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TMI Blog2021 (4) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... idering the findings given by the AO in the assessment order. 2. The ld.CIT(A) has erred in law and on the facts in deleting the disallowance of Rs. 5,48,921/- subject to verification without appreciating the fact that the additional discount given is by way of rent and TDS u/s.1941 is applicable in this case. 3. The ld.CIT(A) has erred in law and on facts in deleting the depreciation on car and car expenses of Rs. 34,63,547/- without appreciating the fact that the basic condition required for claim of depreciation are not fulfilled in this case. 3. The first issue raised by the Revenue is that the learned CIT (A) erred in deleting the disallowances of Rs. 2,59,03,812/- made by the AO under section 40(a)(ia) of the Act. 4. The fact in brief is that, during the assessment proceeding, the AO found that the assessee has not deducted tax under section 194C of the Act on certain payment made to the transporter, freight inward charges and clearing & forwarding charges amounting to Rs. 2,22,48,327/-, Rs. 36,55,545/- and Rs. 138,350/- respectively. 4.1 The assessee with regard to the payment to transporter and freight inward charges claimed that in the TDS return in form 26Q for Qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 40(i)(ia) cannot be invoked, since there was no liability to deduct tax. Disallowance of the said sum is not in accordance with law. It is deleted. (2) Freight charges (Rs. 36,55,541/-) Appellant had purchased goods from Essar Steel Ltd.. The seller of the goods arranged for the transport. It paid the transportation charges and collected the same amount from the appellant. As contended by the AR this amount was only reimbursement of the transportation charges and therefore not liable for deduction of tax. Hence I am of the view that the disallowance is not sustainable. It is deleted. (3) Payment to M/s Trishul Trasnport Co. (Rs. 1,38,350/-) The written submission filed by the appellant is silent on the disallowance. A.O.'s observations remain uncontroverted. Disallowance of the said sum is upheld. 6. Being aggrieved by the order of the ld. CIT-A, both the Revenue and the Assessee are in appeal before us. The Revenue is in appeal for the deletion of Rs. 2,59,03,812/- and assessee is in appeal against the confirmation of the addition of Rs. 1,38,350/- only. The Assessee in its appeal in ITA No. 1397/Ahd/2015 has raised the ground which reads as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority within the prescribed time as provided under sub-section (7) to section 194C of the Act. The relevant provision of sub-section (7) to section 194C of the Act reads as under: (7) The person responsible for paying or crediting any sum to the person referred to in subsection (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. 10.3 At the threshold, we find that though there is provisions under the Act to file the necessary details to the prescribed authority but such prescribed authority has not been nominated under the provisions of law. Thus in the absence of such prescribed authority no fault can be attributed to the assessee for not filing the necessary details as discussed above. In our considered view in the absence of prescribed authority, the details filed by the assessee along with form 26Q should be considered as sufficient compliance on the part of the assessee. Accordingly, we hold that the claim of the assessee cannot be denied in the absence of non-filing of necessary details to the prescribed authority as alleged by the AO. 10.4 It is also signi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT (A) erred in deleting the addition for Rs. 5,48,921/- made by the AO for the additional discount given on account of go-down rent and tax not deducted thereon under section 194I of the Act. 12. During the assessment proceeding it was found that the assessee has given additional discount to 5 parties on account of go-down rent paid by such parties. The details of the parties and the rent stand as under: SN Name of the concern Godown Rent paid (Rs.) 1 Shah Steel & Tubes, Mumbai 2,00,774 2 Puja Tube Corporation, Mumbai 53,617 3 Digar tubes Ltd., Mumbai 30,956 4 Bombay Hardware Pvt. Ltd., Mumbai Rs. 2,51,680 5 Vora Bros. & Co., Mumbai 5,48,921 12.1 The assessee's contention was that usually its customer don't take the delivery of the goods in their own go-down after the purchase but leave the good at the assessee's go-down until and unless the customer further sold the good to other parties. Thereafter the customers instruct the assessee to deliver the goods directly to the premises of such other parties. However the above mentioned parties have taken the delivery of goods to their own go-downs hence it (the assessee) has given discount for g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties own their own go-down in Mumbai and therefore there was no occasion/reason for the assessee to offer any discount for lifting the goods from the go-down of the assessee. Secondly, the assessee is paying the rent to those parties in the form of discounts extended to them and therefore such discount is subject to the provisions of section 194I of the Act being rent in the garb of discount. 17.1 For the 1st reasons, we note that it was the decision of the assessee to extend the discount or not to the parties. Similarly, there was no doubt on the correctness of the claim made by the assessee. The AO has no power to seat on the armchair of the assessee and direct to carry out its business affairs in a particular manner. Therefore we are of the view that such discount extended by the assessee cannot be denied. 17.2 For the 2nd reason, we note that the provisions of section 194I of the Act cannot be attracted on the discount extended by the assessee to its customers/buyers. Similarly the assessee has claimed discount as deduction which cannot be equated with the rent. Furthermore, we also note that the learned CIT (A) has adjudicated the issue raised before him by allowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) who allowed the appeal of the assessee by observing as under: Having considered the facts of the case I am inclined to accept the contentions of the Ld. A.R. As admitted by the A.O himself the funds for purchase of the cars were provided by the appellant. The Hon'ble Supreme Court in the case of Mysore Minerals Ltd. Vs. C.I.T. 239 ITR 775 (S.C) has held that the section of the I.T. Act, 1961, confers a benefit of the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the Legislature to the assessee. It was further held by the Hon'ble Supreme Court that the term owned as occurring in section 32(1) of the Income-tax Act must be assigned a wider meaning. The Hon'ble Supreme Court has held as under: "It is well-settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the Legislature in enacting section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time being vests the dominion over the building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ann.com 458 where the relevant finding of the coordinate bench reads as under: 5. 