AISWARYA GRANITES,KOLLAM vs. ITO WARD 1 & TPS, KOLLAM, KOLLAM

O R D E R

PER BEENA PILLAI, JUDICIAL MEMBER:

1. The Order of the Commissioner (Appeals) of National Faceless Appeal Centre (NFAC) is against-facts and law.

2. The Commissioner of Income Tax (Appeals), NFAC, is not justified in disallowing the payment of commercial tax. The Commissioner (Appeals) should have appreciated that the amount paid was a statutory levy payable by all crushers installed in stone quarries based on their installed capacity. The levy was to be remitted on quarterly basis. The Commissioner (Appeals) NFAC has erred in concluding that the amount paid is in the nature of a compounding fee for any offence or towards Page 2 of 5 an infraction of any law. The interest on the commercial tax paid amounting to Rs.2864 is only a compensatory levy towards delay in remittance of tax during the year and the same cannot be taken to be a penalty. Thus the disallowance is wholly unwarranted.

3. The Commissioner (Appeals), NFAC, is not justified in confirming the disallowance of Rs.50, 000 legal charges by ignoring the fact that the payments were made to different persons and the individual payments were below the threshold limit to which the TDS provisions do not apply. The disallowance is thus based on mistaken understanding of facts and hence not sustainable.

2. The Brief facts of the case are that the assessee is a partnership firm and had filed its return of income on 31.10.2018 declaring total income of Rs.30,28,880/-. The case was selected for complete scrutiny for the reason that expenditure by way of penalty or fine was claimed wrongly by assessee. During the assessment proceedings, the ld. AO observed that assessee had paid normal tax under the head compounded tax under Kerala Value Added Tax, which was claimed u/s 37 of the Act. The ld. AO also noted that TDS was not deducted on certain legal charges as it was paid below the threshold limit of 4 different persons. The ld. AO also noted that the TDS on finance charges that was paid after deducting was charged in the P&L account and the net finance charges that was debited along with TDS. The ld. AO after considering various submissions of the assessee disallowed the following: Expenditure u/s 37(1) of the Act - Rs.16,00,364/- TDS claimed and disallowed - Rs. 68,198/- Aggrieved by the order of the Ld.AO assessee preferred appeal before Ld.CIT(A).

Page 3 of 5 3. The Ld.CIT(A) after considering the details filed by the assessee upheld the disallowance made u/s 37(1) of the Act and partly disallowed the TDS amount claimed by assessee. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.

by the assessee stands allowed for statistical purposes.

6. Ground No.3 is in respect of TDS not deducted u/s 194J of the Act on the legal charges amounting to Rs.50,000/- paid by the assessee. It is submitted that the said amount is paid to 2 different persons and does not qualify for any TDS being deducted as it is below the threshold limit. The Ld.AR submitted that, all the payments were made through banking channels. The assessee has relied on the ledger accounts of the legal charges that is passed at page 31 of the paper book and the bank statement extract placed at pages 32 to 33, wherein the amount is Rs.25,000/- paid to 2 different persons on 2.11.2017 and 17.3.2018. It is submitted that u/s 40(a)(ia) of the Act, the disallowance could be made only if the payment is above the threshold limit. He thus prayed for the deletion of the addition made by the Ld.AO.

7. On the contrary, the ld. D.R. relied on the orders passed by the authorities below.

8. We have heard the rival submissions and perused the materials available on record.