2015 (10) TMI 2255 - AT - Income Tax

Business was not in operation - expenses for employee cost, administrative expenses and finance charges of a beverage unit - deduction u/s 37(1) - CIT(A) deleted the addition - Held that - It is not in dispute that in the instant case, the business of beverage unit was temporarily suspended since assessment year 2002-03 and the assessee was making efforts to settle the dispute with Pepsi Ltd. for whom the assessee was doing bottling work and had to incur expenditure in question for maintaining the unit in operational condition. It is also not in dispute that the expenditure in question is genuine business expenditure of the assessee. The Hon ble Delhi High Court in the case of CIT Vs. Anita Jain (2009 (1) TMI 774 - DELHI HIGH COURT ) and the Hon ble Madras High Court in the case of L. Ve. Vairavan Chettiar Vs. CIT (1965 (4) TMI 6 - MADRAS High Court ) have held that in case of temporary suspension of business, there is nothing to show that the business has been abandoned permanently and expenditure incurred to keep the business alive in the hope of reviving the same is business expenditure allowable under sec. 37(1) of the Act. Further, Departmental Representative has merely relied on the order of the Assessing Officer, but could not point out any specific mistake in the order of the Commissioner of Income Tax (Appeals). - Decided against revenue. Non deduction of TDS u/s 194H - commission paid to newspaper vendors - CIT(A) deleted the addition - Held that - There is no error in the order of the Commissioner of Income Tax (Appeals) in deleting the disallowance on account of commission paid to the newspaper vendors and towards payments of commission to advertising agents under sec. 40(a)(ia). See Bharti Airtel Ltd. Vs. DCIT 2014 (12) TMI 642 - KARNATAKA HIGH COURT - Decided against revenue.

Summary

Issues:
1. Assessment Year 2006-07: Deletion of business expenditure for a non-operational beverage unit.
2. Assessment Year 2011-12: Disallowance of commission payments without TDS deduction.

Assessment Year 2006-07:
The Revenue appealed against the deletion of an addition claimed by the assessee as expenses for an inactive beverage unit. The Assessing Officer disallowed the expenditure as the unit was not operational, following disallowed depreciation in previous years. The Commissioner of Income Tax (Appeals) reversed this decision, noting the expenses were necessary for unit upkeep. The appellant argued the expenses were allowable under S.37(1) and cited relevant case law. The Tribunal upheld the Commissioner's decision, emphasizing the temporary suspension of operations due to a dispute and the necessity of maintaining the unit. The Revenue's appeal was dismissed due to the genuine nature of the expenditure and efforts to revive the business.

Assessment Year 2011-12:
The Revenue challenged the deletion of commission payments without TDS deduction. The Assessing Officer disallowed the deduction under sec. 40(a)(ia) for non-TDS compliance. The Commissioner of Income Tax (Appeals) allowed the deduction, distinguishing between trade discounts and commissions. Citing case law, the Commissioner held that the payments were not commission but discounts. The Revenue contended that TDS was required for principal-agent contracts. The Tribunal upheld the Commissioner's decision, referencing a Karnataka High Court ruling on trade discounts not constituting commission. The appeal was dismissed, confirming the deletion of the disallowed amounts for commission payments.

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