The ACIT,Anand Circle,, Anand v. Prayas Engineering Limited, Anand

ITA 2826/AHD/2010 | 2007-2008
Pronouncement Date: 29-04-2014 | Result: Dismissed

Appeal Details

RSA Number 282620514 RSA 2010
Assessee PAN AABCP5134E
Bench Ahmedabad
Appeal Number ITA 2826/AHD/2010
Duration Of Justice 3 year(s) 6 month(s) 21 day(s)
Appellant The ACIT,Anand Circle,, Anand
Respondent Prayas Engineering Limited, Anand
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 29-04-2014
Date Of Final Hearing 16-04-2014
Next Hearing Date 16-04-2014
Assessment Year 2007-2008
Appeal Filed On 08-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMADABAD BEFORE SHRI D.K.TYAGI JUDICIAL MEMBER AND .. SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER ! '#$% & ' ( ' ( ' ( ' ( ITA NO. 2825/AHD/2010 ASSESSMENT YEAR :2007-08 PRAYAS ENGINEERING LIMITED ANAND SOJITRA ROAD VALLABH VIDYANAGAR-388120 GUJARAT V/S . THE ADDL. COMMISSIONER OF INCOME TAX ANAND RANGE ANAND PAN NO. AABCP5134E (APPELLANT) .. (RESPONDENT) ITA NO. 2826/AHD/2010 ASSESSMENT YEAR :2007-08 THE ADDL. COMMISSIONER OF INCOME TAX ANAND RANGE ANAND V/S . PRAYERS ENGINEERING LIMITED ANAND SJITRA ROAD VALLABH VIDYANAGAR-388120 GUJARAT PAN NO. AABCP5134E (APPELLANT) .. (RESPONDENT) ASSESSEE BY SHRI M.K. PATEL AR RESPONDENT BY SHRI K. C. MATHEWS SR.D.R. DATE OF HEARING 16.04.2014 DATE OF PRONOUNCEMENT 29.04.2014 O R D E R PER : SHRI D.K. TYAGI JUDICIAL MEMBER ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 2 THESE ARE CROSS APPEALS AGAINST THE ORDER OF LD. C IT(A)-IV BARODA DATED 19-07-2010 FOR ASSESSMENT YEAR 2007-08. FIRST WE WILL TAKE UP ASSESSEES APPEAL IN ITA NO. 2825/AHD/2010 2. ASSESSEE HAS TAKEN FOLLOWING TWO GROUNDS OF APPE AL:- 1. THE HONBLE CIT(A) HAS ERRED IN CONFIRMING OF R S. 12 97 893/- U/S. 40(A)(IA) BEING THE REIMBURSEMENT OF EXPENSES PAID TO CLEARING & FORWARDING AGENTS REIMBURSED TOWARDS STAMP CHARG ES DOCUMENTS CHARGES FOR CUSTOM LOADING & UNLOADING C HARGES AND OTHER MISCELLANEOUS EXPENSES. THE SAID EXPENSES IN CURRED ARE IN RESPECT OF REIMBURSEMENT AND HENCE NOT SUBJECT TO T DS. IN VIEW OF THIS THE ACTION OF AO TO INVOKE PROVISION OF SEC. 40(A)(IA) IS UNJUST AND TO BE UNCONFIRMED. IT IS BE HELD SO NOW AND AO BE DIRECTED TO DELETE THE ADDITION. 2. THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE D ISALLOWANCE OF RS. 4 61 160/- U/S. 14A OF THE INCOME TAX ACT 1 961 READ WITH RULE 8D WITHOUT PROVIDING THE NEXUS OF INVESTMENT A ND CONSIDERING THE FACTS SUBMITTED DURING HEARING. IT IS SUBMITTE D THAT THE DISALLOWANCE IS UNCALLED FOR AND BE DIRECTED TO BE DELETED. 3. GROUND NO. 1 RELATES TO DISALLOWANCE OF PAYMENTS OF RS. 12 97 893/- U/S. 40(A)(IA) BEING THE REIMBURSEMENT EXPENSES PAID TO CLEARING AND FORWARDING AGENT WITHOUT DEDUCTION OF TAX AT SOURCE. 