2014 (6) TMI 987 - AT - Income Tax

TDS disallowance - Whether the Ld. CIT(A) was justified in deleting the disallowance u/s 40(a)(ia) by holding that TDS disallowance applies only to amounts payable as on 31st March and not to amounts already paid during the year? - Held that - the issues relating to the applicability of section 194C of the Act as contained in the Grounds raised in the Cross Objection as also the fresh plea raised by the assessee before us based on the second proviso to section 40(a)(ia) of the Act inserted by the Finance Act 2012 w.e.f. 01.04.2013 deserve to be examined afresh on their merits. The aforesaid new plea has not been examined by the lower authorities because they did not have the benefit of the insertion of second proviso to section 40(a)(ia) of the Act by the Finance Act 2012 w.e.f. 01.04.2013 before them - the matter is restored back to the file of the Assessing Officer with directions to examine contentions of the assessee and decide the same - appeal allowed by way of remand.

Summary

Issues Involved:
Disallowance under section 40(a)(ia) of the Income-tax Act, 1961 for transportation charges.

Analysis:
1. Revenue's Appeal Ground:
The Revenue challenged the CIT(A)'s decision to delete the disallowance under section 40(a)(ia) by arguing that Tax Deducted at Source (TDS) disallowance applies only to amounts 'payable' as of March 31 and not to amounts already paid during the year. This issue was central to the Revenue's appeal.

2. Assessee's Cross Objection Grounds:
The assessee raised multiple grounds in the cross-objection, including the contention that section 40(a)(ia) provisions were not applicable to payment of expenses, and the Assessing Officer erred in disallowing payments under this section. Additionally, the assessee argued that certain payments made to contractors should have been excluded based on specific provisions. The issue of reimbursement of expenses was also raised.

3. Substantive Issue:
The primary issue in both appeals revolved around a disallowance of a specific amount by the Assessing Officer under section 40(a)(ia) of the Act concerning transportation charges. The Assessing Officer disallowed an amount for failure to deduct tax as required under section 194C of the Act. The CIT(A) partially upheld this disallowance, leading to appeals by both parties.

4. Judgment and Decision:
The Tribunal considered various arguments and precedents, including the applicability of section 194C and the insertion of a new proviso to section 40(a)(ia) by the Finance Act, 2012. The Tribunal reversed the CIT(A)'s decision based on consistency with a Pune Bench judgment and held in favor of the Revenue. However, the Tribunal acknowledged the need to examine fresh pleas and issues raised by the assessee, directing the matter back to the Assessing Officer for a detailed review.

5. Conclusion:
Ultimately, the Tribunal allowed the assessee's Cross Objection for statistical purposes, indicating partial relief. The appeal of the Revenue was allowed, while the Cross Objection of the assessee was partly allowed. The Tribunal emphasized the importance of a thorough examination of all relevant issues, including the applicability of tax provisions and the impact of new legislative changes, ensuring due process and natural justice.

This detailed analysis encapsulates the key legal issues, arguments, and the Tribunal's decision in the judgment concerning the disallowance under section 40(a)(ia) of the Income-tax Act, 1961 for transportation charges.