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Income Tax Appellate Tribunal, INDORE BENCHE, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: This appeal by the Revenue is directed against the order of Ld. Commissioner of Income Tax(Appeals), Ujjain, (in short ‘CIT(A)’), dated 28.02.2014 pertaining to the A.Y. 2010-11. The revenue has raised following grounds of appeal: “1. Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in deleting the addition of Rs.19,50,019/- made by the Assessing Officer on account of non deduction of TDS on the payment made to M/s Gayatri
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Boring, Tanodiya towards blasting expenses even when bills produced by the assessee and kept on record do not reflect any such bifurcation towards labour charges and material used and assessee failed to deduct TDS on entire amount of Rs.21,87,970/-. 2. Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in deleting the addition of Rs.17,00,000/- made by the Assessing Officer on account of diesel expenses shown by the assessee.”
Briefly stated the facts are that the case of the assessee was taken for scrutiny assessment and assessment u/s 143(3) of the Income Tax Act, 1961( hereinafter refer to as the ‘Act’) was framed vide order dated 22.02.2013 while framing the assessment, the assessing officer observed that the assessee has not deducted tax, therefore, he invoked the provisions of u/s 40(a)(ia) and made addition of Rs.21,78,970/- in respect of blasting expenses. The Assessing Officer further made addition of Rs.4,25,000/- on account of non deduction of tax on JCB rent, further the assessing officer made addition of Rs.80,305/- on account of payment made one M/s Shrinath borewell, Javra. The assessing officer also made addition in respect of payments made to Shri Vishnu Shastri on which tax was not deducted amounting to Rs.4,26,155/-. Further the Assessing officer made disallowance out of diesel expenses of Rs.17,00,000/- and out of salary expenses of Rs.1,50,000/-.
Aggrieved by this the assessee had preferred an appeal before the Ld. CIT(A) who after considering the submissions of the assessee partly allowed. Thereby, the Ld. CIT(A) deleted the disallowance of
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Rs.19,50,019/- and deleted the addition of Rs.17,00,000/- made on account of diesel expenses. 4. Ground no.1 is against the deleting addition of Rs.19,50,019/-. Ld. Departmental Representative (‘DR’ in short) vehemently supported the order of the AO, on the contrary Ld. Authorized Representative (‘AR’ in short) supported the order of Ld. CIT(A). He submitted that the Assessing Officer made disallowance on the basis that the payments made to M/s. Gayatri Boring, Tanodia on which tax was not deducted. The assessee had credited in his books of account the expenditure only in a composite manner. He submitted that this finding of the Assessing Officer is contrary to the record.
We have heard the rival contentions perused the material available on record. The Ld. CIT(A) in his decision deleted the addition by observing as under: “I have considered the written submissions and also the reasons given by the AO in the assessment order. In my opinion that arguments and the submissions filed by the appellant have sufficient merit. The appellant is a civil contractor and the blasting has been the consequential work to the main contract of the appellant. It is also observed that the AO has not disputed that the material component of the blasting expenses was Rs.19,50,019/- and the labour component being only an amount of Rs.2,28,941/-. The absence of written agreement to disallow the entire expenditure for the reasons brought out by the AO are not well founded particularly when the entire facts have been confirmed by the payee party. The documentary evidences in the form of separate sheets indicating the amount of material and the labour component have also been filed by the payee party. Nothing had prevented the AO to conduct 3
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further inquiries with regard to the authenticity of the separate sheets filed during the assessment proceedings. These sheets give complete details of labour component and the material component of the transaction. Moreover, the AO has also not carried out any examination of books of accounts and return of income of M/s. Gayatri Boring Tanodia to ascertain if the amount under consideration has been reflected as a contractual receipt or sale of material. Simply because the party has taken the composite amount to ledger account is not sufficient reason to treat the amount as attributable to the work liable for TDS u/s 194C of the Act, when it had contained amount a 90% of material component. The appellant during the course of assessment proceedings filed Xerox copies of all the relevant bills, bifurcation of amount of labour charges and blasting materials, the slips indicating the bifurcation of material price and labour charges attached by M/s Gayatri Boring Tonadia with the various bills. The AO has not denied the filing of these relevant materials before him during the course of assessment proceedings. The AO has also not doubted the authenticity of the confirmations filed by the payee party and the above bills. It is also not a case of the AO that the expenses were not genuine and for non-business purpose. Therefore, in my considered opinion, it is not justifiable to disallow the entire expenditure on account of blasting only for the reason that the TDS was not done u/s 194C of the Act particularly when 90% of the expenditure pertained to the purchase of material and just 10% pertained to the work which can be considered as falling within the purview of the relevant TDS provisions. The reasons brought out by the appellant for non-deduction of TDS on the work component of the blasting amounting to Rs.2,28,941/- has not been found tenable. In my opinion, the TDS at the specified rate was statutorily required to be deducted on this part of amount. Therefore, to this extent, the AO was justified in disallowing the expenditure for the reason of non-deduction of TDS. Therefore, the remaining addition of Rs.19,50,019/- is hereby directed to be deleted. This ground of appeal is partly allowed.”
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The above finding on fact is not controverted by the Revenue by placing any contrary material on record. As the Ld. CIT(A) has given specific finding that labour charges component was of Rs.2,28,940/-. Under these facts, we do not see any reason to interfere in the findings of Ld. CIT(A), more particularly when the assessee has demonstrated that there was not a composite appeal for blasting and labour charges. This ground of the Revenue appeal is dismissed.
Ground No.2 is against the deleting addition of Rs.17,00,000/- made by the AO on account of diesel expenses. The Ld. DR supported the order of the AO on the contrary the Ld. DR supported the order of the Ld. CIT(A).
We have heard the rival contentions perused the material available on record. The assessing Officer observed that the assessee had debited power and fuel expenses of Rs.77,22,683/- against sale and contract receipts of Rs.2.19 crore. The Assessing Officer observed that payments were made both in cheque and cash. The Assessing Officer did not believe the evidences produced by the assessee on the ground that it remained unverifiable whether the diesel purchase was used for business of the assessee, however, the Ld. CIT(A) deleted the addition by observing that in the assessment year 2009-10 labour expenses claimed were of Rs.23.35 crores against the total turnover of Rs.1.01 crores. However, during the year under appeal, the labour expenses have been claimed at
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Rs.33.55 lacs which is just 15% of total turnover of Rs.2.19 crores therefore, the Ld. CIT(A) was of the view that use of machine was higher which decreased the labour cost and increased the diesel cost. This findings of Ld. CIT(A) is not rebutted by the Revenue by giving any contrary material on record. This ground of the Revenue is also dismissed.
In the result, the appeal of the Revenue is dismissed.
Order was pronounced in the open court on 13 .12.2017.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य / JUDICIALMEMBER Indore; �दनांक Dated : 13/12/2017 ctàxÄ? P.S/.�न.स.
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Private Secretary/DDO, Indore