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TMI Blog2017 (5) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. was erred in travel beyond the directions of the ITAT, while disallowing the entire expenditure incurred under the head ‘machinery rents’. - Additions deleted - Decided in favour of assessee. TDS u/s 194C - reimbursement of expenditure incurred by the parties towards cost of fuel and spare parts - Held that:- The provision of section 194C of the Act has no application, when the payment is made towards reimbursement of cost of fuel and spare parts. The A.O. never disputed the fact that the impugned expenditure is incurred is towards reimbursement of fuel and spare parts, but disallowed said expenditure for failure to produce contractual agreements to prove its claim. We do not find any merits in the findings of the A.O. for the reason that there is no necessity of written contractual agreement to prove the expenditure incurred towards reimbursement of cost of fuel and spare parts. The assessee is in the business of hiring of machinery and in the process it has hired out its machineries to M/s. ESSAR Constructions, Chennai. The assessee has instructed the party to incur expenditure towards cost of fuel and spare parts, which was adjusted against the machinery rents payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In so far as disallowance of machinery maintenance expenditure u/s 40(a)(ia) of the Act, the ITAT observed that the assessee has explained expenditure incurred under the head machinery maintenance, which is incurred towards reimbursement of fuel and spare parts cost incurred by M/s. ESSAR Constructions, Chennai and M/s. Kishore Enterprises, which cannot be considered service contract which attracts TDS provisions of section 194C of the Act. 3. Consequent to the directions of the ITAT, the A.O. had taken up the case for re-examination. During the course of re-examination proceedings, the A.O. asked the assessee to furnish necessary details of expenditure incurred under the head machinery rent including name and address of the payee, mode of payment and also confirmation letter from the parties. In response to notice, the assessee has filed ledger extract along with confirmation letters explaining the nature of expenditure incurred, mode of payment and also balance outstanding at the end of the year. The A.O., however, could not satisfied with the explanations of the assessee, observed that the assessee failed to produce any proof to establish the identity of such persons and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including the decision of Hon ble High Court of Bombay in the case of Vodafone International Holdings BV Vs. CIT (311 ITR 46), observed that the assessee has not produced the details of payment, etc. as sought to decide whether expenses were genuinely incurred and payment was genuinely made, more so, when even identity of payer is not established and one payee has been denied the confirmation filed by the assessee and said it to be forged, the details of payments such as cheque numbers, etc. are also not furnished, the findings of the A.O. are unchanged. The assessee has not produced any evidence in support of genuineness of payments and TDS as per law was done, therefore, uphold additions made by the A.O. towards disallowance of unproved expenditure. In so far as disallowance of machinery maintenance expenditure, the CIT(A) observed that the assessee failed to produce any agreement in support of payments or any documentary evidence in support of payments made and failed to substantiate that the said expenditure was not liable for TDS or the TDS has been done on the same, therefore, confirmed disallowance made by the A.O. u/s 40(a)(ia) of the Act. Aggrieved by the CIT(A) order, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The A.O. ignoring the above findings, went on to disallow the expenditure as unproved expenditure for the simple reason that the assessee has failed to furnish necessary details, ignoring all the evidences filed by the assessee in the form of confirmation letters from the party and also ledger extracts to prove the payment of such outstanding credits in the subsequent financial years. We further observed that the assessee has filed a paper book containing confirmation letters along with ledger extracts. On perusal of the details filed by the assessee, we find that the parties have confirmed the transactions and also outstanding balance at the end of the year. Therefore, we are of the view that the A.O. was erred in travel beyond the directions of the ITAT, while disallowing the entire expenditure incurred under the head machinery rents . The CIT(A) without appreciating the facts, simply uphold additions made by the A.O., therefore, we direct the A.O. to delete additions made towards disallowance of machinery rent. 8. The next issue that came up for our consideration is disallowance of machinery maintenance expenditure u/s 40(a)(ia) of the Act, for failure to deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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