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TMI Blog2016 (4) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... within the period specified under the contract. By no stretch of imagination can such expenses be hit by Explanation 1 to sec. 37(1) of the Act, as there was neither any breach of law nor any offence committed or the said expenditure was of the nature that was prohibited under law. - Decided in favour of assessee - ITA No. 3950/Del/2013 - - - Dated:- 19-4-2016 - Sh. J. S. Reddy, AM And Smt. Beena A Pillai, JM For the Petitioner : Sh. Mohit Gupta, CA For the Respondent : Dev Jyoti Das, CIT-DR ORDER Per Beena A. Pillai, JM The present appeal has been filed by the Revenue against the order of the ld. CIT(A)-XVI, Delhi vide order dated 19.03.2012 for A.Y. 2009-10 on the following grounds of appeal: 1. Whether on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in not considering the fact that Circular No. 715 of CBDT dated 08.08.1995 says that tax deduction u/s 194I does not depend upon nomenclature the tax is to be deducted from rent paid by whatever name called. Also as per explanation (i) to section 194I of the Act, the incidence of deduction of tax at source (TDS) does not depend upon the nomenclature but on the contents of the agreement. 5. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred not considering the observance of the Assessing Officer that the assessee itself had contradicted its claim by submitting that it had itself deducted TDS @ 11.33% on certain machine hire charges on the payments made to same parties to which payments have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il engineers, steel structure, plumbing and electric work on contract basis. As per the details filed by the assessee it was observed by the ld. Assessing Officer that TDS was deducted u/s 194C of the Act. The ld. Assessing Officer was of the opinion that the assessee should have deducted TDS u/s 194I of the Act on the payments made to the parties. The ld. Assessing Officer, therefore, made an addition u/s 40(a)(ia) of the Act for non deduction of TDS. 2.2 Aggrieved by the order of the ld. Assessing Officer the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A) further observed that assessee had never entered into any contract for hiring of machinery and equipments, and the contracts entered with all the contractors were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific terms of contract. Failure of completion of specific terms of contract is incidental to the business and liability of compensation arising because of such failure is an allowable deduction under the Act. As there was neither breach of law, nor any offence committed nor the said expenditure was prohibited by law, these expenses are not hit by the Explanation to section 37(1). I find support for my views from the following judicial pronouncements: I. CIT vs. Sri Rajagopal Transports P. Ltd. (1983) 144 ITR 573 (Mad.); II. Addl. CIT vs. Arvind Mills Ltd. (1977) 109 ITR 212 (Guj); III. CIT vs. Indian Commercial Co. P. Ltd. (1977) 106 ITR 465 (Bom.); IV. CIT vs. Murari Lal Ahuja Sons, (1989) 177 ITR 228 (P H). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub section3(1) of Section 139. This section 40(a) (ia) of the Act refers to only the duty to deduct tax and pay to the government account. If there is any short fall due to any difference of opinion as to the taxability of any item or the nature of pay provisions, the assessee can be declared to be an assess in default u/s.201 of the Act and no disallowance can be made by invoking the provisions of section 40(a) (ia) of the Act. 4. Respectfully following the same, we uphold the findings of the ld. CIT(A) in respect of ground nos. 1 to 6. 5. Ground no. 7 relates to the deletion of an addition being liquidated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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