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Issues involved: Disallowance of expenses claimed u/s 40(a)(ia) of the I.T. Act, 1961 for non-deduction of tax on payments as a transport contractor.
Summary: The appeal was filed by the assessee against the confirmation of disallowance of expenses claimed under Section 40(a)(ia) of the I.T. Act, 1961 for non-deduction of tax on payments as a transport contractor. The Assessing Officer noted that the assessee had received transport works orders without deducting tax at source, leading to the disallowance of Rs. 2,75,00,000. The first appellate authority upheld the disallowance, stating that no defect was established by the assessee to warrant interference. The assessee argued that no disallowance should be made if tax is deducted in the last month of the previous year and deposited before the due date of filing the return. The assessee also cited various case laws to support their contention. The Tribunal found that the assessee had complied with tax deduction at source requirements and set aside the disallowance, directing the addition to be deleted. The Tribunal observed that the learned CIT(A) had misdirected himself in considering the accounting treatment given by the assessee, which was clarified by the CBDT. The Tribunal noted that the assessee had deducted tax at source on payments made up to the end of eleven months in the twelfth month of the financial year, as required by law. The Tribunal emphasized that the provisions of Section 40(a)(ia) should be interpreted in a manner that does not lead to unjust enrichment by the State on technical grounds. The Tribunal concluded that the disallowance of Rs. 2,75,00,000 was unjustified and without basis, and therefore directed it to be deleted. In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the order of the learned CIT(A) and deleting the addition of Rs. 2,75,00,000 made on account of disallowance of expenses claimed under Section 40(a)(ia) of the I.T. Act, 1961.
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