2015 (4) TMI 148 - AT - Income Tax

Disallowance u/s.40(a)(ia) due to no TDS - no moneys outstanding at the end of the year - Non deduction of TDS on payment actually made to the sub-contractors - civil construction - Held that - Issue regarding inapplicability of section 40(a)(ia) in respect of amounts paid during the year stands concluded against the assessee in the case of CIT vs. Sikandar Khan N. Tunvar 2013 (5) TMI 457 - GUJARAT HIGH COURT and CIT vs. Crescent Export Syndicate 2013 (5) TMI 510 - CALCUTTA HIGH COURT . View taken by the Special Bench of this Tribunal in Merilyn Shipping & Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) stands rejected by the judgement of Hon ble Gujarat High Court in the case of CIT vs. Sikandar Khan N.Tunvar(supra) and CIT vs. Crescent Export Syndicate (supra). In this view of the matter and bearing in mind the fact that neither there is any decision of any of Hon ble High Court in favour of the assessee, on this issue, nor we do not have the benefit of any guidance of Hon ble jurisdictional High Court on this issue, we are bound by the specific views expressed by Hon ble Gujarat High Court and by the Hon ble Calcutta High Court rather than a long drawn inference from the judgement of Hon ble Allahabad High Court in the case of CIT vs. Vector Shipping Services Pvt. Ltd. (2013 (7) TMI 622 - ALLAHABAD HIGH COURT) . - Decided against assessee. Disallowances of certain expenses - Held that - The hyper technical approach adopted by the A.O. is thus does not appeal to us. We delete the disallowance of ₹ 25,400/- in respect of repairs and maintenance expenses, in respect of prepaid insurance of vehicle and machinery, in respect of printing and stationery expenses. As for the disallowance of ₹ 46,700/- which is made on account of expenses being personal in nature, we see no reasons to interfere in the same. Accordingly, to that extent disallowances are confirmed. - Decided partly in favour of assessee.

Summary

Issues:
1. Disallowance of payment to sub-contractors under section 40(a)(ia) of the Income Tax Act.
2. Adhoc disallowances of certain expenses.

Analysis:

Issue 1: Disallowance of payment to sub-contractors under section 40(a)(ia) of the Income Tax Act:
- The assessee challenged the disallowance of Rs. 5,45,000 made under section 40(a)(ia) for payments to sub-contractors without tax deductions.
- The CIT(A) confirmed the disallowance as tax was not deducted on the payments.
- The assessee argued citing a High Court judgment and a Tribunal decision that disallowance applies only to outstanding sums at year-end.
- The Tribunal noted conflicting decisions but relied on Gujarat and Calcutta High Court judgments to confirm the disallowance.
- The Tribunal rejected the assessee's arguments and upheld the disallowance of Rs. 5,45,000.

Issue 2: Adhoc disallowances of certain expenses:
- The AO disallowed expenses like repairs, maintenance, diesel, petrol, machinery, office, and miscellaneous expenses based on various grounds.
- The CIT(A) upheld most disallowances except for diesel, petrol, and office expenses.
- The Tribunal found most disallowances based on conjecture and surmise, deleting disallowances for repairs, maintenance, prepaid insurance, and printing expenses.
- However, the disallowance for personal nature expenses was confirmed.
- The Tribunal partly allowed ground no.3, deleting some disallowances but confirming others.
- Overall, the appeal was partly allowed based on the detailed analysis of each expense category.

In conclusion, the Tribunal addressed the issues of disallowance of payments to sub-contractors and adhoc disallowances of certain expenses under the Income Tax Act, providing a thorough analysis of legal precedents and factual considerations to arrive at its decision.