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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by the Revenue emanates from the order of the Ld. CIT(Appeals)-4, Pune dated 01.03.2017 for the assessment year 2012-13 as per the grounds of appeal on record.
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The crux of the grievance of the Revenue in this appeal is with regard to deletion of the disallowance of Rs.1,18,84,418/- u/s.40(a)(ia) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) for failure to make TDS u/s.194J read with Explanation 2 to clause (vii) of Sub-section (i) of Section 9 of the Act. This disallowance was deleted by the Ld. CIT(Appeals) which forms the bedrock of Revenue‟s appeal before us.
The brief facts in this case are that the assessee company is engaged in the business of owning and maintaining Race horses. The assessee company had filed its e-return of income declaring total loss at Rs.(-)1,62,58,690/-. During the assessment proceedings, the assessee was requested to furnish relevant details with respect to major expenses debited to the Profit & Loss account. On perusal of the same, it was observed that on certain expenses, no TDS was deducted. The details of the said expenses are as under:
Expenses Amount in Rs. Live Stock lease Rent 35,68,186/- Live Stock Expenses 1,18,84,418/- Total 1,54,52,604/-
The Assessing Officer requested the assessee to furnish explanation with respect to the claim of above expenses made on account of Live Stock Expenses and Live Stock Lease Rent. Further, the assessee was also requested to explain as to why said expenses should not be disallowed due to failure to comply with TDS provisions. The Assessing Officer was not satisfied with submissions of the assessee and the entire amount of Rs.1,54,52,604/-
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was disallowed by the Assessing Officer and added to the total income of the assessee.
That before the Ld.CIT(Appeals), the assessee filed detailed written submissions which is there on record. The Ld.CIT(Appeals) after considering the submissions of the assessee, facts of the case and the assessment order held as follows:
“5.3 Decision : I have perused the assessment order and the submission made by the appellant as above carefully. It is seen that the AO had disallowed the Live Stock Expenses of Rs.1,18,84,418/- & Live Stock lease Rent of Rs.35,68,186/- totaling to Rs.1,54,52,604/- on the ground that the appellant did not deduct TDS on the same and as the same was also disallowed in A.Y.2011-12. 5.3.1 The appellant on the other hand, submit that the AO without understanding the nature of expenses had applied the provisions of Section 40(a)(ia) of the Act for disallowing the expenses claimed by the appellant under proviso to section 48(4) of the Act. The appellant contended that section 40(a)(ia) of the Act was applicable only in case of expenses falling u/s.30 to 38 of the Act and claimed as business expenses under the head ‘Profits & Gains of Business or Profession’. The nature of expenses falling under the head ‘Income from Other Sources; in the case of the appellant. Reference was also made to the amendment of section 58(1A) w.e.f. 1st April, 2008, effective from A.Y.2018-19 wherein the provisions of section 40(a)(ia) would be applied for computing the income chargeable under the head ‘Income From Other sources’. In regard to expenses incurred on Live Stock Lease Rent, the appellant contended that such disallowance was completely beyond purview of section 194I of the Act. It was contended that the payment made as laid down in section 194I could never include the ‘Live Stock’. The Appellant also cited a number of decisions in support of its contention. The appellant therefore submitted that the addition was unlawful and unwarranted. 5.3.2 I find merit in the contention of the appellant. It is seen that the AO without appreciating the nature of expenses and claim of the appellant had invoked the provisions of section 40(a)(ia) for the expenses covered u/s.58(1A) of the Act. This is a patent mistake committed by the AO while disallowing the aforesaid expenses. It appears that the AO has led by the findings for AY.2011-12 in the assessment and followed the same mechanically without examining the very claim of the appellant and also the nature of such expenses. It is not the case of the AO that the expenses were not genuine. In view of the facts of the case itself without going to further nitty-gritty of the various decisions cited by the appellant, I hold that the AO was not justified in making the addition of Rs.1,54,52,604/- and the Same deserves to be deleted. The same is therefore deleted. Ground nos.1, 2 & 3 raised by the appellant are accordingly allowed.”
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We have perused the case records and analyzed the facts and circumstances in this case. On perusal of the assessment order, it is pertinent to note that the Assessing Officer has passed his decision mainly on the findings for assessment year 2011-12 and followed the same mechanically without examining the very claim of the assessee and the nature of such expenses. The applicability of section 40(a)(ia) of the Act are in a case of expenses falling u/s.30 to 38 of the Act and claimed as business expenses under the head „Profit & Gains of Business or profession‟. The nature of expenses is falling under the head „Income from Other sources‟ in the case of assessee. Reference was also made to the amendment of section 58(1A) w.e.f. 1st April, 2008, effective from A.Y.2018-19 wherein the provisions of section 40(a)(ia) would be applied for computing the income chargeable under the head „Income From Other sources‟, however, the relevant assessment year under consideration is A.Y.2012-13. Regarding expenses incurred on Live Stock Lease Rent, the assessee contended that such disallowance was completely beyond purview of Section 194I of the Act. The assessee has cited a numbers of decisions in support of its contention. The Ld. CIT(Appeals) has analyzed the entire factual matrix and legal aspects on the issue and has recorded a finding that ultimately nowhere in the assessment order, the Assessing Officer stated that the expenses were not genuine.
In view of the above facts and circumstances, we do not find any infirmity with the findings of the Ld.CIT(Appeals) and therefore, the same does not call for any interference. Hence, relief provided to the assessee by the Ld. CIT(Appeals) is hereby sustained. Accordingly, grounds raised by the Revenue are dismissed.
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In the result, appeal of the Revenue is dismissed.
Order pronounced on 03rd day of October, 2019.
Sd/- Sd/- D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 03rd October, 2019. SB आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(Appeals)-4, Pune. 4. The Pr. CIT-3, Pune. , आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ववभागीय प्रतततनधध ऩुणे / DR, ITAT, “B” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune.
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Date 1 Draft dictated on 01.10.2019 Sr.PS/PS 2 Draft placed before author 03.10.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order