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Income Tax Appellate Tribunal, BENGALURU BENCH B, BENGALURU
Before: SHRI. INTURI RAMA RAO & SHRI. LALIET KUMAR
PER LALIET KUMAR, JUDICIAL MEMBER :
The present appeal is filed by the assessee against the order of the CIT (A), Mangaluru, dt.31.07.2017, for the assessment year 2010-11, on the following effective grounds :
ITA.1969/Bang/2017 Page - 2
With respect to grounds 2 and 3 the Ld. AR has submitted that the disallowance of the bad debts on account of spare parts returned of Rs.2,61,590/- and the disallowance on account of loss on schemes of Rs.79,000/- which was required to be reimbursed by the assessee’s principal, M/s. Mahindra & Mahindra Ltd, are required to be allowed u/s.37 of the Act, as expenditure was incurred wholly for the purpose of assessee’s business.
On the other hand the Ld. DR has drawn our attention to para 5.2.2 of CIT (A) wherein it is held as under :
ITA.1969/Bang/2017 Page - 3
5.2.2 The submissions of the appellant were considered. The AR submitted that the liability crystalised during the year though the transactions were related to the earlier years. But no evidence in support of the liability crystalised during the year was submitted. The AR also could not submit the year wise breakup of the purchase returns. In view of the above, as the expenditure pertains to earlier years, the action of the AO is upheld. The addition is confirmed.
With respect to ground.3 on disallowance on account of loss on schemes of Rs.79,000/-, the Ld. AR has submitted that the discounts were given to the customer under various schemes by the assessee on behalf of its principal, M/s. Mahindra & Mahindra Ltd. However the lower authorities have disallowed this as they were not incurred during the previous year pertaining to the impugned assessment year.
Per contra, Ld. DR has drawn our attention to para 5.3.2 of the CIT (A) order which is as under :
5.3.2 The submissions of the appellant were considered. The AR submitted that the liability crystalised during the year though the transactions were related to the earlier years. But no evidence in support of the liability crystalised during the year was submitted. The AR also could not submit the year wise breakup of the schemes. In view of the above, as the expenditure pertains to earlier years, the action of the AO is upheld. The addition is confirmed. The Ld. DR relying on the above has submitted that the authorities below have rightly disallowed the claim of Rs.79,000/-.
We have heard the rival submissions and perused the record. As per section 36(1)(vii) r.w.s.36(2) of the Act, the assessee is ITA.1969/Bang/2017 Page - 4 required to prove that it has written off debt as irrecoverable in the accounts of the assessee during the previous year and further the bad debt has been taken into account in computing the income of the assessee of the previous year or in an earlier previous year, in which the amount of such debt or part thereof is written off. In the present case, the assessee has not filed any evidence in support of its liability crystallised during the year and further no evidence has been shown to prove that it was taken into account while computing the income of the assessee. In view of the above, claim of the assessee is liable to fail. Accordingly we dismiss the ground with respect to bad debts of Rs.2,61,590/-.
Similar are the facts in respect of disallowance of Rs.79,000/-. For this purpose also the assessee has not given any evidence or any scheme wise break up of discounts unsettled by M/s. Mahindra and Mahindra Ltd. In view thereof no interference is called for. Accordingly grounds 2 and 3 are dismissed.
In respect of ground 4 of the assessee, the Ld. AR has submitted that the TDS should have been deducted at the rate of 15% and 20% up to 30.09.2009. However inadvertently, the TDS was deducted at the rate of 10%. It was submitted by the assessee that the provisions of Section 40(a)(ia) are not attracted , since for the short-deduction of TDS, the whole amount cannot be disallowed u/s.40(a)(ia) of the Act. For that purposes, the assessee relied upon the judgment of the Hon’ble jurisdictional High Court in the matter of CIT v. Kishore Rao & Others (HUF) [ITA No.660/2015, ITA.1969/Bang/2017 Page - 5 dt.17.03.2016]. Our attention was drawn to paras 6, 7 and 8 of the judgment, which reads as under : 6. In our view, as per the decision of the Calcutta High Court, the view taken by the Tribunal is that Section 40(a)(ia) of the Act may he invoked only in case of there being an absence of deduction. Further, in case of bona fide wrong impression, if the deduction is at a lesser rate, the same cannot be a ground for disallowance by invoking the provisions of Section 40(a)(ia). 7. Examining the matter, we find that there are two angles to the matter: The first is, whether it was a case of no deduction' or not in the present case. The answer would be in the negative because, the deduction was already made at the rate of 1%. The second angle would be as to whether it was under a bona fide wrong impression that only 1% was deducted instead of 2%. The contention of the assessee was that, having realized that deduction was 2% instead of 1%, the amount of TDS has been paid with interest. It is also a matter of fact that, two separate rate of deductions have been provided for the same work of contractor, one is at the rate of 1% if the contractor is individual Of HUF, whereas, it is 2% if the contractor is other than individual or HUF. The Tribunal, in view of facts and circumstances, found that, it is a bona fide wrong impression. 8. As such, on the aspects of the bona fide wrong impression keeping in view the contention of the assessee that in the middle of year, there is change of jaw about the deduction, as well as on the non-availability of the provisions of Section 40(a)(ia), when the issue is covered by the Calcutta High Court Judgment in case of S.K.Tekriwal supra, we do not find that any substantial question of law would arise for consideration as sought to be canvassed. Hence, the appeal is dismissed.
On the other hand the Ld. DR submitted that facts of the case are distinguishable. In the case before the Hon’ble High Court, ITA.1969/Bang/2017 Page - 6 there is no bonafide wrong impression on the part of the assessee to deduct the TDS at lower rate.
We have heard the rival contentions and perused the record. In the considered opinion of the Bench, the issue is squarely covered in favour of the assessee by the judgment of the jurisdictional High Court in the matter of Kishore Rao (supra), therefore the assessee is entitled to relief as claimed in ground 4 of the appeal.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 7thd day of March, 2018.