2015 (4) TMI 543 - AT - Income Tax

Unexplained cash credit u/s.68 - CIT(A) deleted the addition - Held that - Amount of ₹ 1,00,000/- received from Nanak Sadi Centre and ₹ 2,50,000/- received from Nilkanth Industries was not found cash credits but repayment received from them towards advances made to them on earlier dates. In this background, CIT(A) was convinced from the explanation given by assessee that amounts represent advance repayments from Nanak Sadi Centre and Nilkanth Industries and fully explained and held that in these circumstances, provisions of Section 68 of the Act are not attracted and accordingly, he rightly directed the Assessing Officer to delete the addition in question. This reasoned finding of CIT(A), needs no interference from our side. - Decided against revenue. Disallowance u/s 40(a)(ia) r.w.s 194J - non deduction of TDS while making payment - Held that - Held that - As regards to payment of ₹ 3,62,440/- made to MohMangal Carting Contractor, assessee has hired Hydraulic Trucks for carting boulders from explosion sites to the crushers sites for making metals etc. Payments were made on regular basis. In case of Associated Cement Ltd. (1993 (3) TMI 1 - SUPREME Court) was in connection with any work and on income comprised therein in Section 194C(1) of the Act. CIT(A) distinguishing the case law has rightly confirmed the addition made by Assessing Officer invoking the provisions of Section 40(a)(ia) of the Act. - Decided against assessee. In respect of payment to MohMangal Carting Contractor of ₹ 3,63,440 towards moving matter from mine to crusher-machine and crushed metal from crusher to storage place. In facts and circumstances, Assessing Officer was justified in invoking provision of Section 194C for making disallowance under the provisions of Section 40(a)(ia). Same is upheld because assessee hired Hydraulic Trucks for carting boulders from explosion sites to the crushers sites for making metals etc. - Decided against assessee. Payment made to Ramaiya Compressorwala and Ladubhai Compressorwala, payments were for hire or rent charge for equipment like compressor only. CIT(A) having considered the submission of assessee observed that assessee has been hiring equipment from year to year and the payments are made on regular basis even if no written agreement exists between the contractor and contractee. The equipment is specialized one hired for the drilling work. Hiring of such equipment and payment on such hiring squarely falls within the scope of Section 194C. In view of above, CIT(A) confirmed the order with regard to above payments, disallowed by Assessing Officer by invoking provision of Section 40(a)(ia). This factual and reasoned finding of CIT(A) needs no interference. - Decided against assessee. Disallowance of payment made for accounting work, Audit fees and Income Tax fees payable, provision made during the year is nothing but amount credited is exigible to TDS. Therefore, only amount of ₹ 15,000/- provision made on 31.03.2006 for fees to be paid for the year concerned i.e. A.Y.2006-07 may attract TDS liability and amount paid ₹ 15,000/- fees accrued for earlier year and paid in the year 2006-07 was not exigible to TDS. Provision made of ₹ 15,000/- fees payable to Income Tax Consultant on 31.3.2006 for the A.Y. 2006-07 which was understood as credited in any other name, is exigible to TDS but being below ₹ 20,000/, no TDS was required to be made. Regarding Accounting fees, amount of ₹ 20,000/- was shown payable on 01.4.2005 was the expenditure of earlier year and paid during the year is not expenditure but a discharging of liability which is not exigible to TDS Provision made of ₹ 20,000/- of Accounting fees for A.Y.2006-07 was as good as amount of fees payable for A.Y.2006-07. Amount of provision does not exceed ₹ 20,000/-, so, it was held not deductible to TDS and therefore non-deduction of Tax does not attract the provision of Section 40(a)(ia). In view of the above, CIT(A) agreed with the contention of assessee that payment made on this account is not subject provision of Section 40(a)(ia) of the Act. Accordingly, CIT(A) rightly directed the Assessing Officer to delete the additions made on this account. This reasoned finding of CIT(A) needs no interference - Decided against revenue. Addition u/s 40(A)(3) - payment exceeding ₹ 20,000/- at one time in a single day - CIT(A) deleted the addition - Held that - All the aforesaid Compressorwalas shown in para (6) of Assessment Order have not been paid amount exceeding ₹ 20,000/- per bill and therefore, provisions of Section 4oA(3) was not applicable. Further stand of assessee has been that payments were made to these persons also covered in Explanation clause of Rule 6DD of sub-rule(g) because payment is made in a village- Alipore, Degam, which on the date of such payment was not served by any bank to any person who ordinarily reside or carrying on any profession, business or vocation in any of village. Payees had no bank account at Alipore-Degam, therefore assessee was required to make payment in cash. In this background, CIT(A) was justified in directing the Assessing Officer to delete addition because application was within eligible limits. This reasoned finding of CIT(A) needs no interference - Decided against revenue. Disallowance of 10% and 5% out of various expenses - Held that - Assessing Officer made addition of ₹ 35,963/- being 10% out of above i to iv aggregate expenses of ₹ 3,59,633/- and made addition of ₹ 1,14,672/- being 5% out of above v & vi aggregate expenses of ₹ 22,93,423/-. In appeal, CIT(A) estimated lump sum 5% disallowance on Telephone expenses (Rs.70,825/-), petrol expenses (Rs.48,610/-) and diesel expenses (Rs.21,93,423/-) and directed the Assessing Officer to restrict the disallowance to 5% of ₹ 23,12,858/- (Rs.70,825/- ) (Rs.48,610/-) (Rs.21,93,423/-) 23,12,858/- . This reasoned finding of CIT(A) need no interference from our side - Decided against revenue. Disallowance of agricultural income - AO after making inquiry from land records and from APMC gave the finding that assessee had inflated income from vegetables - Held that - After considering the facts and circumstances of the case, CIT(A) found that Assessing Officer was too conservative to adopt income from sale vegetables at ₹ 24,200/-. Vegetables are grown from 0.59 Hector. Accordingly, he estimated the income from vegetable at ₹ 3,50,000/-. Under the facts and circumstances, CIT(A) directed the Assessing Officer to give relief of ₹ 3,50,000/-. This reasoned finding of CIT(A) needs no interference from our side - Decided against revenue.

