2013 (11) TMI 72 - HC - Income Tax

Disallowance u/s 40(a)(ia) TDS u/s 194C - payable as on the date of the balance sheet or it can be invoked also to disallow such expenditure which became payable at any time during the relevant previous year and was actually paid within the previous year Held that - This case is squarely covered by the recent decision of the Division Bench of this Court in Tax Appeal No.905 of 2012 reported in 2013 (5) TMI 457 - GUJARAT HIGH COURT disallowance is upheld Decided in favor of Revenue.

Summary

Issues:
Challenge to impugned judgment and order dated 5/10/2012 passed by the Income Tax Appellate Tribunal regarding AY 2005-2006 based on substantial questions of law related to section 40(a)(ia) of the Income Tax Act.

Analysis:

1. Challenge to Impugned Judgment:
The Tax Appeal was filed by the appellant - revenue challenging the decision of the Income Tax Appellate Tribunal (ITAT) regarding the addition of Rs.4,85,252 in contravention of section 40(a)(ia) of the Income Tax Act and the mandatory requirements of section 200(1) and section 194(c) of the Act for AY 2005-2006. The primary issues revolved around the interpretation and application of section 40(a)(ia) in disallowing certain expenditures.

2. Arguments Presented:
The appellant's counsel argued that the issues raised were similar to a recent decision by the Division Bench of the Court in Tax Appeal No.905 of 2012, where it was held that the decision of the Special Bench of the Tribunal in the case of M/s. Merilyn Shipping & Transports Vs. ACIT did not establish the correct law. The appellant sought a similar outcome based on the Division Bench's ruling, requesting the Court to quash the ITAT's decision and remand the matter for fresh consideration.

3. Response of the Respondent:
The respondent's counsel did not contest the appellant's arguments, indicating a lack of disagreement with the position taken by the appellant regarding the applicability of the Division Bench's decision to the present case.

4. Court's Decision:
After hearing both parties and considering the Division Bench's decision in Tax Appeal No.905 of 2012, the Court allowed the appeal. The impugned judgment and order of the ITAT were quashed and set aside. The matter was remanded to the ITAT for a fresh review of any other issues related to the disallowance under section 40(a)(ia) of the Income Tax Act, in line with the Division Bench's ruling.

This detailed analysis highlights the legal proceedings, arguments presented, and the ultimate decision of the Court in addressing the issues raised in the Tax Appeal concerning the interpretation and application of section 40(a)(ia) of the Income Tax Act for the relevant assessment year.