M/S. Shri Banwari Dal Mill,, Kanpur vs Assessee

M/s Shri Banwari Dal Mill, Vs Income Tax Officer-2(1), 84/185-D, Karwalo Nagar, Kanpur. Kanpur. PAN:ABFFS0339N (Appellant) (Respondent)

Appellant by Shri Rakesh Garg, Advocate Respondent by Shri Rajnish Yadav, D. R. Date of hearing 28/11/2014 Date of pronouncement 16/01/2015

ORDER

PER A. K. GARODIA, A.M.

This is an assessee's appeal directed against the order passed by learned CIT(A)-II, Kanpur dated 16/03/2012 for the assessment year 2005- 2006.

2. The grounds raised by the assessee are as under:

"1. Because the CIT(A) has erred on facts and in law in upholding the addition of Rs.8,88,232/- on account of non deduction of TDS, being payment made to Railways towards freight of goods from Mumbai to Kanpur which addition is contrary to facts bad in law be deleted.

2. Because the CIT(A) has failed to appreciate that no TDS is deductible on payments made to Railways towards freight as defined in Sec. 194C of the Act both in the residuary clause and also under the definition of "works", the disallowance upheld is arbitrary, contrary to the provisions of law and be deleted.

2 3. Because the CIT(A) has erred in law and on facts in confirming the addition on account of non deduction of TDS on freight and commission charges of Rs.2,33,374/-.

4. Because there being no amount outstanding to be paid either on account of railway freight or on account of commission, the provisions of section 40(a)(ia) are not applicable.

5. Because the CIT(A) has erred in law and on facts in confirming the addition of Rs. 17,5007- on account of expenditure made for the purpose of purchase of electric meter as "capital" in nature as against the claim of the assessee as "revenue expenditure".

6. Because the CIT(A) has erred in law and on facts in confirming the ad hoc addition of Rs.25,000/- on account of total wages paid of Rs.1,29,825/-.

7. Because the CIT(A) has erred in law and on facts in confirming the ad hoc addition of Rs.20,000/- made by the AO out of palledari's payment of Rs.l,13,105/-.

8. Because the CIT(A) has erred in law and on facts in confirming the disallowance of Rs.11,112/- out of telephone expenses of Rs.44,448/-.

9. Because the CIT(A) has erred in law and on facts in confirming the disallowance of Rs.10,000/- out of general expenses of Rs.31,647/-."

3. It was submitted by Learned A.R. of the assessee that these payments were for reimbursement and therefore, no TDS was required to be deducted. He further submitted that the matter may be restored back to Assessing Officer for fresh decision and the assessee will establish before the Assessing Officer that these payments are on account of reimbursement of expenses and therefore, no TDS was required to be deducted.

4. Learned D.R. of the Revenue supported the orders of the authorities below.

3 5. We have considered the rival submissions. We find that various disallowances were made u/s 40a(ia) for the reason that as per Assessing Officer, TDS was required to be deducted and since TDS was not deducted, disallowance was called for u/s 40a(ia) of the Act. Before us, this is the claim of the assessee that these payments are on account of reimbursement and therefore, no TDS was required to be deducted and as a consequence, no disallowance is justified u/s 40a(ia) of the Act. Since there is no finding of the authorities below on this aspect, we feel it proper to remit the matter back to the file of Assessing Officer for fresh decision. We would like to make it clear that the burden is on the assessee to establish that the payments are on account of reimbursement of expenses and if the assessee is able to establish this, no disallowance should be made because if no TDS is required to be deducted then no disallowance is justified. For those payments, which are not in the nature of reimbursement and TDS was required to be deducted, disallowance may be made as per law.

6. In the result, the appeal of the assessee stands allowed for statistical purposes.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:16/01/2015. *C.L.Singh

Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar