2011 (5) TMI 950 - AT - Income Tax

Summary

Issues involved: Revenue's appeal against the order of Commissioner of Income tax (Appeals)-VIII, Ahmedabad regarding the disallowance of expenses claimed by the assessee u/s.40(a)(ia) of the Act for the assessment year 2005-06.

Summary:

Issue 1: Disallowance of expenses u/s.40(a)(ia) of the Act
The Revenue appealed against the order disallowing expenses claimed by the assessee under Section 40(a)(ia) of the Act. The assessee, a private limited company engaged in construction activity, had disclosed preoperative expenses during assessment. The Assessing Officer found that the assessee did not deduct tax at source on certain payments, leading to disallowance under Section 40(a)(ia). However, the assessee contended that since the expenses were not debited to the profit and loss account but capitalized as preoperative expenses, disallowance under Section 40(a)(ia) was not applicable. The Ld. CIT(A) considered the submissions and deleted the addition, stating that as the expenses were not claimed in the profit and loss account but capitalized under preoperative expenses, disallowance under Section 40(a)(ia) did not arise. The Tribunal upheld the Ld. CIT(A)'s decision, concluding that since the expenses were not claimed in the profit and loss account, disallowance under Section 40(a)(ia) was not sustainable. Therefore, the Revenue's appeal was dismissed.

Conclusion: The Tribunal upheld the Ld. CIT(A)'s decision, ruling in favor of the assessee regarding the disallowance of expenses claimed under Section 40(a)(ia) of the Act for the assessment year 2005-06.