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Facts
The assessee, engaged in the real estate business, appealed an order concerning the assessment year 2012-13. The Assessing Officer made an addition of Rs.1,00,000/- on account of advertisement charges paid to a sister concern, disallowing it as not for business activity. Another issue involved the disallowance of rent paid of Rs.2,40,000/- due to non-deduction of TDS.
Held
The tribunal noted that the assessee was not pressing the ground related to advertisement charges. Regarding the TDS disallowance on rent, the tribunal restricted the disallowance to 30% as per the amended provisions of Section 40(a)(ia) of the Act for the relevant assessment year. Furthermore, disallowances made on adhoc basis for other expenses like fuel, maintenance, telephone, etc., were deleted as they were not permissible.
Key Issues
Whether disallowance for advertisement charges paid to sister concern is justified? Whether disallowance for non-deduction of TDS on rent is limited to 30%? Are adhoc disallowances permissible under the Income Tax Act?
Sections Cited
40(a)(ia), 194-I, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
(�नधा�रण वष� / Assessment Year : 2012-13 ) Smart Lifestyle Multitrade Pvt Ltd., Vs ITO, Ward 1(4), B/190, BDA Housing Colony, Bhubaneswar Baramunda, Bhubaneswar PAN No. : AANCS 4516 R (अपीलाथ� /Appellant) .. (��यथ� / Respondent) �नधा�रती क� ओर से /Assessee by : Shri P.R.Mohanty, Adv राज�व क� ओर से /Revenue by : Shri Vijaya Singh, ld Sr DR सुनवाई क� तार�ख / Date of Hearing : 3 /12/2025 : 3 /12/2025 घोषणा क� तार�ख/Date of Pronouncement आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order dated 13.6.2025 passed by ld JCIT(A)-3, Chennai in Appeal No.CIT(A), Bhubaneswar- 1/10162/2019-20 for the assessment year 2012-13.
Shri P.R.Mohanty,fs ld AR appeared for the assessee and Shri Vijaya Singh, ld Sr DR appeared for the revenue.
It was submitted by ld AR that the assessee is in the business of real estate. It was the submission that the return filed by the assessee came to be processed and assessment came to be completed us.143(3) of the Act, in which an addition of Rs.1,00,000/- has been made in respect of advertisement charges paid to sister concern. It was the submission that the Assessing Officer had disallowed the same on the ground that it was not for business activity. It was the submission that the assessee is not pressing this ground. In view of above, this ground is dismissed.
In regard to next issue, it was the submission that this was against the action of the Assessing Officer in making disallowance under the provisions of section 40(a)(ia) of the Act in respect of non-deduction of TDS u/s.194-I of the Act on rent paid of Rs.2,40,000/-. It was the submission that the assessment year involved is 2012-13 and in view of the fact that the amendment made by the Finance Act (2) to section 40(a)(ia) of the Act, which stood as on date, the disallowance is liable to restricted to 30%. For this proposition, ld AR relied on the following decisions: “1. M/s. R.H. International vs ITO (ita No.6724/Del/2018) order dated 20.3.2019 2. Smt. Kanta Yadav vs ITO in dated 12.5.2017.
We have considered the rival submissions. As the provisions of section 40(a)(ia) of the Act for the impugned assessment year, the disallowance is restricted to 30% on the addition on account of non-deduction u/s.194-I stands restricted on rent paid of Rs.2,40,000/-. This ground is partly allowed.
It was the further submission that there are other additions i.e. fuel & maintenance expenses, repair & maintenance expenses, telephone, internet, travelling & conveyance expenses and business promotion expenses. It was the submission that all the disallowances were made on adhoc basis. It was the submission that adhoc disallowance is not permissible under the income tax Act.
In reply, ld Sr DR supported the orders of lower authorities.