4. BRIEF FACTS OF THE CASE ARE THAT AO OBSERVED DUR ING THE ASSESSMENT PROCEEDINGS THAT ASSESSEE HAS NOT DEDUCTED TAX AT S OURCE FROM PAYMENTS OF RS. 12 97 893/- MADE TO EXPRESS TRANSPORT PVT. LTD RENDERING SERVICES AS CUSTOM HOUSE AGENT FOR IMPORT AND EXPORT OF GOOD S. THE ASSESSEES CONTENTION WAS THAT TDS WAS NOT DEDUCTED ON BILLS I N RESPECT OF REIMBURSEMENT OF EXPENSES AS PER BOARDS CIRCULAR 7 15 DATED 08/08/1995. ON PERUSAL OF BILLS ISSUED BY THE CUSTO MS HOUSE AGENT AO CONCLUDED THAT THE PAYMENTS WERE RAISED DIRECTLY BY EXPRESS TRANSPORT PVT. LTD TO THE ASSESSEE AND PAYMENTS GIVEN ON ACCO UNT OF RE- IMBURSEMENT SHOULD HAVE BEEN SUBJECTED TO TDS. AO FURTHER OBSERVED THAT THE CLEARING AND FORWARDING AGENT WOULD NOT BE TREATED AS AGENT OF ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 3 NON-RESIDENT SHIPPING COMPANY AND WAS AN INDEPENDEN T CONTRACTOR /LICENCED CUSTOM HOUSE AGENT NOT WORKING FOR ANY PA RTICULAR NON-RESIDENT SHIPPING COMPANY. THE AO REFERRED TO CBDTS CIRCU LAR NO. 715 CLARIFYING THAT PAYMENTS OF CLEARING AND FORWARDING AGENT FOR CARRIAGE OF GOODS ARE TO BE SUBJECTED TO DEDUCTION OF TAX AT SOURCE U/S. 194C AND UNLIKE TRAVEL AGENTS THEY WERE INDEPENDENT CONTRACTORS. AO FUR THER STATED THAT SECTION 194(C) REFERS TO ANY SUM PAID AND REIMBURSEMENT OF ACTUAL EXPENSES CANNOT BE DEDUCTED OUT OF THE BILL AMOUNT FOR THE P URPOSE OF TAX DEDUCTION AT SOURCE. HE THEREFORE HELD THAT REIMBURSEMENT CO ULD NOT BE TAKEN OUT OF THE BILL AMOUNT FOR THE PURPOSE OF TAX DEDUCTION AN D IT WAS NOT MATERIAL AS TO WHETHER ONE BILL FOR AGENCY COMMISSION WAS RAISE D BY CLEARING AND FORWARDING AGENT AND ANOTHER BILL FOR REIMBURSEMENT OF ACTUAL EXPENSES WAS BEING RAISED IN RESPECT OF EXPENSES OTHER THAN AGENT. AO DISALLOWED PAYMENT OF RS. 12 97 893/- U/S. 40(A)(IA) TO THE CL EARING AND FORWARDING AGENT WITHOUT DEDUCTING TAX AT SOURCE. 5. LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE S UBMISSION OF THE ASSESSEE WHICH HAS BEEN REPRODUCED BY HIM IN HIS OR DER CONFIRMED THIS ACTION OF AO. 6. LEARNED COUNSEL OF THE ASSESSEE AT THE TIME OF H EARING BEFORE US PLACING RELIANCE ON THE DECISION OF THE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS GUJARAT NARMADA VALLEY FERTILIZERS CO. LT D SUBMITTED THAT EXPENSES INCURRED BY THE AGENT ON BEHALF OF THE ASS ESSEE WHICH WERE REIMBURSED BY ASSESSEE SUBSEQUENTLY CANNOT BE SUBJE CTED TO TDS. IT WAS FURTHER SUBMITTED THAT ON THE COMMISSION PAYMEN T TO THE AGENT TAX WAS DULY DEDUCTED. HE THEREFORE SUBMITTED THAT THE ADDITION OF RS. 12 97 893/- MADE BY AO AND SUSTAINED BY LD. CIT(A) MAY KINDLY BE DELETED. LD. DR ON OTHER HAND VEHEMENTLY SUPPORTED THE ORDERS PASSED BY LOWER AUTHORITIES. ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 4 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT ON THE COMM ISSION PAID BY THE ASSESSEE TO THE AGENT FOR CLEARING AND FORWARDING TAX WAS DULY DEDUCTED. THE ONLY DISPUTE BEFORE US IS REGARDING TDS ON EXPE NSES INCURRED BY THE AGENT ON BEHALF OF THE ASSESSEE-COMPANY WHICH WERE SUBSEQUENTLY REIMBURSED BY THE ASSESSEE-COMPANY TO THE AGENCY. THE ISSUE IS NOW COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVEN UE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS GUJARAT NARMADA VALLEY FERTILIZERS CO WHEREIN ON SIMILAR FA CTS HONBLE HIGH COURT HAS HELD THAT NO PART OF AMOUNT REIMBURSED WAS TO B E DISALLOWED U/S. 40(A)(IA) IF TAX HAS NOT BEEN DEDUCTED WHICH IS CL EAR FROM THE HEAD NOTES OF JUDGMENT WHICH READS AS UNDER:- SECTION 40(A)(IA) OF THE INCOME-TAX ACT 1961-BUSI NESS DISALLOWANCE-INTEREST ETC. PAID TO RESIDENT WITHOU T DEDUCTION OF TAX [REIMBURSEMENT TO EXPENSES]-EXPENSES WERE INCURRED BY AGENT ON BEHALF OF ASSESSEE-PRINCIPAL FOR TRANSPORTATION AND OTHER CHARGES WHICH HAD BEEN SPELT OUT IN BILL ITSELF-SO FAR AS O BLIGATION TO DEDUCT TAX AT SOURCE FORM PAYMENT OF TRANSPORT CHARGES AND OTHER CHARGES WAS CONCERNED SAME WAS COMPLIED WITH BY AGENT WHO HAD MADE PAYMENT ON ITS BEHALF WHETHER NO PART OF AMOUNT RE IMBURSED WAS TO BE DISALLOWED-HELD YES [PARA 3] [IN FAVOUR OF A SSESSEE] IN VIEW OF THE ABOVE THIS GROUND OF ASSESSEE IS AL LOWED. 8. GROUND NO. 2 RELATES TO DISALLOWANCE OF EXPENSES OF RS. 6 54 164/- U/S. 14A OF THE INCOME TAX ACT READ WITH RULE 8D IN RESPECT OF EXEMPT DIVIDEND OF RS. 47 41 076/-. ASSESSEES CONTENTIO N BEFORE THE AO WAS THAT NO EXPENSE EXCEPT DEMAT CHARGES OF RS. 98 404/ - WAS INCURRED FOR EARNING DIVIDEND INCOME CLAIMED TO BE EXEMPT AND TH IS DIVIDEND INCOME WAS MAINLY EARNED OUT OF INVESTMENTS MADE IN EARLIE R YEARS. THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE TO TH E AO AND HE APPLYING RULE 8D MADE DISALLOWANCE OF RS. 6 54 144/-. THIS ACTION OF THE AO WAS CONFIRMED BY LD. CIT(A). ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 5 9. BEFORE US LEARNED COUNSEL OF THE ASSESSEE SUBMIT TED THAT RULE 8D IS NOT APPLICABLE FOR THE ASSESSMENT YEAR UNDER APP EAL THEREFORE AO WAS NOT JUSTIFIED IN MAKING DISALLOWANCE U/S. 14A BY AP PLYING THIS RULE. HE REITERATED THE SUBMISSION MADE BEFORE THE LOWER AUT HORITIES THAT ONLY EXPENSES INCURRED BY THE ASSESSEE WERE ONLY RS. 98 404/- TOWARDS DEMAT CHARGES FOR EARNING EXEMPT INCOME DURING THE YEAR U NDER APPEAL. HE THEREFORE PRAYED THAT IF AT ALL ANY DISALLOWANCE IS REQUIRED TO BE MADE IT SHOULD BE