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2013 (8) TMI 522 - AT - Income TaxExpenses not allowed for non-deduction of TDS u/s 40(a)(ia) - Assessee is a partnership firm and is an agent of M/s Maruti Udyog Ltd. and its business is sales, servicing and managing a workshop for maintenance of vehicle - Assessee had incurred an expenditure of Rs.29,70,172/- and Rs.11,31.388/- under the heads denting and painting expenses and free service charges - No TDS was deducted against denting and painting expenses and free service charges payments Held that - Relying upon the judgment in the case of Hero MotoCorp. Ltd. Vs. Addl. CIT in ITA No. 1980/D/2012, it is held that dealer has not rendered technical services as contemplated u/s 194J to the assessee for which the assessee paid a particular amount to the dealer and non-deduction of tax at sources on such payments does not attracts disallowance u/s 40(a) (ia) Provisions of 194J are not applicable. Regarding applicability to section 194C Held that - Individual payments were not exceeding Rs.50,000/- and, therefore, provisions of section 194C are also not applicable Decided against the Revenue.
Issues Involved:
1. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act for non-deduction of TDS on denting and painting expenses. 2. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act for non-deduction of TDS on free service charges. Issue-wise Detailed Analysis: 1. Deletion of Addition on Denting and Painting Expenses: The Revenue appealed against the deletion of an addition of Rs. 29,17,172/- made by the Assessing Officer (AO) under Section 40(a)(ia) of the Income Tax Act due to non-deduction of TDS on denting and painting expenses. The AO observed that the assessee had incurred expenses under this head but had not deducted TDS. The assessee clarified that these expenses related to daily wages, material purchases, and not payments to other dealers, thus TDS was not applicable. The AO was not satisfied and made a disallowance. Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] examined the submissions and remand report and concluded that the denting and painting services were conducted in-house, involving raw material purchases and payments to employees, not constituting a work contract. Hence, Section 194C was not applicable. The CIT(A) deleted the addition, holding that the non-deduction of TDS did not warrant disallowance under Section 40(a)(ia). 2. Deletion of Addition on Free Service Charges: The Revenue also appealed against the deletion of an addition of Rs. 11,31,388/- made by the AO under Section 40(a)(ia) for non-deduction of TDS on free service charges. The AO noted that the assessee did not furnish party-wise details and did not produce books of accounts, leading to the disallowance. The assessee explained that these expenses were payments to other Maruti dealers for servicing vehicles sold by the assessee, which did not attract TDS. The CIT(A) agreed with the assessee, stating that free service charges did not fall under the ambit of Sections 194C/194J, and thus, TDS was not warranted. The CIT(A) deleted the addition, supporting the argument with the case of Hero MotoCorp. Ltd. vs. Addl. CIT, which clarified that free service obligations embedded in the sale price of vehicles did not constitute technical services under Section 194J. Tribunal's Decision: The Tribunal reviewed the material and arguments from both parties. It found that the AO's disallowance of Rs. 29,70,172/- was primarily due to the non-production of bills and vouchers. However, the CIT(A) had rightly deleted the addition, as the expenses were for raw materials and payments to employees, not contractual payments requiring TDS. For the addition of Rs. 11,31,388/-, the Tribunal noted that these were service charges paid to other dealers for free services, which did not involve technical services under Section 194J. The Tribunal upheld the CIT(A)'s decision, stating that individual payments did not exceed Rs. 50,000/-, making Section 194C inapplicable. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of additions made under Section 40(a)(ia) for non-deduction of TDS on denting and painting expenses and free service charges. The Tribunal found no infirmity in the CIT(A)'s order, concluding that the provisions of Sections 194C and 194J were not applicable to the assessee's case.
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