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2016 (2) TMI 239 - AT - Income TaxDisallowance of hire charges under sec. 40(a)(ia) - non deduction of tds - CIT(A) deleted the addition - Held that - The assessee has deducted TDS and deposited the same with the Central Govt. account as prescribed under the Act. The provisions of sec. 40(a)(ia) of the Act is applicable, in case there is a failure on the part of the assessee to deduct TDS and remit the same to the government account. There is nothing in the said section to treat inter alia that the assessee is defaulter where there is shortfall in deduction of TDS. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under the various TDS provisions, the assessee can be declared to be an assessee in default under sec. 201 of the Act and no disallowance can be made by invoking the provisions of sec. 40(a)(ia) of the Act. Therefore, we do not find any error or infirmity in the CIT(A) s order, hence, we inclined to uphold the order of the CIT(A) and reject the ground raised by the Revenue. - Decided in favour of assessee Disallowance of expenditure under the head soil purchase, tractor maintenance and other expenses - Held that -Assessing Officer disallowed 5% under the head soil expenses, 5% under the head tractor maintenance and 10% under the head other expenses. The Assessing Officer was of the opinion that the assessee has not furnished the supporting bills and vouchers for the expenditure debited in the profit & loss account and all the expenditure incurred are supported by self made vouchers, therefore made adhoc disallowance. The CIT(A), confirmed the additions made by the Assessing Officer. Even before us, the assessee has failed to prove the expenditure incurred was reasonable and not excessive. Having regard to the facts and circumstances of the case, we are of the view that the disallowance made by the Assessing Officer and confirmed by the CIT(A) is reasonable, hence, does not call for any interference at this stage. Therefore, we reject the ground raised by the assessee. - Decided against assessee
Issues Involved:
1. Disallowance under Section 40(a)(ia) for short deduction of TDS on hire charges. 2. Disallowance under Section 40(a)(ia) for non-deduction of TDS on sub-contractor payments. 3. Adhoc disallowance of expenditure under the heads soil purchase, tractor maintenance, and other expenses. Detailed Analysis: 1. Disallowance under Section 40(a)(ia) for short deduction of TDS on hire charges: The assessee, a partnership firm engaged in civil contracts, filed its return of income for the A.Y. 2009-10. During scrutiny, the Assessing Officer (A.O.) observed that the assessee incurred hire charges of Rs. 1,20,40,586/- and deducted TDS at 1.33% under Section 194C. However, the A.O. contended that the payments were in the nature of rent for hiring vehicles, requiring a 10% TDS under Section 194I, leading to a short deduction and subsequent disallowance of Rs. 1,03,65,405/- under Section 40(a)(ia). The CIT(A) deleted this disallowance, referencing the Hon'ble Calcutta High Court's judgment in CIT vs. S.K. Tekriwal, which held that Section 40(a)(ia) does not apply where TDS is deducted, even if under the wrong section, provided it is deposited with the government. The Tribunal upheld the CIT(A)'s decision, agreeing that shortfall due to a difference in opinion on TDS applicability does not warrant disallowance under Section 40(a)(ia). Instead, the assessee could be treated as a defaulter under Section 201. 2. Disallowance under Section 40(a)(ia) for non-deduction of TDS on sub-contractor payments: The A.O. disallowed Rs. 59,87,134/- paid to sub-contractors without TDS deduction. The assessee argued that this amount was paid within the financial year, invoking the Special Bench decision in Merilyn Shipping and Transports, which states Section 40(a)(ia) applies only to amounts payable at the year-end. However, the CIT(A) upheld the disallowance, citing a stay on the Special Bench decision by the Andhra Pradesh High Court. The Tribunal acknowledged the Special Bench decision but noted the absence of specific details proving the payments were made within the year. Consequently, the Tribunal remanded the issue to the A.O. to verify the payment status and restrict disallowance to amounts payable at the financial year's end. 3. Adhoc disallowance of expenditure under the heads soil purchase, tractor maintenance, and other expenses: The A.O. disallowed 5% of soil purchase and tractor maintenance expenses and 10% of other expenses due to inadequate supporting bills, relying mainly on self-made vouchers. The CIT(A) upheld these disallowances. The Tribunal, noting the assessee's failure to substantiate the reasonableness and necessity of the expenses, found the disallowances reasonable and upheld the CIT(A)'s decision. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes, specifically remanding the issue of sub-contractor payments for further verification by the A.O.
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