RESTRICTED TO THIS MUCH AMOUNT. LD. DR O N THE OTHER HAND VEHEMENTLY SUPPORTED THE ORDERS OF LOWER AUTHORITIE S. HE THOUGH CONCEDED THAT RULE 8D IS NOT APPLICABLE FOR THE ASS ESSMENT YEAR UNDER APPEAL BUT ARGUED THAT REASONABLE DISALLOWANCE U/S. 14A IS CALLED FOR AND AO HAS TAKEN THE HELP OF RULE 8D TO MAKE A REASONAB LE DISALLOWANCE IN THIS CASE THEREFORE ORDER PASSED BY HIM AND SUSTAI NED BY LD. CIT(A) MAY BE UPHELD 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT DISALLOWANC E U/S. 14A HAS BEEN MADE IN THIS CASE BY APPLYING RULE 8D IN RESPECT OF EXEMPT INCOME OF RS. 47 41 076/- THOUGH RULE 8D IS NOT APPLICABLE FOR TH E YEAR UNDER APPEAL THE ASSSESSEE HIMSELF HAD ADMITTED THERE WAS AN EXPENSE OF RS. 98 404/- TOWARDS DEMAT CHARGES IN RESPECT OF THIS EXEMPT INC OME. THE ASSESSEE DID NOT ATTRIBUTE ANY ADMINISTRATIVE OR MANAGERIAL EXPENSES TOWARDS EARNING OF THIS DIVIDEND INCOME. INVESTMENTS DECIS IONS ARE TAKEN BY THE TOP MANAGEMENT OF THE COMPANY THEREFORE SOME PART OF ADMINISTRATIVE AND MANAGERIAL EXPENSES CAN BE HELD AS ATTRIBUTABLE TO EARN THE EXEMPT INCOME FROM SUCH INVESTMENTS. SINCE THE SAME HAS NOT BEEN DONE WE DEEM IT PROPER THAT THE DISALLOWANCE IN THIS CASE U/S. 14A BE RESTRICTED TO RS. 3 LACS TO TAKE CARE OF THIS ANOMALY. THIS GROU ND OF ASSESSEES APPEAL IS PARTLY ALLOWED. 11. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLO WED. ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 6 NOW COMING TO REVENUES APPEAL IN ITA NO. 2826/AHD/ 2010 12. REVENUE HAS TAKEN FOLLOWING THREE GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 60 60 960/- U/S. 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENT MADE TO AKASSISH MECHATRONICS LTD. COMPLETELY OVERLOOKING THE FACT THAT AS PER PROVISIONS OF SECTION 40(A)(IA) TAX IS TO BE DEDUC TED AT SOURCE UNDER CHAPTER XVIIB WHICH PRESCRIBES DIFFERENT RATE UNDER DIFFERENT SECTIONS AND IN THE INSTANT CASE THE ASSESSEE DED UCTED TAX AT A LOWER RATE THAN PRESCRIBED U/S. 194J OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 8 86 940/- MADE U/S. 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENT MA DE TO ELECON INFORMATION TECHNOLOGY LTD. COMPLETELY OVERLOOKING THE FACT THAT AS PER PROVISIONS OF SECTION 40(A)(IA) THE TAX IS TO BE DEDUCTED AT SOURCE UNDER CHAPTER XVIIB WHICH PRESCRIBES DIFFERE NT RATE UNDER DIFFERENT SECTIONS AND IN THE INSTANT CASE THE ASS ESSEE DEDUCTED TAX AT A LOWER RATE THAN PRESCRIBED U/S. 194J OF TH E ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 3 60 204/- MADE U/S. 40(A)(IA) OF THE ACT IN RESPECT OF MACHINE HI RE CHARGES COMPLETELY OVERLOOKING THE FACT THAT AS PER PROVISI ONS OF SECTION 40(A)(IA) THE TAX IS TO BE DEDUCTED AT SOURCE