2014 (1) TMI 698 - AT - Income Tax

Disallowance u/s 40(a)(ia) of the Act Payments made to SIDBI towards reimbursement of depute personnel cost - Default in Not deducting TDS u/s 192 of the Act - Held that - The deputed employees are employed by the SIDBI who paid the salaries as per the terms and conditions after making necessary TDS in accordance with the law in force - The agreement (MoU) between the assessee and the SIDBI allows deputing of the personnel to the assessee for which assessee is under obligation to reimburse the personnel cost - The amount constitutes such personnel costs reimbursed by the assessee - That being the fact of the addition, the question of applicability of section 40(a)(ia) to such payments by way reimbursements do not attract the TDS provisions to the amount Following CIT vs. OCB Engineers 2013 (6) TMI 48 - BOMBAY HIGH COURT Thus, the CIT (A) has wrongly decided the issue without appreciating the facts of the case and the law in force Decided partly in favour of Assessee. Deletion of disallowance u/s 40(a)(ia) of the Act Late payment of TDS to Government account Held that - The appellant explained that the TDS amount in respect of expenses have been paid before the due date of filing of return of income - the deduction is allowable where TDS has been paid / deposited before the due date of filing of the return of income - the entire tax deducted at source from the payments made during the period 1.4.2007 to 28.2.2008 was paid by the appellant in Government account till the month of July, 2008 ie well before the due date of filing of income tax return for the year under consideration - The appellant further explained that section 40(a)(ia) of the Act have been amended by Finance Act, 2010 - The TDS made by the assessee was deposited to the Government account before the due date for filing of the return of income - There is no dispute on this fact - the CIT (A) has rightly and reasonably adjudicated the issues and there is no infirmity in the order of the CIT (A) Decided against Revenue.

Summary

Issues:
1. Disallowance of payment made to SIDBI towards reimbursement of deputed personnel cost under section 40(a)(ia).
2. Treatment of certain income as income from other sources instead of business income.
3. Disallowance of TDS under section 40(a)(ia) for late payments to the Government account.

Issue 1: Disallowance of Payment to SIDBI:
The appeal concerned the disallowance of an amount paid to SIDBI towards reimbursement of deputed personnel cost under section 40(a)(ia) for the assessment year 2008-2009. The appellant contested the disallowance, arguing that the payment was a reimbursement of expenses incurred on deputed personnel and therefore not subject to TDS provisions. The appellant cited various decisions supporting their position, including M/s. Bhagyanagar Gas Ltd. vs. ACIT and CIT vs. OCB Engineers. The Tribunal agreed with the appellant, holding that section 40(a)(ia) should not apply to reimbursements. The Tribunal set aside the decision of the CIT (A) and allowed the appeal partially.

Issue 2: Treatment of Income as Other Sources:
The appellant also challenged the CIT (A)'s treatment of certain income as income from other sources instead of business income. However, during the proceedings, the appellant decided not to press this ground, leading to its dismissal as not pressed. The issue was not further adjudicated upon, and the appeal was disposed of accordingly.

Issue 3: Disallowance of TDS for Late Payments:
In another appeal filed by the Revenue, the issue revolved around the disallowance of TDS under section 40(a)(ia) for late payments to the Government account. The AO disallowed the amount, alleging non-deduction of TDS within the prescribed time. The CIT (A) granted relief to the assessee, relying on the retrospective application of an amendment brought in by the Finance Act, 2010. The CIT (A) accepted the proposition that the TDS amount was paid before the due date of filing the return of income and cited relevant judgments supporting the retrospective nature of the amendment. The Tribunal found no infirmity in the CIT (A)'s order and dismissed the appeal of the Revenue.

In conclusion, the Tribunal addressed multiple issues concerning disallowances and treatment of income in the appeals related to the assessment year 2008-2009. The judgments provided clarity on the applicability of TDS provisions to reimbursements, the retrospective effect of relevant amendments, and the proper treatment of income under the Income Tax Act, 1961. The decisions were based on thorough legal analysis and established precedents, resulting in partial allowance of one appeal and dismissal of the other.