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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri P.M. Jagtap & Shri A. T. Varkey, JM]
These cross appeals by assessee and revenue and the cross objection by assessee are arising out of the order of Ld. CIT(A)-15, Kolkata dated 21.11.2017 for AY 2009-10. Both these cross appeals and the cross objection are taken up together for the sake of convenience. The second ground of appeal of assessee, the 1st ground of appeal of the revenue and 2. the 1st ground of appeal of the cross objection of assessee are against the action of the Ld. CIT(A) in confirming the addition on account of freight and carriage in ward expenses to the extent of Rs.25,79,530/- u/s. 40(a)(ia) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).
Brief facts of the case are that the AO noted that the assessee company incurred a sum of Rs.1,76,66,048/- on account of freight and transport expenses under the head selling and distribution expenses. The AO took note that out of this sum Rs.21,06,224/- has been capitalized as relating to SGCI and Silico Manganese being WIP. The AO noted that these payments were made as per contract to 14 transporters out of which 2 transporters’ payments were below Rs. 50,000/- viz. Rs.42,547/-. According to AO, the balance payments were made in excess of Rs.50,000/- to each contractor. Therefore, according to AO as per sec. 194C of the Act, the assessee company should have mandatorily deducted TDS u/s. 194C on the aforesaid sum and since the assessee failed to deduct TDS on the sum of Rs.1,76,23,501/- he added back the same invoking sec. 40(a)(ia) of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to restrict the disallowance to an amount of Rs.25,79,530/-. Aggrieved, both the revenue as well as the assessee is in appeal and the assessee has also filed Cross Objection before us.
We have heard rival submissions and gone through the facts and circumstances of the case. The facts noted by the AO is not repeated for the sake of brevity. We note that the Ld. CIT(A) has made a finding of fact that the assessee has deducted TDS on the freight payment amounting to Rs.1,55,59,824/-. Thereafter, the Ld. CIT(A) noted that since the assessee has not deducted TDS for expenses of Rs.25,79,530/- the Ld. CIT(A) has disallowed Rs.25,79,530/- and allowed relief to assessee of Rs.1,50,87,078/- (Rs.1,76,66,608 – Rs.25,79,530). We note that the finding of the fact made by the Ld. CIT(A) that the assessee has deducted TDS of freight payment amounting to Rs.1,55,59,824/- has not been specifically challenged by the Revenue, therefore, the finding of fact of the Ld. CIT(A) has crystallized and, therefore, we find no ground to disturb the finding of fact as recorded by the Ld. CIT(A) and, therefore, the revenue appeal against the relief granted by the Ld. CIT(A) stands dismissed.
Coming to the disallowance confirmed by an amount of Rs.25,79,530/-, we note that it comprises of two figures Rs.21.06,224/- which the assessee had claimed to have been capitalized and Rs.3,49,682/- given to United Traders Co. and Vivek Enterprises amounting to Rs.1,23,624/- out of which we note that Rs.21,06,224/- has never been claimed by the assessee as deduction. Therefore, the question of disallowance does not arise and, therefore, the Ld. CIT(A) erred in confirming the disallowance of this amount because the assessee has never claimed this amount as expenditure so, therefore, question of disallowance by invoking section 40(a)(ia) of the Act does not arise, therefore, we delete the disallowance of an amount of Rs.21,06,224/-. In respect to the other disallowance confirmed by the Ld. CIT(A) of Rs.4,73,306/- (Rs.3,49,682/- plus Rs.1,23,624/-), the Ld. AR does not press against this disallowance and, therefore, we confirm the disallowance made by the Ld. CIT(A) of Rs.4,73,306/-.
The next ground of appeal of the assessee is against the action of the Ld. CIT(A) in confirming Rs.60,199/- u/s. 40(a)(ia) of the Act which is not pressed, so dismissed.
7. Coming to the Revenue’s appeal. Ground no.2 is against the action of the Ld. CIT(A) in restricting the disallowance of freight in ward of Rs.60,199/-, we note that brief facts of the case are that AO in the assessment order has observed that the assessee company has incurred a sum of Rs.33,47,565/- on account of freight and carriage in ward expenses under the head ‘manufacturing expenses’. When the assessee company was asked the details of TDS deducted it failed to produce any details. So, the AO was of the opinion that it is not possible to ascertain whether the assessee company complied with the provisions of sec. 194C of the Act and the AO wondered as to how the entire expenditure claimed related to manufacturing activity of goods inward or is related to capital work in progress of new unit. Since the assessee failed to produce the requisite details 1/5th of the expenditure which works out to Rs.66,95,130/- was disallowed and added back. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to restrict the disallowance to Rs.60,199/-. Aggrieved, the revenue is before us and the assessee though appealed against the confirmation of Rs.60,199/- has not pressed this ground before us. So, we dismiss the assessee’s appeal in respect of the action of Ld. CIT(A) in confirming Rs.60,199/-. So, what we need to adjudicate is the action of the Ld. CIT(A) giving relief to the assessee.
