SHIVANI STEELS,MUMBAI vs. ITO 13(2)(4), MUMBAI

The first issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of expenses on account of transportation charges by invoking the provisions of section 40(a)(ia) of the Act for non-deduction of TDS. For this assessee has raised following ground No. 2: -

Briefly stated facts are that the assessee has claimed transportation charges amounting ₹ 4,65,639/- paid to M/s AS Transport. The AO during the course of assessment proceedings disallowed the expenses as the assessee has not deducted any tax on the payments made to the above party by invoking the provisions of section 40(a)(ia) of the Act. According to AO and CIT(A), the assessee is to deduct TDS under section 194C of the Act and not under section 194I of the Act as claimed by the assessee. However, even the assessee has not deducted TDS u/s 194I of the Act. The AO as well as CIT(A) both have not accepted the explanation of the assessee and according to both the authorities, the assessee has claimed expenses as transportation charges but has not deducted TDS under section 194C of the Act. As is clear from the facts that the assessee failed to deduct TDS under section 194C of the Act, the lower authorities have rightly disallowed the transportation charges by invoking the provisions of section 40(a)(ia) of the Act. However, in the interest of justice, we restore the matter back to the file of the AO for only verifying whether in the assessee’s case second proviso to section 40(a)(ia) of the Act will apply or not, whereby, the other party M/s AS Transport has included the receipts in their income and disclosed the same and paid taxes on the same. In case, M/s AS Transport has paid the taxes on the receipts claimed by assessee as expenses, the AO will delete the disallowances. This issue of the assessee’s appeal is set aside to the file of the AO in term of the above decision.

The next issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of cutting and storage charges for Shivani Steels (A.Y:05-06) non-deduction of TDS by invoking the provisions of section 40(a)(ia) of the Act. For this assessee has raised following ground No. 3: -

We have heard the rival contention and gone through the facts and circumstances of the case. We find from the facts of the case that the assessee has debited an amount of ₹ 15,14,016/- under the head of cutting and storage charges. The AO required the assessee to file party- wise details but assessee has not furnished the same. According to AO, the assessee has not deducted TDS under section 194C of the Act, he disallowed the same by invoking the provisions of Section 40(a)(ia) of the Act. Aggrieved, assessee preferred the appeal before CIT(A) and before CIT(A) it was claimed that the assessee has made following payments: - S. Particulars Amount Total No. Cutting Storage charges 1. Pratima Steels Pvt. Ltd. 48,391 8,00,053 8,48,444 2. Sheth Engg. Works (Inda) 44,406 1,39,283 1,83,690 3. Rishab Digha Steel & Allied 30,825 1,80,755 2,11,580 Products Ltd. 4. Suhas Enterprises 15,082 1,31,988 1,47,070 5. Kutters Fabricators Ltd. 23,761 99,469 1,23,230 Total 1,62,466 13,51,548 15,14,014 6. The CIT(A) noted that the cutting and storage charges are above the threshold limit of ₹ 20,000/- as provide under section 194C of the Act and the assessee has not provided the date wise payment, he confirmed the disallowance. Aggrieved, now assessee is in second appeal.

We find from the facts of the case that the assessee is to deduct TDS under section 194C of the Act because the cutting and storage charges are claimed as per separately entered agreements with the parties mentioned above. The assessee has also made payments above

The next issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of brokerage and commission charges for non-deduction of TDS under section 194 of the Act by invoking the provisions of section 40(a)(ia) of the Act. For this assessee has raised following ground No.4 : -

We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the assessee claimed to have made commission payment to brokers below ₹ 2,500/-. We noticed from the submissions of the assessee filed before CIT(A) vide Para 15 and 16 which reads as under: -

From the above submissions, it is clear that the payments made to most of the brokers are below ₹ 2,500/- but this plea was never examined by the lower authorities.

We find that the plea of the assessee is quite reasonable hence, we set aside the order of CIT(A) and remand the matter back to the file of the AO for adjudication of this plea after verifying the facts. In case, the payments are below ₹ 2,500 in each of the case no disallowance should be made. This issue of the assessee’s appeal is set aside.