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TMI Blog2017 (8) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The provisions of section 195A of the Income-tax Act and the provisions of section 201 and 201(1A) of the Income-tax Act may apply but not the provisions of section 40(a)(ia) of the Income-tax Act. In these circumstances, the Assessing Officer is directed to examine the issue afresh and examine whether the provisions of section 37 would apply. The ground is considered allowed for statistical purposes. Addition under section 40(a)(ia) as reported in the tax audit on considering the fact that TDS has been paid - Held that:- The disallowance is not warranted. The assessee has not violated the provisions of section 40(a)(ia) of the Income-tax Act as the TDS has been deducted and paid to the Government. Moreover the amount is also not outstanding at the end of the year. In view of that, we direct the Assessing Officer to delete the amount and the ground is accordingly allowed. Rent paid for the managing director's residence - disallowance under section 40A - Held that:- Disallowance cannot be either deleted or sustained in the absence of complete details. It is a fact that the respective recipients have declared the income. It is also the fact that the director has not shown i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) on December 30, 2008 has made various disallowances, which the learned Commissioner of Income-tax (Appeals) confirmed, except the claim of excess depreciation which was given relief and on which the Revenue is not an appeal. Aggrieved on the order of the learned Commissioner of Income-tax (Appeals), the assessee is in appeal before us. 3. Ground No. 1 is as under : 1. The Commissioner of Income-tax (Appeals) erred in law and facts of the case in confirming the addition of ₹ 58,714 by the Assessing Officer under section 40A(3) of the Income-tax Act, 1961, ignoring the fact that they are independent payments supported by vouchers and cannot be aggregated. 3.1 The issue pertaining to this ground is that the Assessing Officer noticed from the books of account that the assessee made payments on various dates in cash exceeding ₹ 20,000 each amounting to ₹ 2,93,569 and 20 per cent. thereof was disallowed invoking the provisions of section 40A(3). 3.2 Before learned Commissioner of Income-tax (Appeals), the asses see contested that there is no single payment in excess of ₹ 20,000 and the amounts were paid at different times in the day, which wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year. Since each of the payment is less than ₹ 20,000, even if it is paid to the same person in a day, the same cannot be disallowed as the provisions of section 40A(3) of the Income-tax Act as applicable are not attracted. Accordingly, the disallowances made by Assessing Officer, as confirmed by the Commissioner of Income-tax (Appeals), stands deleted. The ground is allowed. 4. Ground No. 2 is as under : 2. The Commissioner of Income-tax (Appeals) ought to have deleted the addition under section 40(a)(ia) of the Income-tax Act, 1961 amounting to ₹ 1,78,280 considering the fact that TDS has been deducted and paid. 4.1 The issue pertains to the disallowance of an amount of ₹ 1,78,280 invoking the provisions of section 40A(3) of the Income-tax Act. The Assessing Officer noticed that in the five cases of contractors, TDS has been charged to the respective accounts and later ₹ 50,620 was written off. The Assessing Officer noted that the assessee had paid/credited various accounts to the contractors without deducting TDS. However, the assessee submitted that tax on contract amounts have been paid to the Government and expenditure has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.1 The issue arising out of this ground was that an amount of ₹ 15,800 has been paid without deducting tax. The assessee submitted that the TDS has been deducted on the said payment and the amount has already remitted to the Government account. Even though the same was reiterated before the learned Commissioner of Income-tax (Appeals), the learned Commissioner of Income-tax (Appeals) rejected the ground that the assessee has not preferred the ground nor substantiated the contentions made in the statements of facts. 5.2 After consider the rival contentions, we are of the opinion that the disallowance is not warranted. The assessee has not violated the provisions of section 40(a)(ia) of the Income-tax Act as the TDS has been deducted and paid to the Government. Moreover the amount is also not outstanding at the end of the year. In view of that, we direct the Assessing Officer to delete the amount and the ground is accordingly allowed. 6. Ground Nos. 4 and 5 are as under : 4. The Commissioner of Income-tax (Appeals) ought to have considered that fact that rent paid of ₹ 8,10,000 for the managing director's residence is in the course of business and excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord the working of perquisites in the hands of the managing director, which comes to taxable rent-free accommodation value at ₹ 1,26,750. It was submitted that in the computation of income by that assessee even though this amount was not taken separately, there was excess income offered. The learned counsel referred to the return filed at ₹ 13,28,963 whereas the revised computation of the director would come to ₹ 11,62,590. It was submitted that the expenditure was for the purpose of business and allowable in the hands of the company. 6.4 After considering the rival contentions, we are of the opinion that the provision of rent-free accommodation to the director is generally provided by the company. However, the assessee has not placed on record the terms of employment or the resolution passed with reference to the provision of accommodation to the managing director. Not only that the Assessing Officer has invoked the provision of section 40A of the Income- tax Act, however, there is no finding of the Assessing Officer that the amount was unreasonable. In these circumstances the disallowance cannot be either deleted or sustained in the absence of complete detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee contended before the learned Commissioner of Income-tax (Appeals) that the amount is allowable as a revenue expenditure, the following principles laid down by the hon'ble Supreme Court in the case of CIT v. Associated Fibre and Rubber Industries Pvt. Ltd. [1999] 236 ITR 471 (SC). The learned Commissioner of Income-tax (Appeals) however distinguished the said judgment as it pertains to the assessment year 1972-73. He also referred to the judgment of the hon'ble Supreme Court in the case of Deputy CIT v. Core Health Care Ltd. [2008] 298 ITR 194 (SC) and stated that the proviso inserted in section 36(1)(iii) of the Income-tax Act with effect from April 1, 2004 will operate prospectively and accordingly the proportionate disallowance was required to be capitalised. 7.3 The learned counsel while reiterating the submissions made before the Commissioner of Income-tax (Appeals), referred to the judgment of the hon'ble Delhi High Court in the case of CIT v. Bharat Hotels Ltd. [2016] 381 ITR 222 (Delhi) for the proposition that in a business which is already in existence, the funds borrowed for expansion of the business is allowable as revenue expenditure. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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