2015 (10) TMI 1707 - AT - Income Tax

Addition u/s. 40(a)(ia) - assessee stated that the nature of payments made to eight parties was similar to the 15 parties in respect of whom details were submitted before the Assessing Officer - Held that - We observe that the nature of activity carried out by the assessee is not disputed and the nature of payments made to the said eight parties was similar to the 15 parties, therefore, in the interest of justice, we restore the issue to the file of CIT(Appeals) for fresh adjudication after providing reasonable opportunity of being heard to the assessee. The ld. CIT(Appeals) is also directed to examine the authenticity of the bills before coming to any conclusion - Decided in favour of assessee for statistical purposes. Disallowance of expenditure incurred on improving, i.e. increasing the height of factory shed - revenue v/s capital expenditure - Held that - Out of the total expenditure incurred an amount of ₹ 6,64,535/- related to improvement of height of factory shed whereas balance amount of ₹ 7,14,879/- was incurred on improvement of floor, and walls of shed. However, since the assessee had not given any basis or supporting material for such bifurcation and even exact nature of the said miscellaneous work had also not been elaborated, therefore, the ld. CIT(Appeals) rightly held that the expenditure was capital in nature, as it augmented the production capacity as a result of the expenditure, factory shed had become larger which could support higher production and give advantage to the assessee. We, accordingly, do not find any reason to interfere with the order of ld. CIT(Appeals). - Decided against assessee. Disallowance of job charges u/s 40(a)(ia) in contravention of the provisions of section 194C - CIT(A) deleted the disallowance - Held that - Revenue has not brought on record any material to controvert the findings recorded by the ld. CIT(Appeals) that the transactions were for supply of goods fabricated as per the assessee s requirements. These were not work contracts and therefore, not liable for TDS under section 194C. We, therefore, confirm the finding of ld. CIT(Appeals). - Decided against revenue. Disallowance of payment in nature of salary and not professional fee liable to deduction of TDS u/s 194J - CIT(A) deleted the disallowance - Held that - In the course of appellate proceedings it had been stated before the ld. CIT(Appeals) that provisions under section 194J were not applicable as such payment was made to employee of the assessee, Shri Sagnik Banerjee. He was working as design head for the assessee and had requested that his salary payment cheque may be drawn in the name of Apka Design & Drawing . Before the ld. CIT(Appeals), the request letter of Shri Sagnik Banerjee to this effect and copy of Form No. 16 issued to him were also produced. Accordingly, ld. CIT(Appeals) correctly concluded that the payment was in nature of salary and not professional fee liable to deduction under section 194J.- Decided against revenue.

Summary

Issues:
1. Disallowance of job charges under section 40(a)(ia) in contravention of section 194C.
2. Disallowance of payment as salary instead of professional fee under section 194J.
3. Disallowance of expenses as capital expenditure.
4. Admissibility of delayed appeal by the Revenue.

Analysis:
1. The Revenue appealed against the deletion of disallowance of job charges under section 40(a)(ia) in violation of section 194C. The Assessing Officer disallowed job charges for not deducting TDS from payments to parties. The CIT(A) confirmed the addition. The Tribunal restored the issue to the CIT(A) for fresh adjudication, emphasizing the need for authenticating bills.

2. The Assessee contested the disallowance of expenses as capital expenditure. The CIT(A) upheld the disallowance citing precedents where expenditure increasing capacity was deemed capital. The Tribunal affirmed the decision, noting the lack of supporting material for bifurcation of expenses, leading to the dismissal of this ground.

3. The Revenue challenged the disallowance of job work charges under section 194C. The CIT(A) found the transactions were for goods supplied as per the Assessee's requirements, not contractual job work, hence not liable for TDS under section 194C. The Tribunal upheld this finding, dismissing the Revenue's appeal on this ground.

4. The Revenue also contested the disallowance of payment as salary instead of professional fee under section 194J. The CIT(A) accepted the payment as salary based on evidence provided by the Assessee's employee. The Tribunal found no error in the CIT(A)'s decision, leading to the dismissal of this ground in the Revenue's appeal.

5. The delayed appeal by the Revenue was condoned, allowing it to be admitted on merit. The Tribunal pronounced the order, partly allowing the Assessee's appeal for statistical purposes and dismissing the Revenue's appeal.

This judgment addressed various issues related to disallowances under different sections of the Income Tax Act, emphasizing the need for proper documentation and adherence to legal provisions.