Engineering Professional Pvt.Ltd.,, ... vs Department Of Income Tax

The Revenue is in appeal before us against the order of ld. CIT(A) dated 30.09.2010 passed for AY 2007-08.

2. In the first ground of appeal, the Revenue has pleaded that ld. CIT(A) has erred in deleting the addition made by ITA No.3418/Ahd/2010 2 Asst. Year 2007-08

AO under section 40(a)(ia) of the Income-tax Act, 1961 (herein after the Act).

3. The brief facts of the case are that assessee has filed its return of income electronically on 29.10.2007 showing total income at Rs.41,93,170/- The case of the assessee was selected for scrutiny and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts it revealed to the AO that assessee company is engaged in the business of execution of various projects on turnkey basis in the field of oil, gas, water pipeline etc. The assessee was having its own machinery namely JCB and others. However, on requirement basis, it had taken machineries from the market also. The AO found that assessee has made payment of Rs.10,28,002/- towards equipment rent charges. The assessee failed to deduct TDS on the payment and accordingly the AO has disallowed the claim of expenses amounting to Rs.10,28,002/-.

4. On appeal, ld. CIT(A) has deleted the disallowance observing that machineries were hired by the assessee through different parties according to the requirements. There was no routine contract with those parties. The owners of equipments were not involved themselves in carrying on any part of the work undertaken by the assessee by spending their time and energy and by taking the risk ITA No.3418/Ahd/2010 3 Asst. Year 2007-08

associated with main contract work. Thus ld. CIT(A) observed that there is no sub-contractorship in this case and, therefore, no TDS ought to be deducted.

5. The ld. DR contended that the assessee did not produce any detail before the AO about the nature of contract. How the ld. first authority has appreciated the controversy is not discernible. She submitted that the order of ld. CIT(A) be set aside and the issue be further investigated at the level of AO.

6. The ld. counsel for the assessee relied upon the order of CIT(A).

7. We have duly considered the rival contentions. The copy of agreement, if any, entered into by the assessee with the owner(s) has not been produced either before the AO or before us. If the assessee has taken the machineries along with man-power who has operated the machinery carrying out the work of assessee then it will come within the ambit of section 194C. If assessee has taken the machineries simplicity on rent then probably under section 194-I TDS has to be deducted. In other words it is not ascertainable, whether assessee has assigned the work to the owners of the machineries or it has taken the machineries on rent? Obligation of the assessee to deduct the tax cannot be ITA No.3418/Ahd/2010 4 Asst. Year 2007-08

determined, if requisite details are not available. The findings of the ld. CIT(A) are not sustainable in the given circumstances. We have confronted the ld. counsel for the assessee to show us the details but he expressed his inability of submitting the same at this stage, rather consented that if the issue is set aside to the file of AO then assessee will submit the details. Taking into consideration the facts and circumstances, we set aside the order of CIT(A) and restore the issue to the file of AO for readjudication. The observations made by us will not impair or injure the case of AO and will not cause any prejudice to the defence/explanation of the assessee. This ground of appeal is allowed for statistical purposes.

8. In the next ground of appeal, grievance of the Revenue is that ld. CIT(A) has erred in deleting addition of Rs.42,595/-. We find that assessee has debited development expenses at Rs.4,25,950/-. The ld. AO has disallowed a sum of Rs.42,595 on ad hoc basis @ 10%.

9. On appeal, ld. CIT(A) has deleted the disallowance by observing that small payments were made by the assessee which were necessary for running its business on day to day basis. We further found that turnover of the assessee is of more than Rs.32 crores. It has shown GP at 02.60 crores ITA No.3418/Ahd/2010 5 Asst. Year 2007-08

which is 8% of the turnover. In achieving such a huge turnover while executing turnkey projects at different sites, the small expenditure incurred at Rs.4,25,950/- cannot be construed on higher side. The ld. CIT(A) has rightly deleted the disallowance made by the AO at 10% of this amount on ad hoc basis. The disallowance has been made on the ground that the details are not verifiable. To our mind, sometime it is quite difficult to submit minute details of small expenditure. Therefore, we do not see any reason to interfere on the order of CIT(A) on this issue.

10. In the result, appeal of Revenue is partly allowed for statistical purposes.

Order pronounced in the open Court on 24/6/2015

Sd/- Sd/-

(G. D. Agarwal) (Rajpal Yadav) Vice President Judicial Member Dated 24/6/2015

Mahata/- ITA No.3418/Ahd/2010 6 Asst. Year 2007-08

Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT concerned 4. The CIT(A) concerned 5. The DR, ITAT, Ahmedabad 6. Guard File BY ORDER

Dy. Registrar, ITAT, Ahmedabad

1. Date of dictation: 22/06/2015

2. Date on which the typed draft is placed before the Dictating Member: 23/06/2015 other Member:

3. Date on which approved draft comes to the Sr. P. S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk: 24/6/2015

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: