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Income Tax Appellate Tribunal, GUWAHATI BENCH, “E COURT”
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
ORDER
Per Shri A.T.Varkey, JM
This is an appeal preferred by the assessee against the order of Ld. CIT(Appeals), Shillong dated 29-03-2019 for the AY 2016-17.
Though the assessee has raised seven grounds of appeal
, the ld.AR has pressed only five grounds of appeal i.e. ground nos. 2,3, 4 &
5. According to him, ground nos. 2,3 & 4 can be decided together. Ground nos. 2,3 & 4 reads as under:-
2. For that the Id. CIT(A) was not justified in arbitrarily confirming the disallowance of Rs. 20,413/- being 30% of Legal and Professional Charges of Rs. 68,043/- by invoking provisions of section 40(a)(ia) of the Act without appreciating the fact that the Id. AO has made the disallowance arbitrarily and without bring in on record any material to show that such payment to a person exceeded Rs. 30,000/- during the relevant year. 3 For that the Id. CIT(A) was not justified in arbitrarily confirming the disallowance of Rs. 14,400/- being 30% of Accounting Charges of Rs. 48,000/- by invoking provisions of section 40(a)(ia) of the Act without appreciating the fact that the Id. AO has made the disallowance arbitrarily and without bringing on record any material to show that such payment to a person exceeded Rs. 30,000/-- during the relevant year. 4. that the Id. CIT(A) was not justified in arbitrarily confirming the disallowance of Rs. 67,010/- being 30% of Rent of Rs. 2,23,364/- by invoking provisions of section 40(a)(ia) of the Act without appreciating the fact that the Id. AO has made the disallowance arbitrarily and without bringing on record any material to show that such payment to a person exceeded Rs. 1,80,0001- during the relevant year.”
Golden Arrow Travels P.Ltd
Coming to ground no. 2 i.e disallowance of Rs. 20,413/-, which is 30% of legal and professional charges incurred by the assessee of Rs. 68,043/-, we note that the AO during the assessment proceedings noted that the assessee had debited an amount of Rs. 68,043/- as legal and professional expenses during the relevant FY. Therefore, the AO asked the assessee to explain as to why TDS was not deducted since the payment exceeded the threshold limit prescribed u/s. 194J of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) i.e. Rs. 30,000/-. According to the AO, since no explanation could be submitted by the assessee before him, he disallowed 30% of Rs. 68,043/-, which comes to Rs. 20,413/-. On appeal, the ld. CIT(A) confirmed the order. Aggrieved, the assessee is before us.
4. We have heard both the parties. Before us the ld. AR drew our attention to page-1 of the paper book, which is the ledger copy of legal & professional expenses, wherein we note that the assessee had paid to four (4) legal consultants totaling to Rs. 68,043/-. The payments to these professionals especially individually do not exceed Rs. 30,000/- and since no payment has been made to legal & professional breaches Rs.30,000/- which is the threshold limit prescribed u/s. 194J of the Act, no disallowances u/s. 40(a)(ia) of the Act was warranted. According to us, since the assessee was not required to deduct TDS u/s. 194J of the Act, disallowance ought not to have been resorted to by the AO. However, we note that the AO has disallowed the amount taking note that the assessee did not furnish any explanation on this issue. Therefore, we restore this issue back to the file of the AO for the limited purpose of verification and thereafter, if the payments made to any legal professional do not exceed Rs. 30,000/- no disallowance to be made or else the issue to be decided in accordance to law. With this observation matter is remanded back to AO. 5. Coming to ground no. 3 the ld.AR drew our attention to pages 2 & 3 of the paper book, which are the ledger copies of the “accounting charges” incurred by the assessee. We note that the AO has disallowed accounting charges invoking section 194J/194C of the Act. Since the assessee could not explain before him the expenditure incurred of Rs.48,000/- he resorted to disallowance, which action has been confirmed by Ld. CIT(A). Before us, it was Golden Arrow Travels P.Ltd demonstrated with the help of paper book pages 2 & 3 that assessee had two offices functioning at Shillong and another at Guwahti. According to the ld.AR, the assessee had made the payments to Shri Rasik Biswas, [Shillong] @ Rs. 2,500, which comes to Rs.30,000/- and Shri Vinoy Kr. Barua [Guwahati] @ 1,500/-, which comes to Rs. 18,000/- and since threshold limit of Rs. 30,000/- has not been breached, according to the ld. AR, the disallowance on this issue was not warranted u/s. 40(a)(ia) of the Act. Even though the ld. AR is able to demonstrate before us that in the facts and circumstances of the case no disallowance was warranted, since threshold limit of Rs. 30,000/- to payee has not been breached , we are of the opinion no disallowance could be made/warranted. However, the case of the AO is that the assessee has not given any explanation when he called for it. Therefore, in the interest of justice, we restore this issue also back to the AO for the limited purpose of verification. If the contention of assessee is found to be correct no disallowance is to be made. 6. Coming to ground no. 4, the disallowance u/s. 40(a)(ia) of the Act is made on the rental payments. Our attention was drawn to pages 4-5 of the paper book, which is the ledger copy account in respect of rentals paid to the offices maintained at Shillong and Guwahati. According to the ld.AR, Shillong Office payment was made to Merrywelle Jyrwa to the tune of Rs. 1,18,364/- and in respect of Guwahati office rental payment was made to Navneet Singh of Rs. 1,05,000/- totaling to Rs. 2,23,364/-. Accordingly the ld.AR contended that threshold limit on rental payments u/s. 194I of the Act was at Rs. 1.80 lakhs and since both the payments are below the threshold limit of Rs. 1.80 lakhs, no disallowance could be made u/s. 40(a)(ia) of the Act. We note that the AO has resorted to disallowance since the assessee did not file the details before the AO. Therefore, in the interest of justice, we restore this issue back to the AO for the limited purpose of verification of the aforesaid facts and if the facts contended before us are correct as shown in the ledger account pages 4 and 5 of the paper book, then no disallowance is warranted u/s. 40(a(ia) of the Act. Therefore, the impugned disallowances are set aside and restored back to the AO in respect of grounds nos. 2, 3 & 4 and the AO is directed to decide as observed (supra) and these grounds are allowed for statistical purpose.
