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2016 (2) TMI 1114 - AT - Income TaxTDS u/s 194C - non deduction of tax at source - payments payable at the end of the year or during the year - addition u/s 40(a)(ia) - Held that - M/s. Merilyn Shipping 2012 (4) TMI 290 - ITAT VISAKHAPATNAM held that section 40(a)(ia) of the Act is applicable only to the expenditure which is payable as on 31st March of every year and that the provisions of this section cannot be invoked to disallow the amounts which have already been paid during the year without deducting tax at source. In the present case, the ld. CIT(A) followed this decision of ITAT. This decision of ITAT has not been upset. The Hon ble jurisdictional High Court has dismissed the Department s appeal, as noted hereinabove. - Decided in favour of assessee.
Issues:
- Disallowance of deduction under section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of TDS - Interpretation of the term "payable" in section 40(a)(ia) - Consideration of previous judgments by High Courts Analysis: 1. The Department appealed against the order of the ld. CIT(A) for the assessment year 2009-10, challenging the deletion of the addition made on account of disallowance of deduction under section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of TDS. The Department contended that the provisions of section 40(a)(ia) should be strictly implemented without any default to ensure TDS compliance. 2. The assessee, a trader/exporter, argued before the ld. CIT(A) that only payments payable at the end of the year should be considered for disallowance under section 40(a)(ia), not the amounts already paid. The ld. CIT(A) observed that a portion of the disallowed amount was paid during the year, while the remaining amount was payable at the year-end. The ld. CIT(A) upheld the disallowance of the payable amount in line with previous decisions. 3. The ITAT allowed the Department's appeal, citing a judgment by the Hon'ble Calcutta High Court that disagreed with the previous decisions relied upon by the ld. CIT(A). Subsequently, the assessee filed a Misc. Application, highlighting the decision of the Hon'ble J&K High Court in a similar case, which upheld the ITAT's decision. The Misc. Application was allowed, emphasizing the importance of considering jurisdictional High Court decisions. 4. Upon reviewing the rival contentions and the J&K High Court's decision, the ITAT found in favor of the assessee. The ITAT noted that the jurisdictional High Court had dismissed the Department's appeal in a similar case, confirming the ITAT's interpretation of section 40(a)(ia). Consequently, the ITAT upheld the ld. CIT(A)'s deletion of the disallowance, rejecting the Department's grievance. 5. The ITAT concluded that the issue had been settled in favor of the assessee based on the High Court's decision and the ITAT's interpretation of section 40(a)(ia). Therefore, the ITAT confirmed the order of the ld. CIT(A) and dismissed the Department's appeal. This comprehensive analysis of the legal judgment demonstrates the interpretation of section 40(a)(ia) regarding TDS compliance and the significance of precedent set by High Court decisions in resolving tax disputes.
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