2. On consideration of the facts of the appellant's case it is noticed that the motor car was purchased, though in the name of the appellant's director, it was purchased out of the funds of the appellant-company and it is also not in dispute that the motor car was purchased for the purpose of business of the appellant. Thus the motor car being, business asset of the appellant and purchased for the purpose of business and used as such by the appellant, in view of the decision in the case of Mysore Minerals Ltd. [1999] 239 ITR 775 (SC) referred to above and other decisions cited by the learned authorised representative, I hold that the disallowance made by the Assessing Officer on this ground is not justified and hence the same is directed to be deleted. 22. 2 In the present case it is not disputed that investment was made by the assessee in purchase of the motor car. It is shown as asset in the balance-sheet of the company. If expenditure for running the vehicle was incurred by the assessee, the assessee is de facto owner of the vehicle. It is not disputed that it was used for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the commission expenses amounting to Rs. 55,14,372/- only. 28. The assessee in the year under consideration has claimed an expense of Rs. 74,37,729/- under the head commission which were paid to 15 parties. Out of such 15 parties, one party namely M/s C.M. Smith & Sons Ltd was paid the commission by the assessee for an amount of Rs. 55,14,372/- only. The assessee to establish the genuineness of the commission paid to such party has filed the copy of the income tax return of the party, confirmation from party and the copy of agreement. The assessee also filed the details of the sales generated through the involvement of such commission agent namely M/s C.M. Smith & Sons Ltd. 28.1 However, the AO found certain defects in the agreement filed by the assessee. It was pointed out by the AO that this agreement was made dated 01st January 2010 but there was no sale made by it through the involvement of impugned commission agent in the financial year ending 31st March 2010. Similarly the copy of the agreement was neither notarized nor prepared on the stamp paper. Likewise there was no date mentioned by the parties who executed the agreement. Accordingly, the AO doubted on the genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is allowable only on the assessee furnishing evidence in support of the services rendered. Therefore impugned disallowance of commission is upheld. This ground of appeal is dismissed. 30. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 31. The learned AR before us submitted that the assessee has incurred commission expenses in the regular course of its business and therefore the same is eligible for deduction under section 37 (1) of the Act. 32. On the other hand the learned DR before us submitted that the services rendered by the commission agent have not been brought on record by the assessee. Therefore, it can be inferred that the commission expenses has not been incurred in the course of the business. The learned DR vehemently supported the order of the authorities below. 33. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the onus lies upon the assessee to furnish the necessary details for the services rendered by the commission agent. In the case on hand the assessee has filed certain details as detailed under: i. Details of sales made through the commission ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the previous year; iv. Expenditure should not be of a personal nature; v. Expenditure should have been incurred wholly or exclusively for the purpose of the business or profession. 33.4 All of the five conditions mentioned above are to be satisfied before one can claim any expense as a deduction under this section. The last condition requires for allowing the claim of the expenses that the expenditure should have been incurred wholly or exclusively for the purpose of the business. This is a very vexed question, and a lot of litigation revolves around this issue. In fact, once the assessee has furnished the details for the deduction of commission expenses, the onus is shifted upon the AO to reject the contention of the assessee with valid reasoning and not on the basis of surmise and conjecture. 33.5 Indeed 2 of the parties were the old parties of the assessee yet the assessee hired services for the commission agent. Now the question arises commission paid by the assessee can be denied merely on the ground that these were old parties of the assessee. In our considered view, it cannot be a ground for rejecting the claim of the assessee in the given facts and circumstances. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, from that particular viewpoint that the question has to be approached."
33.9 In view of the above and after considering the facts in totality, we are of the view that the commission paid by the assessee to the party was disallowed by the AO based on his surmise and conjecture which is unwarranted under the provisions of law. The AO has been empowered by the statute under the different sections including the provisions of section 131/133(6) of the Act which authorizes to conduct the investigation/enquiries in the claim made by the assessee before disallowing the same on finding procedural lapses. Thus we do not find any reason to uphold the order of the authorities below. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed.
33.10 In the result, the appeal of the assessee is allowed.
34. In the combined results the appeal of the Revenue bearing ITA No.1531/Ahd/2015 for A.Y 2011-12 is dismissed and the appeal of the Assessee bearing ITA No.1397/Ahd/2015 for A.Y.2011-12 is allowed.
Order pronounced in the Court on 02/03/2021 at Ahmedabad. X X X X Extracts X X X X X X X X Extracts X X X X
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