IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "SMC": DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
ITA.No.4912/Del./2018
Assessment Year 2014-2015
Sudesh Yadav ITO
C/o P.C. Yadav, Advocate vs. Ward-2,
2nd Floor, 221 DDA Site-1, Narnaul
New Rajinder Nagar, Haryana.
Mohindergarh,
New Delhi.
ABRPY5153A
(Appellant) (Respondent)
Sh. P.C. Yadav, Adv.
For Assessee :
Ms. Nida Fatima, Adv.
For Revenue : Dr. Anjula Jain, Sr. DR
Date of Hearing : 18.10.2018
Date of Pronouncement : 01.11.2018
ORDER
This appeal by assessee has been directed against the
order of Ld. CIT(Appeals)-Rohtak dated 05.06.2018 for AY
2014-15.
2. I have heard Ld. Representatives of both the parties and
perused the material available on record.
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3. On ground no. 1, assessee challenged the disallowance of
Rs. 1,96,228/- out of renovation expenses.
4. Assessee is a proprietor of M/s Mahalaxmi Petroleum,
Mahendergarh and during the year assessee was engaged in
the business of running a retail Fuel Outlet (Petrol Pump) of
Hindustan Petroleum Corporation Ltd.(HPCL). During the
year, assessee had declared total turnover of Rs. 30.74 crores
as compared to immediate previous year's turnover of Rs.
26.15 crores. There is an increase in GP ratio from 2.64% to
2.47%. The return of income was filed declaring income from
business and profession amounting to Rs. 10,58,975/- and
income from house property were declared in a sum of Rs.
1,87,110/-. Since, there were no declined in the gross profit
ratio, therefore, it was accepted by the AO. The AO further
noted that assessee had debited Rs. 6,54,094/- on account of
renovation expenses in the books of account. Details of the
same were furnished. The AO asked the assessee to explain
as to why the same may not be capitalized in view of the
enduring nature of these expenses. The assessee has
submitted that it is the requirement of business to upkeep the
driveway and building for smooth functioning of retail outlet.
The AO, however, keeping in view the long lasting nature of
expenses treated 2/3rd of the expenses as Revenue
expenditure and disallowed 1/3rd of these expenses on
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account of capital expenses on which depreciation was
allowed. The AO, accordingly, disallowed Rs. 1,96,228/-. The
CIT(A) on the same reasoning upheld the addition.
5. After considering the rival submission, I am of the view,
addition is wholly unjustified. The assessee is running a
business of retail Fuel Outlet (petrol pump). There is an
increase in the GP rate in assessment year under appeal. AO
accepted substantial renovation expenses incurred by
assessee wholly and exclusively for the purpose of business.
Thus, it was considered as Revenue expenditure. The AO has
not brought anything on record, as to on incurring renovation
expenses what capital had been generated by the assessee.
The nature of business clearly shows that renovation expenses
are required to be incurred for smooth functioning of retail
outlet of petrol pump. Since, turnover of assessee and GP rate
have increased, therefore, there is no question of assessee
inflating the expenditure so as to reduce the taxable income.
The genuineness of the expenses are not in doubt. In this
view of the matter, I hold that the entire expenses were
incurred on account of Revenue expenditure. Therefore,
disallowance of 1/3rd of the expenses is wholly unjustified. I,
accordingly, set aside the orders of the authorities below and
delete the addition of Rs. 1,96,228/-.
6. Ground no. 1 of appeal of assessee is allowed.
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7. On ground no. 2, assessee challenged the disallowance of
Rs. 39,850/- u/s 40(a)(ia) of the Act.
8. At the time of verification of ledger of M/s Mahalaxmi
Petroleum submitted during the course of assessment
proceedings, it was found that assessee has paid cash
amounting to Rs. 39,850/- for advertisement expenses (Rs.
19,925/- on 26.09.2013 and Rs. 19,925/- on 29.09.2013 to
M/s CBH International, New Delhi for the same bill). Hence,
provisions to section 194C of the Act were found applicable in
the case of the assessee for deducting tax at source on the
payments to contractor by the assessee. AO noted that under
the provisions of section 40(a)(ia) expenses of payment to
contractor are not deductible under the head "profit and gains
of a business", if tax is not deducted at source or after such
deduction, has not been paid on or before the due date of filing
of ITR. Show-cause notice was issued as to why this amount
be not disallowed for violation of provisions of section 194C of
the Act. AO noted that no reply had been filed, therefore, the
amount of Rs. 39,850/- was disallowed u/s 40(a)(ia) of the
Act. The Ld. CIT(A) did not accept the explanation of the
assessee and confirm the addition.
