M/S TRISTAR METALLURGICAL PVT. LTD.,KOLKATA vs. DCIT, CIRCLE-4(2), KOLKATA, KOLKATA
What did the Tribunal hold?
The Tribunal noted that the expenses were consolidated on a monthly basis. If broken down daily per person, the threshold limit of Section 40A(3) might not have been breached. Therefore, the issue was set aside for fresh adjudication.
What were the facts?
The assessee claimed travelling and conveyance expenses. The AO disallowed Rs. 35,07,317/- under Section 40A(3) as payments exceeded Rs. 20,000/- without TDS. The CIT(A) confirmed this disallowance.
What were the issues?
Whether consolidated monthly entries for travelling expenses violate Section 40A(3) if daily per-person expenses are within the limit? Whether the assessee was denied a proper opportunity to present the daily breakdown of expenses?
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA BENCH, “D” AT KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
Per Shri A.T.Varkey, JM
This is an appeal preferred by the Assessee against the order of Ld. CIT(A) – 2, Kolkata dated 03.07.2017 for Assessment Year 2014-15.
The main grievance of the Assessee is against the action of the Ld. CIT(A) in confirming the addition of the AO of Rs. 35,07,317/- u/s 40A(3) of the Act.
Brief facts of the case is that during assessment proceedings, the AO noted that the assessee had paid payments exceeding Rs. 20,000/- without deduction of TDS breaching the threshold limit prescribed by section 40A(3) and therefore, he made disallowance of Rs. 35,07,317/- which expenses the assessee claimed under the head “travelling and conveyance.” Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who confirmed the action of the AO. Aggrieved the assessee is in appeal before us.
We have heard both the parties and perused the record. We note that the assessee had claimed travelling and conveyance expenses incurred whenever any employee or director of the appellant-company travels to visit any customer. According to the assessee, if the actual expenses incurred for a person/employee on a daily basis is taken into consideration then it did not breach the threshold limit prescribed by section 40A(3) of the M/s. Tristar Metallurgical Pvt. Ltd. AY- 2014-15 Act. However, the whole confusion occurred according to the learned counsel, because the expenses of travelling and conveyance was entered on a consolidated basis/ entry and that the assessee did not get an opportunity to produce the break-up of the actual expenses incurred per day, per person which would clear the confusion caused by the consolidated entries made on this count. According to the counsel, since no proper opportunity, the assessee got during the assessment proceedings, the break-up of expenses on a daily basis could not be furnished before the AO. So according to assessee, given an opportunity, the assessee would be able to show the AO that on a single day, per person, the assessee has not breached the threshold limit prescribed u/s 40A(3) of the Act. And pleads that the assessee may be given an opportunity before the AO to explain the above facts and give documents to establish the same.
We note that the AO made the addition taking into consideration, the consolidated entries made on a monthly basis by the assessee for the travelling and conveyance expenses of its employees / directors. Since it was brought to our notice that the assessee had made the consolidated entry of this expenses of employees / directors incurred on a monthly basis and if the breakup is taken into consideration i.e. on a daily basis the expenses would not breach the threshold limit prescribed by section 40A(3) of the Act. Therefore, in the interest of justice and fair play, we set aside the order of the Ld. CIT(A) and remit this issue back to the file of the AO for fresh adjudication in accordance to law after hearing the assessee.
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