2015 (6) TMI 350 - AT - Income Tax

TDS u/s 194C - non deduction of TDS on payments made against printing and processing work - CIT(A) deleted the addition - Held that - The assessee has filed copies of bills pertaining to M/s Print-O-Pack Ltd. The same were on account of purchases of magazines and promotional forms. The CIT(A) has recorded that these bills show that the assessee has purchased magazines and promotional forms and the cost of magazine etc. includes cost of paper, printing and binding. He has further recorded that the assessee has also filed confirmation from M/s Print-O-Pack Ltd. vide letter dated 28th November, 2011 wherein it is mentioned that the bills were raised for magazines and brochures which include the cost of paper, printing and binding. The CIT(A) has given a finding that the confirmation from M/s Print-O-Pack Ltd. proves that the payments were made not for the job work or printing charges and in the case of the assessee, it was purchase of magazines and promotional forms and therefore, there was no question of deducting TDS - Decided in favour of assesse. Disallowance u/s 40(a)(ia) - non deduction of TDS on payments made against packing and forwarding charges - CIT(A) deleted the addition while accepting additional evidences - Held that - The assessee has filed copies of bills and confirmations of parties before the CIT(A). The CIT(A) has given a finding that on going through these bills, it was seen that the assessee has purchased poly shrink and polythene bags from M/s Allied Plast, board from Chandra Shekhar (Puraney Dabbey Waley) and Bale Hessien Cloth from Ghanshyam Jute Trading Co. He has recorded a finding that these items are purchases of packing and forwarding material and not the payment for packing and forwarding as observed by the Assessing Officer and therefore, are not covered under the provisions of Section 194C of the Act. In these facts of the case, we are of the view that since the payments were made for purchase of packing and forwarding material, the provision of Section 194C was inapplicable and therefore, no disallowance under Section 40(a)(ia) of the Act could be made - Decided in favour of assesse. Disallowance of unverified bad debts - Held that - A perusal of the details written off as filed in the compilation before us shows that it consists of various debtor parties whose amount due was ranging from ₹ 513/- to ₹ 5,80,601/-. Allowing the small amounts due from various parties and written off by the assessee, the balance amounts exceeding ₹ 20,000/- are addable due to no evidence whatsoever produced by the assessee to show that these were genuine items of bad debts written off by the assesse. Accordingly, the amount of ₹ 9,36,598/- is disallowed on account of failure of the assessee to provide any copy of correspondence with these parties and also failure to communicate the address of these debtor parties and addition is sustained to that extent and the balance addition is deleted - Decided partly in favour of revenue. Addition u/s 2(22)(e) on account of deemed dividend - CIT(A) deleted the addition - Held that - provision of Section 2(22)(e) was not applicable in the case of the assessee as it is well settled that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. The issue is covered in favour of the assessee by the decision of Mumbai Bench of the Tribunal in the case of ACIT Vs. Bhaumik Colors Pvt.Ltd. - 2008 (11) TMI 273 - ITAT BOMBAY-E . - Decided in favour of assesse

Summary

Issues:
1. Deletion of addition under Section 40(a)(ia) for non-deduction of TDS on printing and processing work payments.
2. Deletion of addition under Section 40(a)(ia) for non-deduction of TDS on packing and forwarding charges.
3. Deletion of addition on account of unverified bad debts.
4. Deletion of addition under Section 2(22)(e) for deemed dividend.

Issue 1 - Deletion of addition under Section 40(a)(ia) for non-deduction of TDS on printing and processing work payments:
The Revenue appealed against the deletion of an addition made under Section 40(a)(ia) for non-deduction of TDS on payments for printing and processing work. The CIT(A) found that the payments were for the purchase of magazines and promotional forms, not job work, and hence, TDS deduction was not required. The Tribunal upheld the CIT(A)'s decision as the bills and confirmation from the party clarified the nature of the transaction as purchases, not job work.

Issue 2 - Deletion of addition under Section 40(a)(ia) for non-deduction of TDS on packing and forwarding charges:
The Revenue challenged the deletion of an addition under Section 40(a)(ia) for non-deduction of TDS on packing and forwarding charges. The CIT(A) accepted additional evidence provided by the assessee, determining that the payments were for purchasing packing and forwarding material, not job work, hence TDS deduction was not applicable. The Tribunal upheld the CIT(A)'s decision, emphasizing that the expenses were for material purchases, not for job work or contracts.

Issue 3 - Deletion of addition on account of unverified bad debts:
The Revenue contested the deletion of an addition made on account of unverified bad debts. The CIT(A) accepted additional evidence and found that the assessee failed to provide necessary details or correspondence with debtor parties. The Tribunal disallowed an amount exceeding Rs. 9 lakh due to lack of evidence, while smaller amounts were allowed. The decision was based on the absence of proof regarding the genuineness of the bad debts.

Issue 4 - Deletion of addition under Section 2(22)(e) for deemed dividend:
The Revenue disputed the deletion of an addition under Section 2(22)(e) for deemed dividend. The CIT(A) admitted additional evidence and ruled that deemed dividend could only be assessed in the hands of a shareholder of the lender company. The Tribunal agreed with the CIT(A), citing the precedent that deemed dividend applies to shareholders, not other parties. The decision was supported by legal interpretations and case law, resulting in the dismissal of the Revenue's appeal.

In conclusion, the Tribunal partially allowed the Revenue's appeal, maintaining the CIT(A)'s decisions on various issues related to TDS deductions, bad debts, and deemed dividends, based on the specific nature of transactions and legal provisions applicable.