SUDHA SINDHU PANDA,BALASORE vs. ASSISTANT COMMISSIONER OF INCOME TAX, BALASORE

Shri P.K.Mishra and Shri Himanshu Jena P.K.Mishra and Shri Himanshu Jena, ld AR d ARs appeared for the assessee and Shri assessee and Shri Charan Dass, Ld Sr DR appeared for the revenue. DR appeared for the revenue.

It was submitted by ld AR that the assessee is in appeal against the It was submitted by ld AR that the assessee is in appeal against the It was submitted by ld AR that the assessee is in appeal against the order of the ld CIT(A) in confirming (i) the disallowance of employees order of the ld CIT(A) in confirming (i) the disallowance of employees order of the ld CIT(A) in confirming (i) the disallowance of employees contribution to PF amounting to Rs.1,31,771.00, (ii) disallowance of festival contribution to PF amounting to Rs.1,31,771.00, (ii) disallowance of festival contribution to PF amounting to Rs.1,31,771.00, (ii) disallowance of festival

P a g e 1 | 5 Assessment Year : 2017-18 celebration expenses of Rs.1,63,674/-, (iii) disallowance of prior period expenses to the extent of Rs.57,000/- and disallowance towards freight inward expenses of Rs.1,35,008/-, (iv) disallowance made u/s.40(a)(ia) of the Act of Rs.35,896/- and (v) disallowance of sales promotion expenses of Rs.2,72,409/-.

It was submitted by ld AR that in regard to the issue of employees contribution to PF, the assessee has paid the amount within the due date prescribed under the relevant Act insofar as the payment has been made before the due date of filing of return. In regard to the festival celebration expenses, it was the submission that these were compulsory expenses incurred by the assessee during various festivals in the business premises of the assessee. It was nothing but employee’s benefits. It was the submission that the assessee is in the business of trading of tyres and tubes and vehicle spare parts and maximum number of employees are working. It was the submission that the expenses were in the nature of employee’s welfare. In regard to prior period expenses, it was the submission that these expenses were basically incentives. Similarly in regard to prior period expenses of Rs.1,35,008/-, these were basically in regard to freight inward charges. In regard to disallowance u/s.40(a)(ia) of the Act, it was the submission that these were payments for purchase of software and AMC charges on CC camera. It was the submission that this does not require deduction of TDS. In regard to sales promotion expenses, it was the P a g e 2 | 5 Assessment Year : 2017-18 submission that the adhoc disallowance at 10% has been made, which is not permissible under the income tax Act.

In reply, ld Sr DR vehemently supported the order of the AO and ld CIT(A). It was the submission that the details had not been produced in the course of assessment proceedings or before the ld CIT(A). It was the submission that the addition as made by the AO and confirmed by ld CIT(A) is liable to be upheld.

We have considered the rival submissions. In regard to the issue of employee’s contribution to PF, it is noticed from the assessment order that the amounts had been paid before the due date of filing of return of income. However, in view of the decision of Hon’ble Supreme Court in the case of Checkmate Services Ltd reported in 448 ITR 518 (SC), the issue is held against the assessee.

In regard to festival celebration expenses, it is noticed that these payments were incurred in respect of employee’s festival celebration at the business premises of the assessee. These are merely in the nature of employees’ welfare. This being so, the disallowance made by the AO and confirmed by ld CIT(A) stands deleted.

Coming to the issue of prior period expenses of Rs.57,000/- and Rs.1,35,008/-, it is noticed that the assessee had not provided the explanation before the AO nor any documentary evidence even before the P a g e 3 | 5 Assessment Year : 2017-18 Tribunal is forthcoming. In such circumstances, the disallowance made by the AO and confirmed by ld CIT(A) stands upheld.

Coming to the issue of disallowance u/s. 40(a)(ia) of the Act, it is noticed that the assessee has not been able to prove that the software purchase is a capital expenses. The AMC charges on CC camera being the service contract, TDS is liable to be made. This being so, the disallowance made by invoking the provisions of section 40(a)(ia) of the Act stands confirmed.

Coming to the issue of sales promotion expenses, it is noticed that the Assessing Officer has made an adhoc disallowance of 10%, which is not permissible under the Income tax Act. If the AO disputes any details or evidences produced by the assessee, he should have specifically made the disallowance, which has not been done. This being so, adhoc disallowance of 10% of sales promotion expenses made by the AO and confirmed by the ld CIT(A) stands deleted.

In the result, appeal of the assessee stands partly allowed.