefit to the assessee. See COMINCO BINANI ZINC LIMITED 1992 (2) TMI 11 - CALCUTTA HIGH COURT . Addition u/s 145A by increasing the closing stock for CENVAT receivable - difference between opening and closing stock on account of CENVAT/VAT - HELD THAT - There is no ambiguity that the assessee has been following the exclusive method of accounting. However, the assessee to comply the provisions of section 145A of the Act has given the effect of CENVAT/VAT in the opening stock, and closing stock in the statement of income. Thus, we can safely conclude that though the assessee is following the exclusive method of accounting which is contrary to the provisions of section 145A but the effect of the same has been duly considered by the assessee in its computation of income. We do not concur with the view of the Ld. CIT(A) and accordingly direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.
Issues Involved:
1. Disallowance under Section 40(a)(ia) of the Income Tax Act for non-deduction of TDS. 2. Addition under Section 14A of the Income Tax Act. 3. Disallowance of building repair expenditure as capital expenditure. 4. Addition under Section 145A of the Income Tax Act. Detailed Analysis: 1. Disallowance under Section 40(a)(ia) of the Income Tax Act for non-deduction of TDS: The issue pertains to the disallowance of ?14,59,857/- on account of non-deduction of TDS under Section 194C read with Section 40(a)(ia) of the Act. The assessee, a private limited company engaged in the manufacturing and trading of chemicals, claimed freight expenses paid to various parties without deducting TDS. The assessee argued that the transporters provided their PAN numbers, making TDS provisions inapplicable. However, the CIT(A) disagreed, noting the lack of evidence proving payments to transport contractors and the exceeding of the ?75,000/- limit. The Tribunal observed that the assessee had furnished the PAN of all transport contractors and complied with Section 194C(6). Citing the ITAT Ahmedabad decision in ITO v/s Andhra Roadways, it was noted that non-furnishing of PAN to the prescribed authority is a procedural formality and does not necessitate disallowance. Thus, the Tribunal reversed the CIT(A)'s order and directed the AO to delete the addition. 2. Addition under Section 14A of the Income Tax Act: The assessee contested the addition of ?1,56,498/- under Section 14A. The AO invoked Section 14A read with Rule 8D, disallowing the amount due to the assessee's failure to disallow any expenses against exempt dividend income. The CIT(A) upheld the AO's decision, stating the assessee failed to demonstrate that borrowed funds were not used for investments. The Tribunal, however, noted that the assessee's own funds exceeded the investments, drawing a presumption that investments were made from interest-free funds. Citing judgments from the Bombay High Court (Reliance Utilities and Power Ltd. and HDFC Bank Ltd.) and the Gujarat High Court (UTI Bank Ltd.), the Tribunal held that no disallowance of interest expenses was warranted. However, the Tribunal upheld the disallowance of administrative expenses due to the lack of evidence from the assessee, confirming the AO's decision under Rule 8D. 3. Disallowance of building repair expenditure as capital expenditure: The assessee claimed repair expenses of ?14,37,772/- for factory building repairs, which the AO treated as capital expenditure. The CIT(A) confirmed the AO's decision, noting the use of trucks and tractors and the nature of suppliers indicating major repairs. The Tribunal, however, found no evidence of new assets being formed or enduring benefits derived. Citing judgments from the Calcutta High Court (CIT Vs. Cominco Binani Zinc Limited) and the Gujarat High Court (CIT Vs. Bharat Suryodaya Mills Co. Ltd.), the Tribunal held that the expenditure was revenue in nature and directed the AO to delete the addition. 4. Addition under Section 145A of the Income Tax Act: The issue involved an addition of ?18,91,764/- under Section 145A, including adjustments for CENVAT credit. The AO added the difference in CENVAT credit receivable and adjustments in opening and closing stock. The CIT(A) upheld the AO's decision, emphasizing the need for consistent accounting practices and the inclusion of CENVAT receivables in the closing stock. The Tribunal noted that the assessee consistently followed the exclusive method of accounting, making necessary adjustments for CENVAT/VAT in the statement of income. Citing the Gujarat High Court judgment in Pr.CIT vs. Gujarat Gas Company Ltd., the Tribunal held that the assessee complied with Section 145A provisions and directed the AO to delete the addition. Conclusion: The Tribunal allowed the assessee's appeal, reversing the CIT(A)'s findings on all issues. The order was pronounced on 29/03/2019 at Ahmedabad.
|
