LAXMINARAYAN TRANSPORT, JAJPUR ROAD, JAJPUR V. ACIT, CIRCLE-1(1) CUTTACK, CUTTACK

ITA 130/CTK/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1871 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 02-06-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 15-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 40A(3); 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE Laxminarayana Jajpur Road, Jajpur PAN/GIR No (Appellant This is an appeal filed by the assessee aga Addl./JCIT(A)1, Indore Cuttack/10298/2017 2. Shri Mohit Sheth, S.C.Mohanty, ld Sr DR 3. It was submitted by ld AR that in the course of assessment, the Assessing officer had made an addition of Rs.6,64,800/ “loading charges” on account of violation of provisions of section 40A(3) of IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK ‘SMC’ BENCH, CUTTACK BEFORE SHRI GEORGE MATHAN, JUDICIAL ITA No.130/CTK/2024 Assessment Year : 2015-16 Laxminarayana Transport, Jajpur Road, Jajpur Vs. ACIT, Circle Cuttack PAN/GIR No.AACFL 8593 R (Appellant) .. ( Respondent Assessee by : Shri Mohit Sheth, Adv Revenue by : Shri S.C.Mohanty, ld Sr DR Date of Hearing : 03/0 Date of Pronouncement : 03/0 O R D E R This is an appeal filed by the assessee against the order of the ld Addl./JCIT(A)1, Indore dated 25.1.2024 in Appeal No. Cuttack/10298/2017-18 for the assessment year 2015- Mohit Sheth, ld AR appeared for the assessee. Shri , ld Sr DR represented on behalf of the revenue. It was submitted by ld AR that in the course of assessment, the Assessing officer had made an addition of Rs.6,64,800/ “loading charges” on account of violation of provisions of section 40A(3) of Page1 | 6 IN THE INCOME TAX APPELLATE TRIBUNAL, , CUTTACK JUDICIAL MEMBER ACIT, Circle-1(1), Respondent) Mohit Sheth, Adv , ld Sr DR 06/2024 /06/2024 inst the order of the ld in Appeal No.CIT(A), -16. the assessee. Shri represented on behalf of the revenue. It was submitted by ld AR that in the course of assessment, the Assessing officer had made an addition of Rs.6,64,800/- under the head “loading charges” on account of violation of provisions of section 40A(3) of ITA No.130/CTK/2024 Assessment Year : 2015-16 Page2 | 6 the Act. It was the submission that these were payments made to labourers, who are doing the work of loading and unloading. It was the submission that the assessee is in the business of transport. It was the submission that these payments were compulsorily made in cash as no labourers accept payment by cheque or UPI payment. 4. In reply, ld Sr DR submitted that the provisions of Rule 6DD(J) no more apply and there is violation of provisions of section 40A(3) of the Act. Therefore, the disallowance made u/s.40A(3) of the Act is liable to be upheld. 5. I have considered the rival submissions. Admittedly, the provisions of Rule 6DD(j) is not available in its original form. A perusal of the provisions of section 40A(3) of the Act specifies that if the payment made to a person in a single day exceeds Rs.10,000/- in cash, the same is liable to be disallowed. Admittedly, these are labour payments. There is no evidence to suggest that the payments had been made to a single person of an amount exceeding Rs.10,000/-. Further, considering the fact that these are clearly labour payments towards loading charges and the labourers out of common knowledge would not accept payments through banking channels or UPI payment. They work only when cash is paid to them. This being so and considering the fact in the present case, the addition made by the AO and confirmed by the ld CIT(A) stands deleted. ITA No.130/CTK/2024 Assessment Year : 2015-16 Page3 | 6 6. It was further submitted by ld AR that the Assessing officer has made an addition of Rs.35,000/- under the head “Donation”. It was the submission that these were payments made for local Durga Puja, Ganesh Puja celebration etc. It was the further submission that the assessee being in the business of transport and being highly labour intensive, it was incumbent upon the assessee to incur these expenses, failing which, the movement of his vehicles in the market would get blocked. It was his submission that compare to the turnover of the assessee, these payments were nominal. It was submitted that the disallowance is liable to be deleted. 7. In reply, ld Sr DR supported the order of the Assessing Officer and ld CIT(A). 8. I have considered the rival submissions. A perusal of the facts in the present case clearly shows that the turnover of the assessee is more than Rs.17 crores. The amount of donation that has been paid is only Rs.35,000/-. The assessee is not claiming the same under section 80G but claiming under the head “business expenses”. It is well known fact that a prudent business man has to incur such miscellaneous expenses in the course of his business for the purpose of furtherance of his business activities. Considering the present case as also the necessity, which has been explained by the assessee, the disallowance made by the AO and confirmed by ld CIT(A) stands deleted. ITA No.130/CTK/2024 Assessment Year : 2015-16 Page4 | 6 9. It was further submitted by ld AR that the Assessing Officer has made disallowance an amount of Rs.3,30,865/- under the head “service tax paid” as also Rs.1,69,628/- being interest on service tax. It was the submission that the issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of CIT vs Prime Broking Company (I) Ltd in ITA No.847/2014 order dated 14.10.2016, reported in (2016) 40 ITCD 133 (Bombay). It was the submission that the Hon’ble Bombay High Court had rejected the appeal of the revenue on the issue by following its own order for the assessment year 2008-09, which has also been dismissed by the Hon’ble Bombay High Court vide order dated 9.6.2016 in ITA No.1576/2013. It was the further submission that in respect of interest on service tax, the Co-ordinate Bench of Chennai Tribunal in ITA No.524/Chny/2021 dated 2.11.2022 has categorically held that interest paid on service tax is not a penalty, which can be disallowed u/s.37(1) of the Act and had consequently allowed the claim of interest. 10. In reply, ld Sr DR supported the order of the AO and ld CIT(A). 11. I have considered the rival submissions. As it is noticed that the issues of service tax and interest on service tax are squarely covered by the decisions of Hon’ble Bombay High Court in the case of Prime Broking Company (I) Ltd and the Co-ordinate bench of Chennai Bench of the Tribunal in the case of Prince Holdings Madras (P) Ltd., referred (supra), ITA No.130/CTK/2024 Assessment Year : 2015-16 Page5 | 6 the addition as made by the AO and confirmed by the ld CIT(A) in respect of service tax and interest on service tax stands deleted. 12. It was further submitted by ld AR that the Assessing Officer has disallowed Rs.32,500/- under the head “advertisement and publicity” expenses. Ld AR has not been able to substantiate the claim, therefore, same stands confirmed. 13. It was further submitted by ld AR that the Assessing officer has made adhoc disallowance of 10% out of the expenses under the head “staff welfare and travelling and conveyance expenses”. It was the submission that the adhoc disallowance cannot be made. 14. In reply, ld Sr DR supported the orders of lower authorities. 15. I have considered the rival submissions. A perusal of the assessment order and the impugned order clearly shows that no specific defect in the expenses claimed by the assessee has been shown. It is accepted principles that adhoc disallowance cannot be made under the Income tax Act. This being so, the adhoc disallowance of 10% as made by the AO and confirmed by the ld CIT(A) stands deleted. ITA No.130/CTK/2024 Assessment Year : 2015-16 Page6 | 6 16. In the result, appeal of the assessee stands partly allowed. Order dictated and pronounced in the open court on 03/06/2024. Sd/- (George Mathan) JUDICIAL MEMBER Cuttack; Dated 03/06/2024 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : Laxminarayana Transport, Jajpur Road, Jajpur 2. The respondent: ACIT, Circle-1(1), Cuttack 3. The Addl/JCIT(A)-1, Bengaluru 4. Pr.CIT, Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//