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2020 (5) TMI 109 - AT - Income TaxAddition towards the processing charges on account of non-deduction of TDS - Payment exceeding the limit as specified in the TDS certificate or not? - HELD THAT - In the statement furnished u/s 131 by AR of M/s Cham trading organization, it was clearly admitted that it has received plant hiring charges but there was no finding on such charges received by the party by the AO. AO has accepted the plant hiring charges paid by the assessee to the party. Thus, the finding of the AO in itself is contradictory in the given facts and circumstances. Therefore we are reluctant to make any reference to such finding of the AO. Assessee has made the payment to the partner of M/s Cham trading organization under the instruction. Merely, the payment made to thirdparty under the instruction of the main party cannot be ground to make the disallowance of the expenses. Furthermore, the Shri Ramjibhai Kanji bhai is representing the partnership firm in the capacity of the partner. Thus, payment to the partner cannot be a ground for making the disallowance. There was no documentary evidence brought on record suggesting that earlier TDS certificate issued by the AO for ₹ 50 lakhs was substituted by ₹ 1.50 crores. Thus it is transpired that the TDS certificate issued by the AO up to ₹ 2 crores whereas the payment was made less than ₹ 2 crores. Payment in the given case does not exceeds the limit as specified in the TDS certificate. Hence the ground of appeal of the revenue is dismissed. TDS u/s 194C/195 - addition u/s 40 (a)(ia) - terminal handling charges on account of non-deduction of TDS - Applicability of provisions of section 172(8) - HELD THAT - Handling charges were recovered/received by the agents of the non-shipping companies as evident from the invoice issued by them which are placed. There is a Circular issued by the CBDT. The said Circular No. 723, dt. 19th Sept., 1995 states that where the provisions of s. 172 are to apply, the provisions of ss. 194C and 195 relating to tax deduction at source are not applicable. We also find that handling charges paid to the non-shipping companies also covered under the provisions of section 172(8) DR at the time of hearing has not brought anything on record suggesting that the handling charges were not paid by the assessee to the non-resident shipping companies. In view of the above, we hold that the assessee was not liable to deduct the TDS under the provisions of section 194C/195. - Decided against revenue. Addition of unpaid liabilities u/s 41(1) - AO found that these are very old creditors appearing in the books of accounts of the assessee AND assessee has not filed any confirmation to the fact that these liabilities are still appearing in the books of accounts - HELD THAT - . There is no dispute about the fact that the liability shown by the assessee has not ceased to exist in its books of account and the same is very much reflected in its balance sheet. Therefore, in our considered view, the same cannot be added to the total income of the assessee u/s 41(1) of the Act until and unless it is not written off in the book of accounts. See OPTO AUDIO ELECTRONIC PRODUCTS PVT. LTD., KOLKATA VERSUS ITO., WARD-11(2), KOLKATA 2012 (7) TMI 613 - ITAT, KOLKATA - We hold that there cannot be any income on account of cession of liability which has not been written back by the assessee in its books of accounts. - Decided against revenue. Addition of travelling and conveyance expenses, telephone and postage expenses, and motorcycle maintenance expenses - AO on estimated basis disallowed such expenses to the tune of 10% - HELD THAT - onsidering the nature of the business of the assessee and past history, we feel that the disallowance to the extent of 5% as restricted by the learned CIT (A) is reasonable. Accordingly, we do not want to disturb the finding of the learned CIT (A) - Decided against revenue.
Issues Involved:
1. Deletion of addition on account of processing charges. 2. Deletion of addition on account of terminal handling charges. 3. Deletion of addition on account of unpaid liabilities under section 41(1). 4. Partial deletion of addition on account of car & motorbike expenses, telephone & postage expenses, and travel & conveyance expenses. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Processing Charges: The Revenue contended that the CIT(A) erred in deleting the addition of ?1,98,07,861/- for processing charges due to non-deduction of TDS. The assessee, a partnership firm engaged in marine food processing/export, incurred these charges without TDS under section 194C. The AO found discrepancies, including a lack of processing activity by the billed party and absence of a valid TDS certificate for the actual payee. The CIT(A) deleted the addition, noting similar expenses in prior years without disallowance, registration under Marine Products Export Development Authority, and payments under the direction of the billed party. The Tribunal upheld the CIT(A)'s decision, finding no contradiction in the AO's findings and confirming the validity of the TDS certificate. 2. Deletion of Addition on Account of Terminal Handling Charges: The Revenue challenged the deletion of ?1,29,22,949/- for terminal handling charges due to non-deduction of TDS under section 194C r.w.s 40(a)(ia). The assessee argued these charges were part of ocean freight paid to agents of non-resident shipping businesses, governed by section 172 as clarified by CBDT Circular No. 723. The AO disagreed, viewing the payments as made to resident transport operators. The CIT(A) deleted the addition, referencing the composite nature of the contract and the direct connection between handling charges and freight. The Tribunal upheld this, citing the applicability of section 172(8) and relevant judicial precedents. 3. Deletion of Addition on Account of Unpaid Liabilities Under Section 41(1): The Revenue disputed the deletion of ?26,69,502/- for unpaid liabilities. The AO deemed these liabilities ceased to exist due to their age and lack of confirmation. The CIT(A) deleted the addition, noting the liabilities were not written back in the books and the mere passage of time does not invoke section 41(1). The Tribunal agreed, emphasizing that liabilities must be written off in the books to be considered ceased and referenced supporting case law. 4. Partial Deletion of Addition on Account of Car & Motorbike Expenses, Telephone & Postage Expenses, and Travel & Conveyance Expenses: The AO disallowed 10% of these expenses, totaling ?2,57,639/-, citing potential personal use. The CIT(A) reduced this to 5%. The Tribunal upheld the CIT(A)'s decision, finding the 5% disallowance reasonable given the nature of the business and historical context. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletions and partial deletions of the contested additions. The Tribunal's decision was based on consistent application of legal principles, validation of documentary evidence, and adherence to judicial precedents. The judgment was pronounced in open court on 28/02/2020.
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