9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (12) TMI 396 - AT - Income TaxDisallowance under section 40(a)(ia) - non-deduction of TDS on payments in the nature of purchases Held that - Disallowance will not be attracted, if the respective payee has paid the required taxes in accordance with law. For verification of the actual position, we restore this issue to the file of the AO to verify whether the payee had paid the due taxes after computation of its income including the payments received from the assessee.- Decided in favour of assessee for statistical purposes. Disallowance of rent u/s.4O(a)(ia) - non-deduction of TDS - Held that - Section 40(a)(ia) was amended by the Finance Act, 2010 and as per the amended provisions the expenditure has to be allowed if the deposit is made within the due date of filing of return of income. Mumbai Bench of the Tribunal, in the case of Piyush C. Mehta 2012 (4) TMI 349 - ITAT MUMBAI has allowed the claim of the assessee if the deposit has been made before the due date of filing of return of income. We decide this issue accordingly and restore the matter to the file of the Assessing Officer (hereinafter referred to as the AO) to verify whether the TDS was deducted and deposited within the due date of filing of return and if found so, then the AO to allow the claim of the assessee accordingly. - Decided in favour of assessee for statistical purposes. Disallowance of salary paid to Mr. Hardik Kothari, son of the partner of the assessee firm - Held that - justification has been given regarding payment of commission to Mr. Hardik Kothari and it has been explained that Mr. Hardik Kothari was son of the partner of the firm namely Mr. Viren Kothari that to encourage him for hard work, efficiency and sincerity the firm decided to offer him salary of ₹ 12,500/- and commission on sale of products. It has been explained that he has been looking after production quality and customer relationship. The Ld. A.R. has further invited our attention to the written submissions dated 29.08.11 submitted by the assessee to the Ld. CIT(A) wherein it has been explained that the amount of salary paid to Mr. Hardik Kothari was reasonable. The Ld. A.R. has further explained that the payment of salary was routed through salary account. He has further submitted that the payment of salary to Mr. Hardik Kothari has been allowed in the past. Considering the above submissions of the Ld. A.R., we do not find any justification on the part of lower authorities to disallow the amount of salary paid to Mr. Hardik Kothari, son of the partner. This issue is accordingly decided in favour of the assessee. Disallowance being 1/3rd of the payments made to Mr. Vinit Kothari and towards purchase of software - Held that - We find that the assessee in his letter dated 31.08.10 has explained to the Commissioner that Mr. Vinit Kothari was doing engineering and that the software was developed by him. It is not disputed that Mr. Vinit Kothari is working for the firm. The Ld. CIT(A) has overlooked the contentions raised by the assessee and has disallowed the claim. It is not disputed that the services were provided by Mr. Vinit Kothari to the firm. It has also been explained that the software developed by him was very important to the business of the assessee firm. Considering the above facts and circumstances, in our view, the disallowance is not justified on this issue also and the same is accordingly ordered to be deleted. - Decided in favour of the assessee. Addition of unsecured loans under section 68 - Held that - The said amount pertained to the commission of ₹ 1,79,400/- (net of TDS) that was already disallowed by the AO and confirmed by the Ld. CIT(A). He has explained that this amount was in respect of commission paid and not the loan received. Considering the above submissions of the assessee, we feel that the issue requires reexamination at the hands of AO. The AO is directed to examine the contentions of the assessee in this regard and decide the issue afresh in accordance with law.- Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Disallowance of payments to M/s M.R. Enterprises under section 40(a)(ia) due to non-deduction of TDS. 2. Disallowance of rent under section 40(a)(ia) despite TDS deduction and deposit. 3. Disallowance of commission under section 40(a)(ia) due to TDS issues and the applicability of section 40(a)(ia) to amounts already paid. 4. Disallowance of salary paid to Mr. Hardik Kothari. 5. Disallowance of payments made to Mr. Vinit Kothari for software purchase. 6. Addition of unsecured loans under section 68. Detailed Analysis: Issue 1: Disallowance of Payments to M/s M.R. Enterprises The assessee contested the disallowance of Rs. 13,51,484 under section 40(a)(ia) due to non-deduction of TDS on payments made to M/s M.R. Enterprises. The assessee argued that M/s M.R. Enterprises had already discharged the tax liability by filing their return of income. The assessee referenced the proviso inserted in section 40(a)(ia) by the Finance Act, 2012, effective from 01.04.2013, which states that if the payee has paid the due taxes, the payer should not be deemed in default, and disallowance under section 40(a)(ia) should not apply. The Tribunal referenced decisions from the Bangalore Bench and the Agra Bench, which held that the proviso should be applied retrospectively. Consequently, the Tribunal restored the issue to the AO to verify if the payee had paid the due taxes, allowing the issue for statistical purposes. Issue 2: Disallowance of Rent The assessee argued that TDS of Rs. 36,720 on rent of Rs. 2,40,000 was deducted and deposited within the due date stipulated under section 200(1). The Tribunal noted that the Finance Act, 2010, amended section 40(a)(ia) to allow expenditure if the deposit is made within the due date of filing the return of income. Citing the Kolkata High Court decision in "Virgin Creations" and the Mumbai Bench decision in "Piyush C. Mehta," the Tribunal restored the matter to the AO to verify if the TDS was deposited within the due date of filing the return and, if so, to allow the claim. Issue 3: Disallowance of Commission The assessee contended that TDS on the commission of Rs. 2,00,000 was deducted on 31.03.2008 and deposited on 15.05.2008 within the due date. Additionally, the assessee argued that section 40(a)(ia) applies to amounts payable, not already paid. The Tribunal's decision on this issue was not explicitly detailed but can be inferred to follow the same rationale as Issue 2 regarding TDS compliance within statutory deadlines. Issue 4: Disallowance of Salary to Mr. Hardik Kothari The AO disallowed Rs. 1,50,000 towards salary paid to Mr. Hardik Kothari, suspecting it as a method to divert taxable profits. The CIT(A) disallowed the entire amount, stating it was not reflected in the ledger account. The assessee provided justifications for the salary and commission paid to Mr. Hardik Kothari, explaining his role and responsibilities. The Tribunal found no justification for the disallowance and decided in favor of the assessee. Issue 5: Disallowance of Payments to Mr. Vinit Kothari The assessee argued that payments made to Mr. Vinit Kothari for software development and training were legitimate business expenses. The AO disallowed 1/3rd of the expenditure, while the CIT(A) suspected the payment was a trick to reduce profits. The Tribunal noted that the services provided by Mr. Vinit Kothari were crucial for the business and found the disallowance unjustified, ordering it to be deleted. Issue 6: Addition of Unsecured Loans under Section 68 The CIT(A) confirmed the addition of Rs. 1,79,400 as unsecured loans under section 68. The assessee clarified that this amount pertained to commission already disallowed by the AO. The Tribunal directed the AO to reexamine the issue, considering the assessee's contentions, and decide afresh in accordance with the law. Conclusion: The appeal was partly allowed, with directions for reexamination and verification of specific issues by the AO. The Tribunal emphasized compliance with statutory deadlines for TDS deposits and justified business expenses, ensuring fairness and adherence to legal provisions.
|