ITA No. 233/Gau/2019 Golden Arrow Travels P.Ltd 7. Coming to ground no. 5 which is delayed payment of business disallowance of Rs.7,237/-, which according to assessee is amount of interest on late payment of TDS. We note that this issue is no longer res integra. We note that similar issue has come before this Tribunal in DCIT vs Maa Annapurna Transport Agency Ltd in AY 2013-14, order dt. 15-1-20. Relevant portion is reproduced herein below:-
“28. Ground no. 4 is against the action of the ld. CIT(A) in allowing the amount of Rs. 3,15,107/- which was disallowed by AO being the interest on late payment of TDS. We note that the AO disallowed Rs.3,15,107/- since this amount has been remitted by the assessee for late payment of TDS. We note that the ld. CIT(A) has given relief taking note of the decision of this Tribunal in the case of M/s. Narayani Ispat Pvt. Ltd as well as the decision of the Hon’ble Allahabad High Court in the case of Triveni Engineering Works Ltd. vs Commissioner Of Income-Tax ( 144 ITR 732). We note that this issue is no longer res integra. This Tribunal in Narayani Ispat P. Ltd. has decided this issue by holding as under: The issue of delay in the payment of service tax is directly covered by the judgment of Hon'ble Apex Court in the case of Lachmandas Mathura Vs. CIT reported in 254 ITR 799 in favour of assessee. The relevant extract of the judgment is reproduced below: "The High Court has proceeded on the basis that the interest on arrears of sales tax is penal in nature and has rejected the contention of the assessee that it is compensatory in nature. In taking the said view the High Court has placed reliance on its Full Bench's decision in Saraya Sugar Mills (P.) Ltd. v. CIT (l979) 116 ITR 387 (All.) The learned counsel appearing for the appellant-assessee states that the said judgment of the Full Bench has been reversed by the larger Bench of the High Court in Triveni Engg. Works Ltd. v. CIT (l983) 144 ITR 732 (All.) (FB), wherein it has been held that interest on arrears 0] tax is compensat01Y in nature and not penal. This question has also been considered by mis Court in Civil Appeal No. 830 of 1979 titled Sarraya Sugar Mills (P.) Ltd. v. CfT decided on 29-2-1996. In that view of the matter, the appeal is allowed and question Nos. 1 and 2 are answered in favour of the assessee and against the revenue ... In view of the above judgment, there remains no doubt that the interest expense on the delayed payment of service tax is allowable deduction. The above principles can be applied to the interest expenses levied on account of delayed payment of TDS as it relates to the expenses claimed by the assessee which "are - subject' to the -TDS provisions. The assessee claims the specified expenses of certain amount in its profit & loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assesee. Thus any delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and consequently the principles laid down by the Hon 'ble Apex Court in case of Bharat Commerce Industries Ltd. Vs. CIT (199 ) reported in 230 ITR 733 cannot be applied to the case on hand.
Golden Arrow Travels P.Ltd Thus, in our considered view, the principle laid down by the Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd. (supra) is not applicable in the instant facts of the case. Thus, we hold that the Assessing Officer in the instant case has wrongly applied the principle laid down by the Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd.(supra). We also find that the Hon'ble Supreme Court in the case of Lachmandas Mathura (Supra) has allowed the deduction on account of interest on late deposit of sales tax u/s 37(1) of the Act. In view of the above, we conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well' as TDS liability are allowable expenses u/s 37(1) of the Act. In this view of the matter, we find no reason to interfere in the order of ld.CIT(A) and we uphold the same. Hence, this ground of Revenue is dismissed.”
Therefore, respectfully following the said decision of the Tribunal, we allow this ground of appeal raised by the assessee and direct the AO to delete the addition of Rs. 7,237/-.
9. In the result, the appeal of assessee is partly allowed for statistical purpose . Order is pronounced in the open court on 17th June, 2020. Sd/- Sd/- (Dr. A. L. Saini) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 17th June, 2020 **PP(Sr.P.S.) Copy of the order forwarded to: 1. Appellant –Golden Arrow Travels Pvt. .Ltd Holding No. 7 Ward No. 9 Police Bazar Point, G.S Road, Shillong-793 001.
Respondent – I.T.O., W-1, Shillong. 2 3. CIT(A) , Shillong
CIT, Shillong 5. DR, ITAT, Guwahati.