We have heard rival submissions and gone through the facts and circumstances of the case. We are not repeating the facts noted by the AO, supra, for the sake of brevity. We note that during the appellate proceedings, the Ld. CIT(A) has noted that the assessee has claimed total expenditure of Rs.3,34,75,651/- on account of freight and carriage expenses. However, the AO has allowed only 1/5th of the expenses claimed on the plea that it is related to capital work. We note that the Ld. CIT(A) has made a finding of fact that assessee has deducted TDS wherever it was applicable. The Ld. CIT(A) has made a finding of fact that the assessee has not deducted TDS where payments were less than Rs. 20,000/- or where made to government agencies. This finding of fact has not been controverted by the Department so it has crystallized. The Ld. CIT(A) has only found out that in respect to payment of freight and carriage in ward made to XPS, 1/1, Camac Street, Kolkata-16 amounting to Rs.33,233/- and clearing and forwarding charges amounting to Rs.26,966/- assessee has not deducted TDS, therefore, he has restricted the disallowance to Rs.60,199/- (Rs.33,233 + Rs.26,966) in the place of the expenditure claimed of Rs.3,34,75,651/- so, giving relief to the assessee to the tune of Rs.3,34,15,452/-. We note that this finding of fact has not been controverted by the revenue so, the finding of fact has crystalised and the Ld. DR could not produce any material before us to controvert the finding of fact or the decision of AO to treat the expenses as related to capital work. So, we are inclined not to interfere with the order of the Ld. CIT(A) so, we confirm the order of Ld. CIT(A). Therefore, this ground of appeal of revenue is dismissed.
9. Coming to ground no. 3 of revenue’s appeal which is against the action of Ld. CIT(A) in deleting the disallowance of Rs.1,80,000/- out of rent payment. Brief facts of the issue, according to AO, are that on examination of details the AO found that the assessee company paid rent for residential flat amounting to Rs.1,80,000/- to Tirupati Properties & Investment (P) Ltd. for staff accommodation. According to AO, neither copy of agreement nor utilization of the said flat and whether the said residential flat was allotted to executive staff of the company, remuneration paid to such staff with terms of appointment etc. were furnished. So, according to AO, since the assessee has not even furnished details of TDS deducted out of aforesaid rent payment, claimed for residential accommodation remained unverified, hence he disallowed and added back the said amount. On appeal, the Ld. CIT(A) deleted the addition of Rs.1,80,000/- by observing that the books of account have been verified and the TDS has been deducted on rent payment. Aggrieved, revenue is before us.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO disallowed the claim of rent payment for want of details and evidence and according to him, the assessee has not even furnished details of TDS deducted out of aforesaid rent payment. On appeal, the Ld. CIT(A) deleted the addition by observing that the books of account have been verified and the TDS has been deducted on rent payment. This finding of fact has not been challenged by the revenue so, it has crystallized. We note that flat was taken on rent for utilisation of executive staff of the assessee company, who come to Kolkata from the assessee’s workshop and factory situated at Durgapur for the purpose of business and so is an allowable expenditure. So, we confirm the order of Ld. CIT(A) and dismiss the ground of appeal of revenue.
Next ground of appeal of revenue is against the action of Ld. CIT(A) in deleting the disallowance of Rs.1,20,000/- on account of retainer-ship fees. The AO disallowed the claim of assessee as it remained unverified for want of details of TDS deducted on the aforesaid sum and nature of service rendered by professional. On appeal, the Ld. CIT(A) deleted the addition. Aggrieved, revenue is before us.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO disallowed the claim of assessee as it remained unverified for want of details of TDS deducted on the aforesaid sum and nature of service rendered by professional On appeal, the Ld. CIT(A) deleted the addition by observing that the books of account have been verified and the TDS has been deducted on this payment to professional engaged in advising the assessee on taxation. This finding of facts has not been challenged before us. So, we are not inclined to interfere with the order of Ld. CIT(A). So, we confirm the order of Ld. CIT(A) and dismiss this ground of appeal of revenue.
Next ground of appeal of revenue is against the action of Ld. CIT(A) in restricting the disallowance of Rs.1,95,218/- to Rs.10,000/- on account of donation. Brief facts of the case according to AO are that the assessee company claimed donation paid of Rs.1,95,218/- which it included under the head Miscellaneous Expenses. The AO disallowed the same and added it to the income of the assessee because the assessee in its computation nor did furnish any details and evidence of the aforesaid claim. Moreover, according to AO, the said expenses was not related to assessee’s business, hence he disallowed and added back. On appeal, the Ld. CIT(A) restricted the disallowance to Rs.10,000/-. Aggrieved, the revenue is before us.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee claimed expenditure of Rs.1,95,218/- on account of giving donation. Since no evidence was furnished before AO, he disallowed the claim of assessee. Before the Ld. CIT(A), it was brought to his notice that the payments were made for printing advertisement materials in souvenirs and news papers, so it was contended by the assessee that the expenditure was for business purposes. So, the Ld. CIT(A) allowed the expenditure after examining the ledger account as business expenditure. For doing so, he relied on the order of the jurisdictional High Court in CIT Vs. Bata India Ltd. 201 ITR 884 (Cal). The facts aforesaid could not be controverted by the Revenue, so the impugned order of Ld. CIT(A) is confirmed. Since CO not pressed, it stands dismissed.
In the result, appeal of assessee is partly allowed and that of revenue is dismissed & CO of assessee is dismissed.
Order is pronounced in the open court on 3rd April, 2019