2023 (1) TMI 217 - AT - Income Tax

TDS u/s 194C - payment to sub-contractor - non deduction of TDS - disallowance u/s. 40(a)(ia) - HELD THAT - Before us, AR has pointed to the breakup of labour and wages debited to the Profit and Loss account during the year under consideration. From the aforesaid table she pointed to the instances where the payments made to individual parties are below the limit prescribed u/s. 194C for deduction of TDS. We however find that there is no finding of the lower authorities on this issue. We are therefore of the view that the issue as to whether these payments are below the prescribed limits needs to be relooked by the A.O. We therefore restore the issue back to the file of A.O. and direct him to consider the submissions of the assessee and thereafter pass a speaking order on the issue and decide the issue in accordance with law. Assessee is also directed to co-operate by filing promptly the required details called for by the authorities. Thus the ground of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Disallowance under sec. 40(a)(ia) of the Income Tax Act, 1961.
2. Adjudication of adhoc disallowance under staff and labor welfare and miscellaneous expenses.
3. Addition of notional interest without proper appreciation of facts and legal provisions.

Issue 1: Disallowance under sec. 40(a)(ia) of the Income Tax Act, 1961:
The appeal was filed against the Ld. CIT(A)'s order confirming the disallowance of Rs. 25,73,070 under sec. 40(a)(ia) for alleged non-compliance with sec. 194C provisions. The A.O. had disallowed the amount as TDS was not deducted on payments made to subcontractors. The Ld. CIT(A) upheld the A.O.'s order. During the proceedings, the Ld.AR argued that certain payments fell below the prescribed limit for TDS deduction under sec. 194C. However, there was no finding by the lower authorities on this issue. The Tribunal directed the matter to be relooked by the A.O., emphasizing the need for a speaking order on the issue and cooperation from the assessee in providing necessary details. The Tribunal allowed the ground for statistical purposes, partly allowing the appeal.

Issue 2: Adjudication of adhoc disallowance under staff and labor welfare and miscellaneous expenses:
The ground related to the claim of adhoc disallowance of Rs. 28,823 under staff and labor welfare and miscellaneous expenses. However, this ground was not adjudicated by the Ld. CIT(A) or further addressed in the Tribunal's judgment.

Issue 3: Addition of notional interest without proper appreciation of facts and legal provisions:
The A.O. had confirmed an addition of Rs. 39,203 as notional interest without proper appreciation of facts and legal provisions. The Ld. CIT(A) upheld this addition. The Tribunal did not delve into this issue further in the judgment.

The Tribunal's judgment primarily focused on the disallowance under sec. 40(a)(ia) of the Income Tax Act, 1961, directing a reevaluation by the A.O. regarding TDS deductions under sec. 194C. The other issues raised by the assessee were either dismissed or not addressed in detail by the Tribunal. The decision highlighted the importance of proper verification and a speaking order by the A.O. for a comprehensive resolution of the tax dispute.