UNDE R CHAPTER XVIIB WHICH PRESCRIBES DIFFERENT RATE UNDER DIFFERENT SEC TIONS AND IN THE INSTANT CASE THE ASSESSEE DEDUCTED TAX AT A LOWER RATE THAN PRESCRIBED U/S. 194I OF THE ACT. 13 FIRST TWO GROUNDS ARE DECIDED TOGETHER AS UNDER: - 14. GROUND NO. 1 RELATES TO DISALLOWANCE OF RS. 60 60 960/- U/S. 40(A)(IA) OF THE ACT. ASSESSEE HAD MADE PAYMENT OF RS. 1 01 01 600/- TO AKAAISH MECHATONICS LTD (AML) FOR PROVIDING MAINTENANCE SERVICES FOR PLANT AND MACHINERY EQUIP MENTS AND ELECTRONIC APPLICATIONS FORMING PART OF MACHINERY A ND ALSO ENTERED INTO ANNUAL MAINTENANCE CONTRACT WITH THE SAID COMP ANY TDS U/S.194C WAS DEDUCTED BY THE ASSESSEE FROM THE PAYM ENTS MADE. ASSESSEE FILED COPY OF AGREEMENT WITH AMI. ASSESSING OFFICER WAS OF ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 7 THE VIEW THAT AS PER TERMS OF THE AGREEMENT SERVIC ES RENDERED BY AML WERE IN THE NATURE OF TECHNICAL SERVICES FITTING IN TO THE DEFINITION OF FEES FOR TECHNICAL SERVICES' AS APPEARING IN EXPLANATION 2 T O CLAUSE (VII) OF SECTION 9(1). A.O. OBSERVED THAT AML WAS RENDERING VARIOUS TYPES OF SPECIALIZED SERVICES ALSO AND SUCH ACTIVITY COULD NOT BE HELD A S ROUTINE MAINTENANCE CONTRACT. A.O. ALSO OBSERVED THAT ELECON ENGG. CO. LTD A COMPANY OF THE SAME GROUP WAS DEDUCTING TDS ON THE SAME SERVICES O F AAKAISH MECHATRONICS LIMITED U/S. 194J INSTEAD OF SECTION I 94C. A.O. REFERRED TO CBDT CIRCULAR NO.715 DATED 8.8.95 THAT ONLY ROUTINE MAINTENANCE CONTRACTS WOULD BE COVERED U/S. 194C AND IN THE SAI D CIRCULAR IT HAD BEEN CLARIFIED THAT WHERE TECHNICAL SERVICES ARE RENDERE D IN CONNECTION WITH MAINTENANCE CONTRACTS PROVISIONS OF SECTION 194J W ILL APPLY. A.O. HELD THAT APPELLANT FAILED TO DEDUCT TAX AT SOURCE U/S.1 94J FROM PAYMENTS MADE TO AML AND AMOUNT PAID WITHOUT DEDUCTING TAX AT SOU RCE IS LIABLE TO BE DISALLOWED U/S.40(A)(IA). ASSESSING OFFICER DISALLO WED RS.60 60 960/- (I.E. 3/5 TH OF RS.L 01 01 60O/-) U/S.40(A)(IA). LD. CIT(A) DE LETED THIS DISALLOWANCE. 15. SECOND GROUND RELATES TO DISALLOWANCE OF RS. 8 86 940/- MADE U/S. 40(A)(IA). THE ASSESSING OFFICER WAS OF THE VIEW THAT SERVICES RENDERED BY EITL WERE IN THE NATURE OF TECHNICAL SERVICES AN D TAX AT SOURCE SHOULD HAVE BEEN DEDUCTED U/S.194J INSTEAD OF SECTION 194C ASSESSING OFFICER DISALLOWED 3/5 TH OF THE PAYMENT OF RS.14 78 232/-U/S.40(A)(IA). LD . CIT(A) DELETED THIS DISALLOWANCE. 16. AT THE TIME OF HEARING LEARNED COUNSEL OF THE A SSESSEE IN RESPECT OF BOTH THESE GROUNDS SUBMITTED THAT THERE WAS SHORT D EDUCTION OF TAX THEREFORE NO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT CAN BE MADE IN VIEW OF THE DECISIONS OF COCHIN ITAT BENCH IN THE CASE OF A POLLO TYPES LTD VS. DCIT IN ITA NO. 31/COCH/2010 DATED 29 TH MAY 2013 AND NEW DELHI ITAT BENCH IN THE CASE OF UE TRADE CORPORATION (INDIA) L TD IN ITA NO. ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 8 2303/DEL/2011DATED 18 TH MAY 2012. LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF LOWER AUTHORITIES. 17. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E RECORD WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT IN RESPECT OF PAYMENT MADE BY ASSESSEE TO M/S. ELECON INFORMATION TECHNOLOGY LTD. (EITL) AND M/S. AKAAISH MECHATONICS LTD (AML) T HESE WAS SHORT DEDUCTION OF TAX AND THEREFORE THE RATIO OF THE TRIBUNAL IN THE CASE OF APOLLO TYPES LTD VS. DCIT AND UE TRADE CORPORATION(INDIA) LTD IS DIRECTLY AP PLICABLE TO THE FACTS OF THIS CASE. IN THE CASE OF UE TRADE CORPORATION VS. DCIT THE HONBLE TRIBUNAL IN SIMILAR FACTS HAS HELD AS UNDER:- 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE TAX AUDIT REPORT IN FORM NO.3CD PLACED AT PAGES 20 TO 49 OF T HE PAPER BOOK. ANNEXURE-XIV OF THE TAX AUDIT REPORT GIVES TH E DETAILS OF TAX DEDUCTIBLE UNDER VARIOUS SECTIONS OF THE ACT. PAGE 1 OF ANNEXURE- XIV GIVES THE DETAILS OF PAYMENTS ON WHICH TAX HAS NOT BEEN DEDUCTED AT ALL. THE TOTAL AMOUNT OF EXPENDITURE IS AT RS.7 32 827/-. PAGES 2 TO 6 OF ANNEXURE-XLV GIVE THE DETAILS WHERE THERE IS A SHORTFALL DUE TO LESSER DEDUCTION THAN REQUIRED TO BE DEDUCTED. THE TOTAL AMOUNT OF EXPENSES IS AT RS.20 24 4557-ON WHI CH SHORTFALL OF TAX AT RS.3 26 011/- HAS BEEN WORKED OUT BY THE TAX AUDITORS. PAGE 3 OF THE ANNEXURE GIVES THE DETAILS WHERE TAX HAS B EEN DEDUCTED BUT NOT PAID TO THE CREDIT OF THE CENTRAL GOVERNMEN T THE ASSESSEE HAS ADDED BACK THE EXPENDITURE ON WHICH TAX WAS DED UCTIBLE BUT NO TAX WAS DEDUCTED AT ALL AND ALSO WHERE TAX WAS DEDU CTED AT SOURCE BUT NOT PAID TO THE CREDIT OF CENTRAL GOVERNMENT AM OUNTING TO RS.20 16 778/-. DETAIL OF SUCH EXPENDITURE IS GIVEN AT PAGE 1 AND PAGE 3 OF THE ANNEXURE-XIV TO THE TAX AUDIT REPORT. THE LEARNED AR OF THE ASSESSEE HAS CLAIMED THE BENEFIT OF TWO D ECISIONS ONE BY THE KOLKATA BENCH AND OTHER BY THE MUMBAI BENCH OF ITAT. IN THE CASE OF DCIT VS. CHANDABHOY S JASSOBHOY (SUPRA) THE ASSESSEE MADE PAYMENT TO THE CONSULTANTS BY WAY OF SALARY AF TER DEDUCTION OF TAX AT SOURCE UNDER SEC. 192 AND CLAIMED THE DEDUCT ION FOR THE SAME. THOSE CONSULTANTS WERE WORKING FOR A PERIOD O F TWO YEARS WITH THE ASSESSEE. HOWEVER THE AO APPLIED THE PRO VISIONS OF SEA 194-J. IN THIS CASE IT WAS HELD THAT PROVISIONS OF SEC. 192 WERE APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. ANO THER DECISION RELIED UPON BY THE ASSESSEE IS OF KOLKATA BENCH IN THE CASE OF DCIT VS. S.K TEKRIWAL (SUPRA). IN THIS CASE ALSO THE DI