2015 (11) TMI 638 - AT - Income Tax

TDS u/s 194C - disallowance u/s 40(a)(ia) - non deduction of TDS on Transport Charges - Held that - The reasoning of the Hon ble Supreme Court in the case of Alom Extrusions Ltd (2009 (11) TMI 27 - SUPREME COURT) will equally to the amendment to Sec.40(a)(ia) of the Act whereby a second proviso was inserted in sub-clause (ia) of clause (a) of Section 40 by the Finance Act, 2012, w.e.f. 1-4-2013. The provisions are intended to remove hardship. It was argued on behalf of the revenue that the existing provisions allow deduction in the year of payment and to that extent there is no hardship. We are of the view that the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year. To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. Since the issue has not been adjudicated by the CIT(A), we are of the view to restore the file to CIT(A) for verifying that whether the parties to whom the transport charges have been paid, have shown in their income tax returns or not and pass the order according to Law. - Decided in favour of Revenue for the statistical purpose. TDS u/s 194C - disallowance u/s 40(a)(ia) - non deduction of TDS on Clearing & Forwarding Charges - CIT(A) deleted the addition - Held that - In case of M/s Mithla Shipping Agency the TDS has been deducted and deposited. So the TDS provisions have been complied with. The necessary documents such as TDS certificate TDS paid challan and TDS return had been submitted.For the rest of the parties, the major payment was the reimbursement of the expenses and the services charges of the parties were below the limit as specified under the provisions of TDS. The bill for the service charge and reimbursement of expenses are placed Hence the ground of appeal of the Revenue is dismissed. TDS u/s 194I - disallowance u/s 40(a)(ia) - non deduction of TDS on rent charges - CIT(A) deleted the addition - Held that - CIT(A) has given relief in respect of rent payment to certain parties on the basis of documents produced by the assessee. However the CIT(A) did not mention merit for the allowance of the rent. Further the disallowance of the rent payment due to violation of the provision of section 194C read with section 40(a)(ia) does not hold good as the rent payment to each party does not exceed ₹ 1.20 lakh. The Ld. AR drew our attention on page No. 21 of the paper book, where the details of the rent paid to the parties has been mentioned. The rent paid to the different parties is below the taxable limit specified u/s 194I of the Act. In view of the non- speaking order of the CIT(A) , we are of the opinion in the interest of justice and fair play to give one more opportunity to the assessee to produce the necessary documents for the verification. Hence we restore the file to the CIT(A) to call upon the assessee for the verification of necessary documents and pass the speaking order as per law. - Decided in favour of revenue for the statistical purposes. Unexplained credit under section 68 - receipt of advance unexplained - CIT(A) deleted the addition - Held that - Since the confirmation from the assessee has been submitted for the advance receipt and the supply of the goods has also been made in the subsequent year, we do not want any merit in the ground of appeal of the Revenue. - Decided against Revenue

Summary

Issues Involved:
1. Disallowance of transportation charges under Section 40(a)(ia) for non-deduction of TDS.
2. Disallowance of clearing and forwarding charges under Section 40(a)(ia) for non-deduction of TDS.
3. Disallowance of rent expenses under Section 40(a)(ia) for non-deduction of TDS.
4. Addition under Section 68 for unexplained credit from sundry debtors.

Detailed Analysis:

1. Disallowance of Transportation Charges:
The assessee, a partnership firm, claimed an expenditure of Rs. 7,64,717 towards transportation charges, which was disallowed by the AO for non-deduction of TDS under Section 194C read with Section 40(a)(ia) of the Income Tax Act. The CIT(A) deleted the disallowance, relying on the decision of the Punjab & Haryana High Court in the case of CIT Vs. United Rice Land Ltd., where it was held that in the absence of a contract, TDS provisions do not apply. However, the Tribunal noted that even oral or unwritten contracts are valid under the law, referencing the jurisdictional High Court's decision in Crescent Exports vs. CIT. The Tribunal observed that if the payee has shown the receipt of the amount in their income tax return, the provisions of Section 40(a)(ia) do not apply. Therefore, the case was remanded to the CIT(A) for verification of whether the transport charges were included in the payees' income tax returns.

2. Disallowance of Clearing and Forwarding Charges:
The assessee claimed an expenditure of Rs. 4,00,870 towards clearing and forwarding charges, which was disallowed by the AO for non-deduction of TDS. The CIT(A) deleted the disallowance, observing that TDS was deducted and deposited for M/s Mithila Shipping Agency, and the payments to the other two parties were primarily reimbursements, with service charges below the TDS threshold. The Tribunal upheld the CIT(A)'s decision, noting that the necessary TDS documents were submitted and the service charges were below the specified limit under TDS provisions.

3. Disallowance of Rent Expenses:
The assessee claimed an expenditure of Rs. 6,29,940 towards rent, which was disallowed by the AO for non-deduction of TDS. The CIT(A) partially deleted the disallowance, noting that rent payments to certain parties were below the TDS threshold of Rs. 1.20 lakhs per annum. However, the CIT(A) did not provide detailed reasoning for the allowance. The Tribunal remanded the matter to the CIT(A) for a detailed verification of documents and a speaking order, noting that the rent payments were below the taxable limit specified under Section 194I of the Act.

4. Addition under Section 68 for Unexplained Credit:
The AO added Rs. 2,35,105 as unexplained credit under Section 68, as the assessee failed to produce supporting documents for the advance from M/s Ankita Enterprises. The CIT(A) deleted the addition, accepting the assessee's submission of confirmation and subsequent supply of goods against the advance. The Tribunal upheld the CIT(A)'s decision, noting that the confirmation and ledger copy were submitted, and the supply was made in the subsequent year.

Conclusion:
The Tribunal allowed the Revenue's appeal partly for statistical purposes, specifically remanding the issues related to transportation charges and rent expenses for further verification by the CIT(A). The disallowances for clearing and forwarding charges and the addition under Section 68 were dismissed.