9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (12) TMI 1480 - HC - Income TaxDisallowance u/s. 40(A)(2b) - ITAT deleted addition - Held that - So far as the disallowance made under section 40A(2)(b) of the Act on the ground of motor bus rent is concerned, it appears that the AO disallowed 5% of the total payments towards motor bus rent by observing that the assessee has failed to reconcile the difference in payments as per tax audit report and as submitted during the assessment proceedings and had also not produced any comparative prices. The learned CIT(A) deleted the said disallowances by observing that the AO has not made out any case for excessive or unreasonable payments to the related purpose towards the motor bus rent. The learned CIT(A) also observed that no comparative prices for similar transport services was cited by the AO and therefore, was not justified in making ad-hoc disallowance of 5% under section 40A(2)(b) of the Act and therefore, the CIT(A) as such rightly deleted the disallowances made under section 40A(2)(b) of the Act. Considering the provisions of Section 40A(2)(b) of the Act and the Evidence Act, if the AO was of the opinion that the payment for which disallowance is claimed, is excessive or unreasonable. In that case, it was for the AO to assess fair market price and give comparative instances for payment for similar transport service. In absence of such comparative cases brought on record, as rightly observed by the ITAT it was not open for the AO to make disallowance under section 40A(2)(b) of the Act. We are in complete agreement with the view taken by the ITAT and the observations made by the learned ITAT while deleting disallowances made by the AO under section 40A(2) (b) of the Act on motor bus rent. No error has been committed by the learned ITAT which calls for interference of this Court. - Decided in favour of assessee. Disallowance made under section 40(a)(ia) i.e. with respect to retrospective operation of the amendment in Section 40(a)(ia) by Finance Act, 2010 - Held that - The said question is squarely covered against the revenue by decision of the Division Bench of this Court in Commissioner of Income Tax -Ahmedabad IV Versus Omprakash R. Chaudhary 2015 (2) TMI 150 - GUJARAT HIGH COURT wherein held that the amendment in section 40(a)(ia) of the Act by Finance Act, 2010 would apply retrospectively.- Decided in favour of assessee.
Issues Involved:
1. Deletion of disallowance under Section 40A(2)(b) of the Income Tax Act. 2. Retrospective application of the amendment in Section 40(a)(ia) by Finance Act, 2010. Detailed Analysis: 1. Deletion of Disallowance under Section 40A(2)(b) of the Income Tax Act: The core issue in both appeals is whether the Income Tax Appellate Tribunal (ITAT) was correct in deleting the disallowance made by the Assessing Officer (AO) under Section 40A(2)(b) of the Income Tax Act. The AO had disallowed 5% of the total payments towards motor bus rent, arguing that the assessee failed to produce comparative market prices and reconcile differences in payments as per the tax audit report and submissions during the assessment proceedings. The CIT(A) had deleted these disallowances, observing that the AO did not provide any comparative prices for similar transport services and had not made a case for excessive or unreasonable payments to related persons. The ITAT upheld this decision, emphasizing that the AO must ascertain the fair market price and provide comparative instances for similar transport services before making any disallowance under Section 40A(2)(b). The ITAT noted that the AO had failed to discharge this onus and that an ad-hoc disallowance was not justified. The ITAT's observations included that disallowance under Section 40A(2) requires the AO to form an opinion that the expenditure is excessive or unreasonable in relation to the fair market price of the goods, services, or facilities. The ITAT stated that unless there is a categorical finding about the fair market value and the assessee has an opportunity to be heard, disallowance cannot be made. The ITAT also pointed out that the onus of proving that the payment is not excessive or unreasonable cannot be placed on the assessee, as proving a negative is an impossible task. The High Court agreed with the ITAT's view, stating that no error was committed by the ITAT and that no substantial question of law arose from the ITAT's decision. The High Court affirmed that the AO must provide comparative instances to justify any disallowance under Section 40A(2)(b). 2. Retrospective Application of the Amendment in Section 40(a)(ia) by Finance Act, 2010: The second issue pertains to whether the amendment to Section 40(a)(ia) by the Finance Act, 2010, which allows for the deduction of expenses if the TDS is deposited by the due date of filing the return, applies retrospectively. For Assessment Year (AY) 2006-07, the AO had disallowed Rs. 93,25,426 under Section 40(a)(ia), arguing that the amendment by the Finance Act, 2010, was not retrospective. However, the ITAT held that the amendment was retrospective, and the High Court noted that this issue was already settled against the revenue by a Division Bench of the Gujarat High Court in Tax Appeal No.412 of 2013 and allied matters, which held that the amendment applies retrospectively. For AY 2005-06, the ITAT had accepted the assessee's appeal to allow the expenditure in the next assessment year, rendering the question of disallowance under Section 40(a)(ia) moot for that year. Conclusion: The High Court dismissed both appeals, upholding the ITAT's decisions to delete the disallowances under Section 40A(2)(b) and to apply the amendment to Section 40(a)(ia) retrospectively. The High Court found no substantial question of law warranting interference with the ITAT's judgments.
|
