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2018 (5) TMI 1377 - AT - Income TaxDisallowance of various expenses like, conveyance, travelling, foreign travelling, telephone and electricity etc. - Held that - Disallowance has been made on ad-hoc basis without pointing out any defects in the books of accounts or vouchers maintained for these expenses, thus, addition to be deleted - Decided in favour of assessee. TDS u/s 194C/194I - non-reduction of TDS on monthly maintenance charges paid to housing societies - Held that - For applicability of section 194C there should exist a contract between the parties for carrying out the work as defined under that section. The Ld. CIT(A) has noted that the cooperative societies works on the principle of mutuality and on the principle of no profit no loss and, therefore, reimbursement of the expenses by the members of the society, is in the nature of merely transfer of money from one hand to another and, thus, not falling under the payments mentioned in section 194C - Similarly, the CIT(A) has held for the purpose of section 194I that the payment in the hand of the recipient should be in the character of income, whereas in the instant case, it is merely reimbursement by the members to the society and, therefore, the payment in question is not liable for TDS.- Decided in favour of assessee Disallowance under section 14A - CIT-A restricted addition - Held that - As in the instant case, the decision of the learned CIT(A) that dissatisfaction of the learned AO is not discernible, need a re-look and thus the issue needs to be reexamined by the learned CIT(A) and accordingly, we restore the issue to the file of the CIT(A) for deciding afresh in view of the decision in the case of India Bulls Financial Services Pvt. Ltd. (2016 (11) TMI 1369 - DELHI HIGH COURT). CIT(A) first may adjudicate the issue of requirement of satisfaction as to incorrectness of the claim of the assessee of having incurred no expenses towards exempt income. If he finds that the prerequisite of satisfaction is cleared, then he may decide qualification of disallowance under three parts of Rule 8D(2) in accordance with law.
Issues Involved:
1. Disallowance of expenses under section 37(1) of the Income-tax Act, 1961. 2. Disallowance under section 40(a)(ia) for non-deduction of TDS under section 194C/194I. 3. Disallowance under section 14A of the Income-tax Act. 4. General grounds of appeal. Detailed Analysis: 1. Disallowance of Expenses under Section 37(1): The Revenue challenged the disallowance of ?21,90,000 out of total expenses of ?73,77,381. The Assessing Officer (AO) disallowed these expenses on an ad-hoc basis, citing excessive claims and lack of justification relative to the quantum results declared by the assessee. The CIT(A) deleted this disallowance, referencing a previous Tribunal decision for the assessment year 2008-09, where similar disallowances were deleted. The Tribunal upheld the CIT(A)’s decision, noting that disallowances made on an ad-hoc basis without pointing out specific defects in the books of accounts or vouchers are not permissible. The Tribunal emphasized that the AO did not provide concrete reasons for considering the expenses excessive. 2. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS: The AO disallowed ?7,02,261 under section 40(a)(ia) for non-deduction of TDS on monthly maintenance charges paid to housing societies, arguing that these payments were under an implied contract attracting TDS under sections 194C/194I. The CIT(A) deleted the disallowance, stating that the payments were merely reimbursements to the societies for common expenses incurred on behalf of its members, thus not constituting a contractual relationship necessitating TDS. The Tribunal upheld the CIT(A)’s decision, agreeing that the payments were in the nature of reimbursements and not liable for TDS, referencing the principle of mutuality and the decision in Mistur Shipping Agency Private Limited. 3. Disallowance under Section 14A: The AO invoked Rule 8D to disallow ?3,00,11,791 related to exempt income, while the CIT(A) restricted the disallowance to ?90,103 for demat charges. The Tribunal noted that the AO’s dissatisfaction with the assessee’s claim of no expenses related to exempt income was implied, not explicitly recorded. The Tribunal referenced the Delhi High Court’s decision in Indiabulls Financial Services Ltd., which held that explicit recording of dissatisfaction is not mandatory if the AO’s analysis implies it. Consequently, the Tribunal remanded the issue back to the CIT(A) to re-examine the requirement of satisfaction and, if satisfied, to adjudicate the disallowance under Rule 8D afresh, providing the assessee an opportunity to be heard. 4. General Grounds of Appeal: The Tribunal noted that grounds 4 to 6 were general in nature and did not require specific adjudication. Conclusion: The Tribunal upheld the CIT(A)’s decisions on the disallowance of expenses under section 37(1) and section 40(a)(ia), while remanding the issue of disallowance under section 14A back to the CIT(A) for re-examination. The appeal was partly allowed for statistical purposes. The decision was pronounced on 15th May 2018.
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