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TMI Blog2018 (6) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... ed rental income from the machinery under the head business or provisions, therefore he is entitled to claim depreciation corresponding to the rental income derived from the letting out of machinery u/s 32 - Decided in favor of assessee. Disallowance u/s 194J for non deduction of TDS - expenses under the head legal and professional fees - Held that:- The case of the assessee falls after the enhancement of threshold limit - where the payments exceeds limit of 30,000/-, TDS is required to be deducted - in case Shri Sanjiv Khurana assessee is not in default - in case of R. M. Modi, there is lack of documentary evidence, thus case is remitted back to the file of the AO - decided for statistical purpose. X X X X Extracts X X X X X X X X Extracts X X X X ..... made for allowance of depreciation under section 32 as per ground of appeal numbers 3 above. The learned CIT (A) erred in law by not passing speaking order against contention made by the appellant. Relief claimed The said submission be considered and disallowance of depreciation of ₹ 590440/- be deleted. 7. The learned CIT(A) erred in law in not considering submission made towards compliance with provision of section 40(a)(ia) r.w.s. 201(1) for disallowance of ₹ 80000/- as per ground of appeal numbers 4 above. The learned CIT (A) erred in law by not passing speaking order for the same. Relief claimed The said submission be considered and disallowance of ₹ 80000/- be deleted." 3. The first issue raised by assessee in ground no.1 and 2 is that Ld. CIT(A) erred in confirming the disallowance of ₹ 26,548/- on account of payment for employees' contribution towards PF and ESIC after the due date. 4. Briefly stated facts are that the assessee is a private limited company and engaged in the business of Architecture, Interior Decorator and Turnkey Contractor. The AO during the assessment proceedings observed that the assessee has deposited employees' con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' contribution towards PF and ESIC has been decided against the assessee by the jurisdictional High Court in the case of CIT vs. GSRTC reported in 265 CTR 64. On the contrary, the Ld. DR vehemently supported the order of authorities below. 7. We have heard the rival contentions and perused the materials available on record. At the outset, it was observed that the issue for delayed deposits of employees' contribution towards PF and ESIC has been decided against the assessee by the Hon'ble Jurisdictional High Court in the case of GSRTC (supra). The relevant extract of the order is reproduced below: "In view of the above and considering section 36(1)(va), read with sub- clause (x) of clause (24) of section 2, it is to be held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees account in the relevant fund or funds on or before the 'due date' mentioned in Explanation to section 36(1)(va). Consequently, it is held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on rental basis, which has been used for the purpose of the business by the other party. Thus, the provision of Section 32 have been duly complied with in the case on hand. Even in the earlier year a rental income was offered to tax under the head business or profession and depreciation thereon was duly allowed to the assessee. The objects mentioned in the memorandum of the association permits the assessee to rent out the machineries. Therefore, it can be inferred that the assessee has rented out the machineries for the purpose of its business. 12. However, the Ld. CIT(A) disregarded the contention of the assessee and confirmed the order of AO by observing as under: "5.2 I have carefully considered the rival contentions. I am in agreement with the contention of the AO wrt the disallowance of ₹ 5,90,440/- u/s.32 of the I. T. Act. The appellant has failed to produce evidence wrt usage of machinery given on the rent in connection with claim of depreciation by it. The rented machineries are owned by the assessee. However, they have not been utilized by the assessee. Further, the machineries have been given on rent. In this case, the assessee is engaged in the business of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: "Therefore, in the facts of the present case, we hold that the lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out." From the above judgment, it is inferred that the use of capital asset by the assessee being owner is not mandatory. What is required under the provisions of Section 32 of the Act is that the asset must be used for the purpose of the business. 15. The AO in his order has also alleged that there is no evidence suggesting that the party who has taken machinery on rental basis has used the machine for the purpose of its business. In this regard, we observed that the assessee has discharged his onus by showing the rental income from the machineries in its income tax return. Therefore, the assessee is not answerable, whether the party who has taken the machines from the assessee has actually used for the purpose of their business. Besides the above we also observe that the assessee has offered rental income from the machineries und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has righty disallowed this amount. The appellant has also accepted its mistake in non-deduction of TDS. Accordingly, the disallowance of ₹ 1,05,000/- u/s.40(a)(ia) of the Act is confirmed." Being aggrieved by the order of Ld. CIT(A) assessee is in second appeal before us. 18. The Ld. AR before us submitted that Shri Sanjiv Khurana has included the amount of fees received from the assessee in their income tax return. Therefore, the assessee is not under the obligation to deduct TDS u/s 194J r.w.s. 40(a)(ia) of the Act. Ld. AR in support of his claim has filed the copies of Income Tax Return, Statement of Income, Trading and Profit & Loss account and Balance Sheet, which are placed on Pages 36 to 39 of the Paper book. 19. The Ld. AR also submitted that the payment to Shri Sanjiv Khurana does not exceed the threshold unit as specified u/s 194J of the Act. Therefore, the assessee is not liable to deduct TDS in respect of payment made to Shri Sanjiv Khurana. The assessee also submitted that the threshold unit was increased from ₹ 20,000 to ₹ 30,000/- under the provision of Section 194J of the Act w.e.f 01/07/2010 and in the instant case the bill was raised by Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 24. Besides the above, we also note the assessee has claimed that Shri Sanjiv Khurana has paid the taxes on the amount of professional charges received from the assessee. The assessee in this regard has duly filed the copy of Income Tax Return, Statement of Income of Shri Sanjiv khurana. Therefore, in our considered view further disallowance u/s 194J r.w.s 40(a)(ia) of the Act will lead to double taxation in the hands of the assessee. Therefore we hold that the assessee is not in default on account of non-deduction of TDS u/s 40(a)(ia) of the Act. 25. Now coming to the payment made to R. M. Modi, it was claimed by the Ld. AR that such payment is in the nature of salary and therefore there is no liability for the deduction of TDS from the payment made to Shri R. M. Modi. However, in this regard we note that no documentary evidence has been furnished by the assessee demonstrating that there exists employer and employee's relationship between the assessee and Shri R. M. Modi. Therefore, in the absence of the documentary evidence, we reject the arguments advanced by the Ld. AR. However, we find force in the argument of Ld. AR that Shri R. M. Modi has included the amount of profe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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