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2016 (8) TMI 319 - AT - Income TaxTDS u/s 194C - addition invoking the provisions of the section 40(a)(ia) of the Act in respect of payments made towards labour charges without deducting TDS - outstanding balance at the end of the close of the year - Held that - Considering assessee s submittion that the impugned amount is already paid and nothing is outstanding at the end of the close of the assessment year under consideration. He relied on the judgement of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM . Also see Shri. N. Palanivelu, Prop. M/s. Nagamalai Textiles Versus The Income Tax Officer, Ward II (1) , Salem 2015 (10) TMI 1415 - ITAT CHENNAI wherein held if the impugned amount is not outstanding at the end of the close of the assessment year in respect of the expenses either as outstanding expenses or as sundry creditors, this amount cannot be disallowed. In view of this we are inclined to remit the issue to the file of AO to examine whether the impugned amount is outstanding at the end of the close of the assessment years under consideration and decide in the light of above order of the Tribunal. - Decided in favour of assessee for statistical purposes.
Issues:
1. Addition of ?15,24,800 under section 40(a)(ia) for non-deduction of TDS on labour charges. Analysis: The appeal before the ITAT Chennai involved the addition of ?15,24,800 by invoking section 40(a)(ia) of the Income Tax Act due to non-deduction of TDS on payments made towards labour charges. The assessee, engaged in embroidery work, initially filed a return admitting a total income of ?14,256 for the assessment year 2007-08. The AO, following a scrutiny assessment, made disallowances under section 40(a)(ia) and for lack of supporting bills/vouchers, resulting in a total income of ?19,11,545. The CIT(A) upheld the disallowance of labour charges paid towards embroidery work, leading to the appeal before the ITAT. The CIT(A) observed that TDS was attracted on the labour charges paid to agencies for embroidery work, even though the charges were named as 'Labour Charges' but were actually paid to agencies. The ITAT considered the arguments of both parties, where the assessee's representative cited the Merilyn Shipping and Transports case and argued that the impugned amount was already paid with nothing outstanding at the end of the assessment year. The ITAT referred to the case of Shri N.Palanivelu Vs. ITO, which emphasized the importance of outstanding balance at the end of the relevant year for applicability of section 40(a)(ia). In light of the above, the ITAT decided to remit the issue back to the AO to verify if the impugned amount was outstanding at the end of the assessment years under consideration. The ITAT allowed the ground for statistical purposes and did not consider other grounds pressed by the assessee's representative. The appeal was partly allowed for statistical purposes, with the order pronounced on 30th June 2016 in Chennai.
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