SAMPATH RAJ KARANRAJ,CHENNAI vs. ITO NON CORPORATE WARD 5(1), CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-5, Chennai, dated 02.08.2017 and pertains to assessment year 2013-14.

There was a delay of one day in filing this appeal by the assessee. The assessee has filed a petition for condonation of delay. We have heard the Ld.counsel for the assessee and the Ld. D.R. We find that there was sufficient cause for not filing the appeal before the stipulated time. Therefore, we condone the delay and admit the appeal.

The first issue arises for consideration is with regard to disallowance made by the Assessing Officer under Section 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act') for non-deduction of tax at source.

Shri K. Ravi, the Ld.counsel for the assessee, submitted that the assessee paid interest to M/s Sundaram PNB Paribas Home Finance Ltd. The Assessing Officer disallowed the interest payment under Section 40(a)(ia) of the Act. According to the Ld. counsel, the recipient, namely, M/s Sundaram PNB Paribas Home Finance Ltd. disclosed the interest income and paid taxes, therefore, there cannot be any disallowance in view of the second proviso to Section 40(a)(ia) of the Act.

We heard Smt. Ruby George, the Ld. Departmental Representative also. Since the assessee claims that the recipient, namely, M/s Sundaram PNB Paribas Home Finance Ltd. paid the taxes on the interest income received from the assessee, this Tribunal is of the considered opinion that the matter needs re- examination by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the issue of disallowance made under Section 40(a)(ia) of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and find out whether the recipient, namely, M/s Sundaram PNB Paribas Home Finance Ltd. has disclosed the interest income and paid taxes, and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

The next issue arises for consideration is with regard to ad- hoc disallowance of expenditure.

Shri K. Ravi, the Ld.counsel for the assessee submitted that the Assessing Officer made certain disallowances in respect of salary, staff welfare and conveyance. According to the Ld. counsel, the Assessing Officer disallowed 15% of salary expenses on the ground that the bills / vouchers furnished by the assessee are not in order. According to the Ld. counsel, payment of salary is not in dispute, therefore, there cannot be any disallowance at all.

On the contrary, Smt. Ruby George, the Ld. Departmental Representative, submitted that it is for the assessee to file necessary bills and vouchers for establishing the payment of salary. Since proper bills and vouchers were not furnished, the Assessing Officer disallowed 15% of salary expenses which was rightly confirmed by the CIT(Appeals).

We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer disallowed 15% of the salary claim on the ground that the assessee has not furnished bills and vouchers properly. No doubt, it is for the assessee to maintain bills and vouchers for the expenses incurred. The CIT(Appeals) confirmed the order of the Assessing Officer for the same reason. This Tribunal is of the considered opinion that when the assessee paid salary which is not in dispute, a disallowance of 10% of total salary paid would meet the ends of justice. Accordingly, the orders of the authorities below are modified. The Assessing Officer is directed to disallow only 10% of salary expenses claimed by the assessee.

In the result, the appeal filed by the assessee is partly allowed.