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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN
PER SAKTIJIT DEY, J.M.
Aforesaid appeals by the assessee are directed against two separate orders dated 23rd April 2014, for assessment year 2009–10 and dated 16th April 2014 for assessment year 2010–11, passed by the learned Commissioner (Appeals)–18, Mumbai.
./2014 – A.Y. 2009–10
At the out set, learned Authorised Representative submitted that the dispute raised by the assessee in this appeal has been resolved in the mean time as learned Commissioner (Appeals) while deciding assessee’s appeal for assessment year 2010–11, has granted consequential relief to the assessee. He, therefore, under the instruction of his client submitted that the assessee does not want to press the grounds raised in the appeal and sought withdrawal of the appeal. Learned Departmental Representative has not opposed the aforesaid submissions of the learned Authorised Representative. In view of the above, we dismiss the appeal as “not pressed”.
In the result, appeal stands dismissed.
3 Rohini Industrial Electricals Ltd.
./2014 – A.Y. 2010–11
The solitary issue raised by the assessee in the aforesaid appeal relates to disallowance made under section 40(a)(ia) of the Act for an amount of ` 10 lakh.
Brief facts are, the assessee a company is engaged in the business of electrical contractors by undertaking installation works including civil work and rendering engineering service. For the assessment year under dispute, assessee filed its return of income on 22nd September 2010, declaring total income of ` 15,98,59,680. During the assessment proceedings, the Assessing Officer while examining the Profit & Loss account of the assessee for the impugned assessment year, found that the assessee has debited ` 251.78 lakh as other expenditure. After perusing the details of such expenditure, he called for the relevant details and as observed by the Assessing Officer vide letter dated 29th January 2013, assessee submitted details of other expenditure above ` 1,00,000. On verification of the details submitted by the assessee, the Assessing Officer noticed that the expenditure claimed included an amount of ` 10 lakh being expenditure (provision). When he called upon the assessee to justify the claim of expenditure of ` 10 lakh, it was submitted by the assessee that it has deducted necessary TDS in applicable cases, the Assessing
4 Rohini Industrial Electricals Ltd.
Officer, however, was of the view that the provisions of expenditure on which assessee has not deducted tax at source during the year has to be disallowed in terms of section 40(a)(ia) of the Act. Accordingly, he made the disallowance of ` 10 lakh. Being aggrieved of such disallowance, assessee preferred appeal before the learned Commissioner (Appeals).
In the course of hearing before the first appellate authority, it was submitted by the assessee that out of the amount of ` 10 lakh payment of ` 7,96,707, do not require deduction of tax at source as the provisions of section 194C is not attracted. As far as the balance payment of ` 2,03,293 is concerned, it was submitted by the assessee tax was deducted and deposited before filing of the return of income for assessment year 2010–11. It was submitted by the assessee that while completing assessment for assessment year 2011–12, the Assessing Officer has not allowed deduction of the amount of ` 10 lakh on the reasoning that it is allowable in assessment year 2010–11. The learned Commissioner (Appeals) after considering the submissions of the assessee, though, observed that the assessee is following mercantile system of accounting. However, he was of the view that the expenditure is not allowable. He observed, since the payments made as well as TDS was remitted to the Government account in assessment
5 Rohini Industrial Electricals Ltd. year 2011–12, the expenditure is only allowable in assessment year 2011–12. Accordingly, he rejected assessee’s claim.
Learned Authorised Representative, more or less, reiterating the stand taken before the Departmental Authorities submitted that the assessee was not required to deduct tax on payments of ` 7,96,717 as they do not attract TDS provisions, he submitted as far as balance amount of ` 2,03,293 is concerned, the assessee paid to the Government account after the end of the financial year but before the due date of filing of return of income, hence, no disallowance under section 40(a)(ia) can be made. He submitted, the expenditure of ` 10 lakh was disallowed in assessment year 2011–12 by the Assessing Officer on the ground that the expenditure could have been allowed in assessment year 2011–12 if the TDS is remitted after the due date of filing of return of income for the assessment year 2010–11. He, therefore, submitted disallowance made is unjustified.
Learned Departmental Representative relied upon the order of the learned Commissioner (Appeals).
We have considered the submissions of the parties and perused the material available on record. The break–up of the expenditure claimed of ` 10 lakh which has been subjected to disallowance under section 40(a)(ia) is as under:–
6 Rohini Industrial Electricals Ltd.
Material purchased ` 4,85,879 ` 27,879 Tool purchased ` 1,08,827 Sub–contract charges ` 2,62,520 Transport and freight charges ` 40,227 Hire charges ` 16,500 Repair and maintenance ` 41,800 Security Charges ` 16,389 Local Traveling
As far as payment made towards material purchased and tools purchased are concerned, in our view, such payment do not require deduction of tax at source as the provisions of section 194C are not applicable to such payment. As far as the sub–contract charges is concerned, undisputedly assessee has deducted tax at source. However, such deduction was made after the end of financial year. The same is the case with payment made towards repair and maintenance and security charges. It is not disputed that, such TDS was made and remitted to Government account after the end of the relevant financial year but before due date of filing of return of income for assessment year 2010–11. Thus, in our view, in terms of the first proviso to section 40(a)(ia) no disallowance could be made. As far as the payment made towards transport and freight charges is concerned, as per section 194C sub–section (6) tax is not required to be deducted at source on payments made to a contractor who is in the business of plying, hiring or leasing goods carriages, if he furnishes his PAN to the 7 Rohini Industrial Electricals Ltd.
payer. The assessee has demonstrated before us that the contractor / transporters have furnished their PAN to the assessee at the time of making payment and such information was also submitted before the Assessing Officer. Therefore, in view of the provisions of section 194C(6) there is no requirement of deduction of tax at source. As far as repair and maintenance charges of ` 16,500 is concerned, in our view, in terms of section 194C(5), TDS is not required to be done on payment below ` 20,000, hence, the assessee was not required to deduct tax at source on the payment of ` 3,025 and 1,025 out of the total payment of ` 16,500. However, on the balance amount, the assessee admittedly has deducted tax at source and remitted to the Government account before the filing of return of income for assessment year 2010–11. That being the case, no disallowance under section 40(a)(ia) is called for. As far as the payment made towards local travelling charges of ` 16,389 is concerned, in our view, there is no requirement to deduct tax at source as these payments were made to travel agents for cost of tickets purchased from them. We may further observe, while completing assessment for assessment year 2011–12, the Assessing Officer has disallowed the expenditure of ` 10 lakh on the ground that they pertained to assessment year 2010–11. In our view, assessee’s claim has to be accepted either in the assessment year 2010–11 on accrual basis as it is following mercantile
8 Rohini Industrial Electricals Ltd. system of accounting or on actual payment basis in assessment year 2011–12. Assessee’s claim cannot be disallowed in both the years. As the Assessing Officer has disallowed assessee’s claim in assessment year 2011–12, we allow assessee’s claim in the impugned assessment year by deleting the addition.
In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 19.08.2016