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2021 (4) TMI 236 - AT - Income TaxTDS u/s 194C - Disallowance u/s 40(a)(ia) - payment made to the transporter, freight inward charges and clearing forwarding charges - HELD THAT - There is no ambiguity that the assessee is liable to deduct the TDS under the provisions of section 194C of the Act on the payment made to the transporters and freight inward charges. However, the assessee has been provided an immunity from the deduction of TDS under subsection 6 to section 194C of the Act if the assessee obtains PAN from the transporters. The relevant provisions of subsection 6 to section 194C. Admittedly there is no dispute to the fact that the assessee has obtained PAN from the transporters which were furnished in the TDS return. Thus, in our considered view the claim of the assessee cannot be denied on account of non-deduction of TDS on the payment made to the transporters/freight inwards under sub-section (6) to section 194C . There is provisions under the Act to file the necessary details to the prescribed authority but such prescribed authority has not been nominated under the provisions of law. Thus in the absence of such prescribed authority no fault can be attributed to the assessee for not filing the necessary details as discussed above. In our considered view in the absence of prescribed authority, the details filed by the assessee along with form 26Q should be considered as sufficient compliance on the part of the assessee. Accordingly, we hold that the claim of the assessee cannot be denied in the absence of non-filing of necessary details to the prescribed authority as alleged by the AO. Provisions as provided under sub-section 6 and 7 to section 194C of the Act are independent to each other and therefore they cannot be read in conjunction. In other words non-compliance of the provisions of sub-section 7 to section 194C of the Act the claim of the assessee cannot be denied as there was the compliance on the part of the assessee for the provisions as provided under subsection 6 to section 194C .As decided in M/S ARIHANT TRADING CO. PAHARI 2019 (3) TMI 1251 - ITAT JAIPUR The provisions of section 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in the limited context of non-deduction of TDS and the same cannot be extended to ensure that even where the assessee complies with his statutory obligation not to deduct TDS on receipt of PAN, merely because the subsequent obligation in terms of filing of prescribed forms has not been complied with, the assessee should suffer disallowance of the expenditure. Disallowance on account of forwarding charges - The disallowance was confirmed by the learned CIT (A) for the reason that the assessee is silent on the issue. However, we find that the assessee has also furnished the copy of the PAN of such transporter which is placed on page 167 of the paper book. Thus what is inferred is that even the contention of the authorities below is assumed correct, then also there cannot be any disallowance on account of non-deduction of TDS as the assessee has complied the provisions of section 194C(6) of the Act which have been elaborately discussed in the preceding paragraph. Hence the ground of appeal of the revenue is dismissed and the ground of appeal of the assessee is allowed. TDS u/s 194I - additional discount given on account of go-down rent and tax not deducted thereon - HELD THAT - We note that it was the decision of the assessee to extend the discount or not to the parties. Similarly, there was no doubt on the correctness of the claim made by the assessee. The AO has no power to seat on the armchair of the assessee and direct to carry out its business affairs in a particular manner. Therefore we are of the view that such discount extended by the assessee cannot be denied. Provisions of section 194I of the Act cannot be attracted on the discount extended by the assessee to its customers/buyers. Similarly the assessee has claimed discount as deduction which cannot be equated with the rent. Furthermore, we also note that the learned CIT (A) has adjudicated the issue raised before him by allowing the appeal of the assessee but subject to the direction which has been discussed in the preceding paragraph. As such, we do not find any defect in the order of the learned CIT (A).Therefore we do not find any merit in the ground of appeal filed by the revenue. Disallowance of depreciation on car and expenses related to cars which were registered in the name of the directors - AO held that the assessee company and the director are two different person capable of holding assets in personnel capacity - HELD THAT - Admittedly, it is necessary for the assessee to own the assets for claiming the depreciation on the assets. But the word own has not been defined under the provisions of the Act whether the ownership refers to the legal ownership or the beneficial ownership. Undoubtedly, the assessee in the present case is not the legal owner of the vehicles but it has made the payment for the acquisition of the cars. Thus it can be inferred that the assessee owns the cars in the capacity of beneficial owner. Thus, in our considered view the assessee is entitled for the depreciation on the car - See ELECTRO FERRO ALLOYS LTD. 2011 (10) TMI 495 - ITAT, AHMEDABAD . Regarding the other expenses of fuel and maintenance on such cars, we find that the AO has made the disallowance in adhoc manner which are not permitted under the provisions of law. As such, the AO was under the obligation to pinpoint the personal expenses incurred by the assessee but he has not done so - the dominion ownership of the car rest with the company. The company being a body corporate is different from the individuals. In a body corporate there cannot be any element of personal expenses as alleged by the AO. - Decided against revenue. Disallowance of the commission expenses - As assessee failed to prove the services rendered by the commission agent AO disallowed the same and added to the total income of the assessee - HELD THAT - The commission paid by the assessee to the party was disallowed by the AO based on his surmise and conjecture which is unwarranted under the provisions of law. The AO has been empowered by the statute under the different sections including the provisions of section 131/133(6) of the Act which authorizes to conduct the investigation/enquiries in the claim made by the assessee before disallowing the same on finding procedural lapses. Thus we do not find any reason to uphold the order of the authorities below. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed.
