BISHNU OIL COMPANY ,KOLKATA vs. ITO, WARD - 31(3), KOLKATA , KOLKATA

The assessee in this case has challenged the validity of the order of the ld. CIT(A) in denying the admissibility of the expenditure incurred towards cost of tyres and accessories totalling to Rs.32,500/- as business expenditure on the sole ground that no case was made out for admitting additional evidence being the relevant invoices/bills against which payment were made which were produced before the First Appellate Authority but not furnished before the AO during the assessment proceedings. The second ground is against the order of disallowance u/s 40(a)(ia) on the appellant’s claim for deduction of interest amount to the tune of Rs.56,250/- and Rs.43,858/- which were paid to two parties without deducting of tax at source.

The assessee has filed its return on 26.09.2013 declaring total income of Rs.8,20,260/- which was processed u/s 143(1) of the Act. Subsequently upon scrutiny notices were issued u/s 143(2) and 142(1) of the Act. It appears that during the previous year under appeal the assessee purchased tyres and accessories costing of Rs.15,000/- and Rs.17,500/- respectively. However the claim of such expenses incurred on business was not accepted by the ld. AO on the ground that no bills/vouchers/receipts were produced in support of such claim neither any explanation was offered by the assessee to that effect. In appeal the ld. CIT(A) confirmed such disallowance on the ground that in spite of several opportunities the assessee has failed to submit these documents before the ld. AO neither any case has been made out before the First Appellate Authority for admitting this additional evidence. He thus dismissed this said ground of appeal.

At the time of hearing of the instant appeal the ld. Representative of the assessee submitted before us all the bills/vouchers in respect of the purchases of tyres and accessories to the tune of Rs.15,000/- and Rs.17,500/- which was though paid by cash. These bills as submitted by the ld. Representative were duly furnished before the ld. CIT(A) at the time of hearing of the appeal before the First Appellate Authority which was neither accepted nor considered by him. He thus prayed before us for deletion of the total amount of Rs.32,500/- as made by the ld. AO and confirmed by the ld. CIT(A). The ld. DR, on the other hand, relies on the orders passed by the authorities below.

We have heard the ld. Representative of the parties and perused the relevant materials available on records. We find no reason for not accepting the bills/vouchers for purchases of tyres and accessories as submitted by the assessee before us which was already placed before the ld. CIT(A). The bills and vouchers and relevant documents in support of the claim of the assessee which were though placed before the ld. CIT(A) but was not considered by him and confirmation of addition of Rs.32,500/- on such account that no case has been made to admit those additional evidence and also on the ground that these evidences were not placed before the ld.

During the previous year under appeal the assessee incurred expenditure amounting to Rs.56,250/- on account of interest on unsecured loan taken from one Mr.Pawan Kr. Patni and paid Rs.43,858/- to one Shri R.P,Bajoria and others (HUF) on identified purposes without deducting tax at source. The ld. AO disallowed the entire amount of Rs.1,00,028/- u/s 40(a)(ia) of the Act since TDS was not deducted at source at 194A of the Act. In appeal the ld. CIT(A) confirmed the same. The case of the assessee is this that the assessee is not in default for the purpose of section 40(a)(ia) and thus no disallowance can be made in respect of interest so paid without deduction of tax if the tax is duly paid by the payee.

At the time of hearing of the appeal the ld. Representative of the assessee argued that such tax was not deducted on the basis of declaration of recipients of the interest that necessary tax on such interest incomes will be paid by them in the income tax assessment by way of advance tax/self assessment tax as the case may be. The assessee on good faith has not deducted tax at source. Both the payee filed the Income Tax Returns in time disclosing therein the income from interest earned from the assessee. He further submitted before us that the necessary documents have also been submitted before the Revenue authorities. The ld. DR relies upon the orders passed by the authorities below.

We have heard the ld. Representative of the parties and perused the relevant materials available on record. We find substance in the arguments advanced by the ld. AR. According to the assessee since the parties have filed their income tax return within the due period and paid necessary taxes thereon section 40(a)(ia) of the Act will not be applicable in this case. The judgement relied upon in the case of Right

The following second proviso of section 40(a)(ia) of the Act is also applicable to the case of the assessee. “[ Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub- section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.] Explanation – For the purposes of this sub-clause – (i)”commission or brokerage” shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii)”fees for technical services”shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (iii)”professional services” shall have the same meaning as in clause (a) of the Explanation to section 194J;

Further that we find that the ld. CIT(A) while confirming the addition observed as follows :

It reveals that the assessee has acted bona fide and there was no intention on its part to benefit the recipients of interest by way of not deducting tax from the interest so paid to these two parties. It appears that no reason has been assigned by the ld. CIT(A) while declining to apply the judgment of Right Address Ltd. Vs ITO TDS Ward-59(4) in favour of the assessee. He thus failed to distinguish the judgment on fact and on law while disapplying the same. Taking into consideration of the case made out by the assessee, the judgments as well, we allow the ground of appeal preferred by the assessee by deleting the addition of Rs.1,00,208/- as made by the authorities below.

In the result the appeal of the assessee is allowed.

C.I.T.(A)-9, Kolkata. 4. C.I.T-6, Kolkata

CIT(DR), Kolkata Benches, Kolkata. True Copy By order,