The Income Tax Appellate Tribunal (ITAT), Bangalore Bench deleted the addition and held that payment made by the assessee to the seven sub-contractors did not breach the threshold limit.
The assessee, M/s Art – E- Mide Construction Pvt. Ltd. has paid to sub-contractor at Assam an amount of Rs. 3,69,021 and to Sub-contractor at West Bengal to the tune of Rs. 8,00,145 without deducting TDS, so the AO asked the assessee to give details and to show cause as to why this amount should not be disallowed as per provision of Section 40(a)(ia) of the Act.
Pursuant to which the AO acknowledges that the assessee had filed reply wherein he furnished the details of statement of payment and explained that no payment has exceeded the taxable limit as prescribed under Section 194C of the Act, therefore according to assessee disallowance was not warranted.
According to AO, he issued notice under section 133(6) of the Act for verification of the genuineness of the claim made by the assessee. However, according to AO, the notices were un-served, therefore according to AO the assessee failed to substantiate the aforesaid payment and therefore be treated the same as bogus and disallowed Rs.3,88,995/-.
The coram consists of J. S. Reddy and A. T. Varkey noted that in respect of the payments in issue, the assessee had filed details of the payments made to seven sub-contractors, from which it reveals that details like date wise payment made to each of the seven sub-contractor is found and has been reproduced by the AO.
The Tribunal clarified that the threshold limit for deduction TDS was Rs. 75,000/-.
“We note from a perusal of the table in the assessment order that in this case, the payment made by the assessee to the seven sub-contractors didn’t breach the threshold limit of Rs. 75,000,” the ITAT said.
“The assessee has incurred expenses in crores by making payment to sub-contractors in Assam itself where TDS of an amount of Rs. 4,70,97,972/-, in West Bengal to the tune of Rs. 3,50,86,872/- and in Orissa to the tune of Rs. 76,00,058/- etc. and has filed documents to substantiate payment made which are available on page 92 to 143 of PB, we are inclined to delete the addition,” the ITAT said.
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