2016 (1) TMI 405 - AT - Income Tax

Non deduction of tds on repairs and maintenance expenses - Held that - It can be assumed that the repairs and maintenance expenses debited to the profit & loss account was purely in the nature of labour charges for repairs and maintenance and did not include any expenditure on account of purchase of any components/parts. We find that the AO has not made any enquiry with regard to the nature of expenditure. However, before the ld.CIT(A), the assessee has given separate account of replacement of spares and labour charges. Under these facts, we deem it proper to restore these issues to the file of AO for decision afresh. Needless to say that the AO would afford reasonable opportunity of being heard to the assessee. - Decided in favor of assessee for statistical purposes.

Summary

Issues:
Appeal against orders of CIT(A) regarding disallowance of expenses under section 40(a)(ia) of the Income Tax Act for AY 2006-07.

Analysis:
1. The appeals by two assessees were directed against separate orders of the CIT(A) both dated 26/07/2010 for AY 2006-07. Common issues were involved, so they were heard together. The lead case, ITA No.1414/Ahd/2011, was taken up as the facts of both cases were identical.

2. The Assessee in ITA No.1414/Ahd/2011 raised grounds against the addition made by AO under section 40(a)(ia) for non-deduction of TDS from transportation commission and repairs & maintenance expenses. The Assessee argued that the payments were net of agreed commission and no TDS was required. The Assessee also challenged the levy of interest under sections 234A, 234B, and 234C of the Act.

3. The assessment was framed under section 143(3) of the Act, with disallowances made by the AO for transportation commission and repairs & maintenance expenses. The Assessee appealed to the CIT(A), who upheld the disallowances. The Assessee filed an appeal before ITAT against the CIT(A)'s order.

4. The delay in filing the appeal was condoned after considering the reasons provided by the Assessee. Grounds 1, 2, and 3 challenged the additions made by the AO under section 40(a)(ia) of the Act, which required TDS deduction. The Assessee requested restoration of the appeals to the AO for verification and decision afresh.

5. ITAT found that the AO had not adequately enquired into the nature of the expenses and decided to restore the issues to the AO for fresh consideration. The Assessee's appeal was allowed for statistical purposes. Ground 4 against the levy of interest was held accordingly.

6. The appeal for another Assessee for AY 2006-07 had identical grounds and facts as the previous case. ITAT decided to restore the common issues to the AO for a fresh decision. Grounds 1, 2, and 3 were allowed for statistical purposes, and ground 4 regarding interest levy was held accordingly.

7. In conclusion, both appeals for AY 2006-07 were allowed for statistical purposes. The order was pronounced on October 21, 2015, in Ahmedabad.