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TMI Blog2014 (5) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, therefore some part of administrative and managerial expenses can be held as attributable to earn the exempt income from such investments - thus, the disallowance u/s. 14A is restricted to Rs. 3 lacs – Decided partly in favour of Assessee. Disallowance u/s 40(a)(ia) of the Act – Lower rate of TDS deducted as prescribed u/s 194J of the Act – Held that:- Following APOLLO TYRES LTD Versus DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1), ERNAKULAM [2013 (11) TMI 209 - ITAT COCHIN] - if any part of the tax which required to be deducted was found to be not deducted then can be levied in respect of that part of the amount which was not deducted - the language of section 40(a)(ia) does not say that even for short deduction disallowance has to be made proportionately - section 40(a)(ia) does not enable the assessing officer to disallow any proportionate amount for short deduction or lesser deduction – thus, the order of the CIT(A) deleting the addition is upheld – Decided against Revenue. Disallowance u/s 40(a)(ia) of the Act – Payment made for machinery hiring charges – TDS not deducted – Held that:- CIT(A) has deleted the disallowance on the ground that machinery/plant and equipme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs House Agent, AO concluded that the payments were raised directly by Express Transport Pvt. Ltd to the assessee and payments given on account of reimbursement should have been subjected to TDS. AO further observed that the clearing and forwarding agent would not be treated as agent of non-resident shipping company and was an independent contractor /licenced custom house agent not working for any particular non-resident shipping company. The AO referred to CBDT s Circular No. 715 clarifying that payments of clearing and forwarding agent for carriage of goods are to be subjected to deduction of tax at source u/s. 194C and unlike travel agents, they were independent contractors. AO further stated that section 194(c) refers to any sum paid and reimbursement of actual expenses cannot be deducted out of the bill amount for the purpose of tax deduction at source. He therefore held that reimbursement could not be taken out of the bill amount for the purpose of tax deduction and it was not material as to whether one bill for agency commission was raised by clearing and forwarding agent and another bill for reimbursement of actual expenses was being raised in respect of expenses o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Ground No. 2 relates to disallowance of expenses of Rs. 6,54,164/- u/s. 14A of the Income Tax Act read with Rule 8D in respect of exempt dividend of Rs. 47,41,076/-. Assessee s contention before the AO was that no expense except demat charges of Rs. 98,404/- was incurred for earning dividend income claimed to be exempt and this dividend income was mainly earned out of investments made in earlier years. This contention of the assessee was not acceptable to the AO and he applying rule 8D made disallowance of Rs. 6,54,144/-. This action of the AO was confirmed by Ld. CIT(A). 9. Before us learned counsel of the assessee submitted that Rule 8D is not applicable for the assessment year under appeal, therefore AO was not justified in making disallowance u/s. 14A by applying this rule. He reiterated the submission made before the lower authorities that only expenses incurred by the assessee were only Rs. 98,404/- towards demat charges for earning exempt income during the year under appeal. He therefore prayed that if at all any disallowance is required to be made it should be restricted to this much amount. Ld. DR on the other hand vehemently supported the orders of lower authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a lower rate than prescribed u/s. 194J of the Act. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the disallowance of Rs. 3,60,204/- made u/s. 40(a)(ia) of the Act, in respect of machine hire charges, completely overlooking the fact that as per provisions of section 40(a)(ia), the tax is to be deducted at source under chapter XVIIB which prescribes different rate under different sections and in the instant case, the assessee deducted tax at a lower rate than prescribed u/s. 194I of the Act. 13 First two grounds are decided together as under:- 14. Ground no. 1 relates to disallowance of Rs. 60,60,960/- u/s. 40(a)(ia) of the Act. Assessee had made payment of Rs. 1,01,01,600/- to Akaaish Mechatonics Ltd (AML) for providing maintenance services for plant and machinery, equipments, and electronic applications forming part of machinery and also entered into annual maintenance contract with the said company, TDS U/S.194C was deducted by the assessee from the payments made. Assessee filed copy of agreement with AMI. Assessing Officer was of the view that as per terms of the agreement, services rendered by AML were in the nature of technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the facts of this case. In the case of UE Trade Corporation vs. DCIT, the Hon ble Tribunal in similar facts has held as under:- 6. We have heard both the parties and gone through the material available on record. We have also gone through the Tax Audit Report in Form No.3CD placed at Pages 20 to 49 of the Paper Book. Annexure-XIV of the Tax Audit report gives the details of tax deductible under various sections of the Act. Page 1 of Annexure- XIV gives the details of payments on which tax has not been deducted at all. The total amount of expenditure is at Rs.7,32,827/-. Pages 2 to 6 of Annexure-XlV give the details where there is a shortfall due to lesser deduction than required to be deducted. The total amount of expenses is at Rs.20,24,4557-on which shortfall of tax at Rs.3,26,011/- has been worked out by the tax auditors. Page 3 of the Annexure gives the details where tax has been deducted but not paid to the credit of the Central Government, The assessee has added back the expenditure on which tax was deductible but no tax was deducted at all and also where tax was deducted at source but not paid to the credit of Central Government amounting to Rs.20,16,778/-. Detail o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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