Summary

Issues Involved:

1. Addition of unexplained cash credit under Section 68 of the Income Tax Act.
2. Disallowance under Section 40(a)(ia) for non-deduction of tax at source.
3. Disallowance under Section 40A(3) for cash payments exceeding Rs. 20,000.
4. Disallowance of personal expenses.
5. Treatment of agricultural income as business income.
6. Disallowance of excess payment of royalty.

Issue-wise Detailed Analysis:

1. Addition of Unexplained Cash Credit under Section 68 of the Income Tax Act:

The Revenue contested the deletion of Rs. 3,50,000/- by CIT(A) for A.Y. 2006-07 and Rs. 1,00,000/- for A.Y. 2007-08, arguing these were unexplained cash credits. The assessee provided confirmations and bank statements showing these amounts were repayments of advances made to Nanak Sadi Centre and Nilkanth Industries. The CIT(A) accepted the explanations and deleted the additions, a decision upheld by the Tribunal due to the reasoned findings.

2. Disallowance under Section 40(a)(ia) for Non-deduction of Tax at Source:

The Revenue challenged the deletion of Rs. 75,000/- for A.Y. 2006-07, arguing it was subject to TDS under Section 194J. The assessee contended that payments to MohMangal Carting Contractor, Ramaiya Compressorwala, and Ladubhai Compressorwala were for hiring equipment, not contracts, and thus not subject to TDS under Section 194C. CIT(A) confirmed disallowances for these payments but deleted the disallowance for auditor fees. The Tribunal upheld CIT(A)'s decision, finding the payments were correctly categorized and the provisions of Section 40(a)(ia) were appropriately applied.

3. Disallowance under Section 40A(3) for Cash Payments Exceeding Rs. 20,000:

The Revenue contested the deletion of Rs. 19,253/- disallowed by the Assessing Officer for cash payments exceeding Rs. 20,000. The assessee argued these payments were made in a village not served by any bank, falling under Rule 6DD(g). CIT(A) accepted this explanation and deleted the disallowance, a decision upheld by the Tribunal due to the reasoned findings.

4. Disallowance of Personal Expenses:

The Revenue contested the deletion of Rs. 34,992/- for A.Y. 2006-07 and Rs. 41,469/- for A.Y. 2007-08, arguing these were personal expenses. The assessee contended these were business expenses. CIT(A) restricted the disallowance to 5% of the total expenses, a decision upheld by the Tribunal due to the reasoned findings.

5. Treatment of Agricultural Income as Business Income:

The Revenue contested the deletion of Rs. 3,50,000/- for A.Y. 2006-07 and Rs. 6,50,000/- for A.Y. 2007-08, arguing these were inflated agricultural incomes treated as business income. The assessee provided evidence of agricultural activities and sales. CIT(A) accepted the explanations and deleted the additions, a decision upheld by the Tribunal due to the reasoned findings.

6. Disallowance of Excess Payment of Royalty:

The Revenue contested the deletion of Rs. 15,940/- for A.Y. 2007-08, arguing the assessee claimed excess royalty. The assessee provided evidence of actual payments. CIT(A) accepted the explanations and deleted the disallowance, a decision upheld by the Tribunal due to the reasoned findings.

Conclusion:

The Tribunal upheld the CIT(A)'s reasoned findings and dismissed the appeals of both the assessee and the Revenue for both assessment years. The decisions were pronounced in the open Court on March 31, 2015.