FFERENCE IN SHORTFALL ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 9 WAS DUE TO THE APPLICABILITY OF PROVISIONS. THE ASS ESSEE HAS DEDUCTED TAX AT SOURCE U/S 194C WHEREAS ACCORDING T O THE ASSESSING OFFICER PROVISIONS OF SECTION 1941 ARE AP PLICABLE. THUS THE ASSESSEE'S CASE IS COVERED BY THE DECISIONS OF THE TRIBUNAL REFERRED TO ABOVE. NO DOUBT ASSESSEE IS IN DEFAULT AS PER PROVISIONS OF SEC. 201 BUT DISALLOWANCE OF THE EXPENDITURE IS NOT PERMISSIBLE U/S 40(A)(IA) RESPECTFULLY FOLLOWING THE PRECEDENT S IT IS HELD THAT DISALLOWANCE OF RS. 20 24 45 5/- IS NOT JUSTIFIED. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. IN VIEW OF THE ABOVE THE ORDER PASSED BY LD. CIT(A ) DELETING THE ADDITIONS OF RS. 60 60 960/- AND RS. 8 86 940/- IS HEREBY UPHELD. BOTH THESE GROUNDS OF REVENUE ARE DISMISSED. 18 GROUND NO. 3 RELATES TO DISALLOWANCE OF RS. 3 60 204/- U/S. 40(A)(IA) FOR PAYMENT MADE FOR MACHINERY HIRING CHARGES WITHO UT DEDUCTION OF TAX. 19. AO DURING THE ASSESSMENT PROCEEDINGS FOUND TH AT ASSESSEE HAD NOT MADE ANY TDS FOR MACHINE HIRE CHARGES AMOUNTING TO RS. 2 44 764/- AND TO ELECON ENGINEERING LTD AMOUNTING TO RS. 1 11 5 440/-. ASSESSEES SUBMISSION WAS THAT TDS WAS NOT APPLICABLE ON MACHI NE HIRE CHARGES BEFORE JULY 2006. AS PER AO BY AMENDMENT U/S. 194 I W.E.F 13-07-2006 RENT WAS CLARIFIED TO INCLUDE ANY PAYMENT BY WHATEV ER NAME CALLED UNDER ANY LEASE SUB-LEASE TENANCY OR ARRANGEMENT FOR US E OF ANY EQUIPMENT PLANT AND MACHINERY ETC. AO HELD THAT TDS U/S. 19 4I FROM RENT PAYMENTS WAS TO BE MADE BEFORE 13-07-2006 AND MADE DISALLOW ANCE U/S. 40(A)(IA) OF RS. 3 60 204/-. LD. CIT(A) HOWEVER DELETED THIS DISALLOWANCE ON THE GROUND THAT MACHINERY/PLANT AND EQUIPMENT WERE COVE RED IN DEFINITION OF RENT FOR THE PURPOSE OF SECTION 194I ONLY W.E.F. 13 -07-2006 THEREFORE BEFORE THIS DATE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S.194I FROM MACHINERY HIRE CHARGES AND DISALLOWANCE MADE B Y AO U/S. 40(A)(IA) ON THIS COUNT WAS NOT SUSTAINABLE. WE FIND NO INFI RMITY IN THIS FINDING OF LD. ITA NO. 2825 & 2826/AHD/10 A.Y. 07-08 PRAYAS ENGINEERING LTD VS. ADDL. CIT PAGE 10 CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUE IS ALSO DISMISSED. 20. IN THE RESULT REVENUES APPEAL IS DISMISSED. 21. IN THE COMBINED RESULT ASSESSEES APPEAL IS PA RTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 29 .04.2014 SD/- SD/- (ANIL CHATURVEDI) (D.K.TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER A.K. ) ) ) ) * ** * +# +# +# +# - .# - .# - .# - .# / COPY OF ORDER FORWARDED TO:- 1. 01 / APPELLANT 2. +01 / RESPONDENT 3. # $4 / CONCERNED CIT 4. $4- / CIT (A) 5. 8 +#! / DR ITAT AHMEDABAD 6. : ;< / GUARD FILE. BY ORDER/ ) =/ ? (