Issues Involved:
1. Deletion of disallowance under section 40(a)(ia) of the Income Tax Act. 2. Deletion of disallowance of additional discount subject to verification. 3. Deletion of disallowance of depreciation on car and car expenses. 4. Confirmation of disallowance of commission expenses. Issue-wise Detailed Analysis: 1. Deletion of Disallowance under Section 40(a)(ia) of the Income Tax Act: The Revenue contended that the CIT(A) erred in deleting the disallowance of ?2,59,03,812/- made by the AO under section 40(a)(ia) of the Act. The AO found that the assessee did not deduct tax under section 194C on payments to transporters, freight inward charges, and clearing & forwarding charges. The assessee argued that PAN details of the transporters were reported in the TDS return, complying with section 194C(6) and (7). The AO rejected this, stating that the assessee failed to submit PAN details to the prescribed authority within the prescribed time. The CIT(A) deleted the disallowance for transportation and freight inward charges, but upheld the disallowance for clearing & forwarding charges of ?1,38,350/-. The Tribunal upheld the CIT(A)'s decision, noting that the prescribed authority under section 194C(7) was not specified, and thus, the assessee's compliance by filing PAN details in form 26Q was sufficient. 2. Deletion of Disallowance of Additional Discount Subject to Verification: The Revenue challenged the deletion of ?5,48,921/- disallowed by the AO for additional discount given on account of go-down rent without deducting tax under section 194I. The AO argued that the discount was essentially rent and required TDS deduction. The CIT(A) deleted the disallowance subject to verification, accepting the assessee's contention that the discount was a business practice to receive early payments. The Tribunal upheld the CIT(A)'s decision, stating that the discount extended was a business decision and not subject to TDS under section 194I. 3. Deletion of Disallowance of Depreciation on Car and Car Expenses: The Revenue argued that the CIT(A) erred in deleting the disallowance of depreciation on cars and related expenses, as the cars were registered in the directors' names. The AO disallowed the depreciation, stating that the cars were not owned by the company and could be used for personal purposes. The CIT(A) allowed the depreciation, citing the Supreme Court's decision in Mysore Minerals Ltd. v. CIT, which held that beneficial ownership suffices for claiming depreciation. The Tribunal upheld the CIT(A)'s decision, noting that the cars were purchased with company funds and used for business purposes, thus entitling the assessee to claim depreciation. 4. Confirmation of Disallowance of Commission Expenses: The assessee contested the confirmation of disallowance of ?55,14,372/- in commission expenses paid to M/s C.M. Smith & Sons Ltd. The AO disallowed the commission, doubting the genuineness of the agreement and the necessity of hiring a commission agent for old customers. The CIT(A) upheld the disallowance, stating that the assessee failed to demonstrate the services rendered by the agent. The Tribunal reversed the CIT(A)'s decision, emphasizing that the AO did not conduct necessary enquiries to substantiate the disallowance and that the assessee provided sufficient evidence of the commission's legitimacy. Conclusion: The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, concluding that the disallowances made by the AO were not justified based on the evidence and legal provisions presented. The Tribunal emphasized the importance of adhering to statutory requirements and conducting thorough enquiries before making disallowances.
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