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2021 (12) TMI 232 - HC - Income TaxTDS u/s 194C - addition u/s 40(a)(ia) - Non deduction of TDS on payments made to various transporters, this included the freight inward charges and clearing and forwarding charges - HELD THAT - As relying on VALIBHAI KHANBHAI MANKAD 2015 (1) TMI 203 - SC ORDER assessee company has not deducted the TDS of payment made to the transporters as per sub-section(6) of section 194(c). However, the details of the transporters have been filled-in in the TDS return, wherein their PAN cards also have been duly submitted to the Income-tax authorities, as this is a sufficient compliance of sub-section (7) of section 194(c). The Tribunal was absolutely correct in upholding the version of the assessee. It also rightly held that after obtaining the PAN Card from the transporters, assessee is needed to furnish the same in the prescribed form to the prescribed authority within prescribed time. Tribunal held that there is no prescribed authority nominated under the provisions of law. Thus, in absence of such prescribed authority, no fault was attributed to the assessee obviously for not filing the details before such authority. The details filed by the respondent assessee along with Form No.26 naturally could be construed as sufficient compliance. No fault can be found with these detailed findings and the settled position of law. - Decided in favour of assessee. Disallowance of commission expenses - Assessing Officer has treated as non-genuine commission claimed by the assessee given to M/s. C.M. Smith and Sons Ltd.- HELD THAT - We notice that the Assessing Officer chose not to exercise its powers under section 131/133(6) of conducting the investigation or enquiries. Tribunal has rightly observed that on surmises and conjectures, AO has chosen to make disallowance. This Court in the case of Voltamp Transformers Pvt. Ltd. vs. CIT 1980 (10) TMI 35 - GUJARAT HIGH COURT has left it to the concerned assessee to decide its commercial expediency and business needs. Ordinarily, a business person would alone decide as to in what manner it would seek to hire the service of the commission agent. Merely because, the doubt was created by the Assessing Officer only on the premises that two of the companies were already being served by the respondent assessee and the sales were made in the past, it chose to disallow the commission, is not a sustainable premise. If there was any question with regard to genuineness of the transaction further inquiry or investigation is permissible under the law and in absence thereof, doubting agreement or financial statement of the agent was impermissible, much less, disallowing the commission without appreciating business expediency.
Issues Involved:
1. Deletion of disallowance under Section 40(a)(ia) of the Income Tax Act. 2. Deletion of disallowance of commission expenses. Detailed Analysis: Issue 1: Deletion of Disallowance under Section 40(a)(ia) of the Income Tax Act 1. Background: The appellant challenged the Income Tax Appellate Tribunal's decision, which deleted the disallowance of ?1,38,350 made under Section 40(a)(ia) for non-compliance with Sections 194C(6) and (7). The respondent assessee had filed a return declaring a total income of ?8,65,92,110. The case was selected for scrutiny, and it was found that the assessee did not deduct TDS for payments made to transporters. 2. Assessing Officer's Decision: The Assessing Officer disallowed the expenses under Section 40(a)(ia) because the assessee did not deduct TDS as required under Section 194C. The assessee contended that TDS was not required as per Clause 6 of Section 194C and that PAN details of the transporters were provided. 3. CIT(Appeals) and Tribunal: The CIT(Appeals) deleted the addition for transportation charges but confirmed the disallowance for forwarding charges. The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, holding that the assessee's compliance with Section 194C(6) and (7) was sufficient. 4. High Court's Analysis: The High Court referenced the case of "Commission of Income-tax-I vs. Valibhai Khanbhai Mankad" and concluded that once the conditions of the proviso to Section 194C(3) are satisfied, the liability to deduct TDS ceases. The High Court also cited "Commissioner of Income Tax, Madurai vs. Sri Parameshwari Spinning Mills(P.)Ltd." to support that non-filing of statements under Section 194C(7) does not negate the benefit under Section 194C(6). 5. Conclusion: The High Court upheld the Tribunal's decision, stating that the assessee had complied with the requirements by submitting PAN details and that there was no prescribed authority for filing these details. Thus, the disallowance under Section 40(a)(ia) was rightly deleted. Issue 2: Deletion of Disallowance of Commission Expenses 1. Background: The appellant challenged the Tribunal's decision to delete the disallowance of ?55,14,372 in commission expenses. The Assessing Officer deemed the commission paid to M/s. C.M. Smith and Sons Ltd. as non-genuine. 2. Assessing Officer's Decision: The Assessing Officer argued that the commission was not justified as the parties involved were old customers, and there was no need for a commission agent. The agreement was considered insufficient evidence. 3. CIT(Appeals) and Tribunal: The CIT(Appeals) deleted the disallowance, noting that both companies were taxed at the same rate and the agent had shown substantial income. The Tribunal upheld this, emphasizing that the onus was on the Assessing Officer to disprove the genuineness of the commission expenses. 4. High Court's Analysis: The High Court referenced the case of "Voltamp Transformers Pvt. Ltd. vs. CIT" to assert that business decisions regarding commission payments are at the discretion of the assessee. The High Court found that the Assessing Officer had not conducted adequate inquiries and had based the disallowance on surmises and conjectures. 5. Conclusion: The High Court upheld the Tribunal's decision, stating that the Assessing Officer's doubts were insufficient for disallowance without further inquiry. The commission expenses were deemed genuine and necessary for business purposes. Final Judgment: The High Court dismissed the appeal, affirming the Tribunal's decisions on both issues, with no costs awarded.
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