9. After considering the rival submission, I am of the view
that the addition is unjustified. Ld. Counsel for the assessee
submitted that section 194C is not applicable in this case,
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because the amount paid in the year was less than Rs.
75,000/- as per proviso to section 194C(5) of the Act. Section
194C(5) of the Act provides "no deduction shall be made from
the amount of any sum credited or paid or likely to be credited
or paid to the account of, or to, the contractor, if such sum
does not exceed Rs. 30,000/-.
Provided that where the aggregate of the amounts of such sum
credited or paid or likely to be credited or paid during the
financial year exceeds Rs. 75,000/-, the person responsible for
paying such sum referred to in sub-section (1) shall be liable
to deduct Income tax under this section". The above provision
clearly shows that no deduction is required under the above
provision, if the amount paid to the account of the contractor
does not exceed Rs. 30,000/-. The proviso to this section
provides that where the aggregate of the amounts paid exceeds
Rs. 75,000/-, such person shall be responsible to deduct TDS.
In the present case, the assessee has not paid more than Rs.
30,000/- on one occasion because payment below Rs.
30,000/- each was paid on different occasions. The aggregate
of the amount also does not exceeds in a year at Rs. 75,000/-.
Therefore, assessee is not liable to deduct TDS u/s 194C(5) of
the Act. I, accordingly, set aside the orders of the authorities
below and delete the addition.
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10. In the result, the ground no. 2 of appeal of the assessee
is allowed.
11. On ground no. 3, assessee challenged the addition of Rs.
79,200/- on account of lease rent income. The AO on perusal
of the documents found that rent to the extent of Rs. 79,200/-
has been credited in the bank account of the assessee but the
amount of the said rent has not been reflected in ITR for
assessment year under appeal. The assessee was show
caused as to why the rental income above should not be added
to the returned income of the assessee. The assessee stated
that assessee was unaware of this fact, therefore, it was not
shown in the ITR. The AO, however, made addition of Rs.
79,200/-. The Ld. CIT(A) confirm the addition.
12. After considering the rival submission, I am of the view
that addition is unjustified. Ld. Counsel for the assessee
submitted that assessee is receiving this amount from HPCL
as lease charges and M/s HPCL in turn is charging this
amount from assessee as service charges. The assessee is
paying is lease rental of Rs. 6,600/- to M/s HPCL. Therefore,
the net impact of this entry is Revenue neutral. The
authorities below have failed to understand these entries. The
copies of the accounts are filed at pages 38 onwards in the PB.
He has submitted that on similar facts no addition have been
made in earlier year and subsequent year. In view of the
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above and considering the copy of the account of the assessee
in the books of HPCL Ltd. filed at pages 38 to 53 of the PB, it
is clear that assessee was paying these lease rentals as well as
receiving the same amount from HPCL as lease charges. Ld.
Counsel for the assessee, therefore, rightly contended that the
net impact of this entry is Revenue neutral. Nothing is
brought to my notice, if similar additions have been made in
earlier year or subsequent year. Addition is, therefore, wholly
unjustified.
I, accordingly, set aside the orders of the authorities below and
delete the addition of Rs. 79,200/-. This ground of appeal of
assessee is allowed.
13. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court.
Sd/-
(BHAVNESH SAINI)
JUDICIAL MEMBER
Delhi
Dated: 01.11.2018
*Kavita Arora, P.S.
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Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT `SMC' Bench, Delhi
6. Guard File.
// BY Order //
Assistant Registrar : ITAT Delhi Benches : Delhi.
Date of dictation 22.10.2018
Date on which the typed draft is placed before the dictating 24.10.2018/29.10.18
Member
Date on which the typed draft is placed before the Other Member
Date on which the approved draft comes to the Sr. PS/PS
Date on which the fair order is placed before the Dictating Member
for pronouncement
Date on which the fair order comes back to the Sr. PS/PS 01.11.18
Date on which the final order is uploaded on the website of ITAT 01.11.18
Date on which the file goes to the Bench Clerk 01.11.18
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant Registrar for
signature on the order
Date of dispatch of the Order
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