2022 (9) TMI 462 - AT - Income Tax

Disallowance of expenses like manufacturing charges, wages, labour charges, salary, travelling, conveyance, staff welfare and maintaining - HELD THAT - The assessee had paid the expenses through banking channel. The amount was incurred out of such imprest booked on 31.03.2007, the details explanation was filed by the assessee - The expenses are paid in job-site and all the expenses are accumulated from different site to head office which was entered in books of accounts on dated 31.03.2007. AO did not find any specific lacuna or did not point out any discrepancies related to the expenses disallowed - Without any specific finding the addition of expenses is liable to be deleted. TDS u/s 194C - Disallowance u/s. 40(a)(ia) - HELD THAT - The assessee paid the transporter amount of Rs. 22,850/- and on date 26.06.2006 and dated 27.02.2007 amount of Rs. 22,850/-, accordingly the total amount is worked out amount to Rs. 49,573/- which is contravention of section 194C of the Act for non-deduction of TDS. The assessee was not able to clarify properly for reason for non-deduction of TDS on payment to transporter. The assessee was unable to mention any supporting case law in support of its reason for non-deduction of tax by contravening section 194C. Accordingly, this ground of the assessee is deleted. Appeal partly in favour of assessee.

Summary

Issues:
1. Addition of expenses disallowed by the AO.
2. Disallowance of expenses under section 40(a)(ia) for non-deduction of TDS.

Analysis:

Issue 1: Addition of expenses disallowed by the AO
The assessee, a manufacturer of distribution transformers, challenged the addition of expenses totaling Rs. 7,99,997 made by the AO during assessment proceedings. The expenses included manufacturing charges, wages, labor charges, salary, traveling, conveyance, staff welfare, and were booked on 31.03.2007. The assessee explained that the expenses were incurred for erecting tubular poles in remote areas under a government scheme. The expenses were paid through banking channels, and details were provided along with vouchers for materials procured. The Tribunal observed that the AO did not find any specific discrepancies related to the disallowed expenses. As the expenses were incurred for business purposes and paid through legitimate channels, the Tribunal held that the addition of expenses should be deleted.

Issue 2: Disallowance of expenses under section 40(a)(ia) for non-deduction of TDS
The disallowance under section 40(a)(ia) amounting to Rs. 49,573 was made due to non-deduction of TDS on payments to a transporter. The assessee argued that the amount was paid and not payable, thus section 40(a)(ia) should not apply. However, the Tribunal noted that the assessee failed to provide a proper clarification for the non-deduction of TDS on the transporter payments. Despite the lack of supporting case law or valid reasons for non-deduction, the Tribunal upheld the addition of Rs. 49,573 under section 40(a)(ia).

In conclusion, the Tribunal partly allowed the appeal of the assessee, deleting the addition of expenses disallowed by the AO but upholding the disallowance of expenses under section 40(a)(ia) for non-deduction of TDS.