2014 (8) TMI 277 - AT - Income Tax

Payment made to non-resident for technical services u/s 40(a)(ia)- Liability to deduction TDS Held that - CIT(A) observed that irrespective of the fact that whether the assessee has claimed as deduction or not disallowance has to be made since tax was not deducted - Both the authorities have not examined whether the amount paid to the non-resident was deducted while computing the income chargeable to tax or not - even though the assessee claims that the payment to non-residents was not claimed as expenditure while computing taxable income, it was not examined by any of the authorities - thus, the matter is remitted back to the AO for re-examination Decided in favour of Assessee.

Summary

Issues Involved:
1. Disallowance u/s 40(a)(ia) of the Act.
2. Contribution made to staff welfare account.

Analysis:

Issue 1: Disallowance u/s 40(a)(ia) of the Act:
The appeal involved the consideration of disallowance u/s 40(a)(ia) of the Act. The assessee, a non-banking financial company engaged in gold loan activities, made payments to a non-resident for engineering site services without deducting tax at the source. The representative for the assessee argued that since the payment was capitalized and only depreciation was claimed, there should be no disallowance u/s 40(a)(ia). The assessing officer disallowed the payment as per section 40(a)(ia) since tax was not deducted. The Tribunal noted that the authorities did not examine whether the payment to the non-resident was deducted while computing taxable income. The Tribunal emphasized that if the assessee did not claim the payment as an expenditure and did not deduct it while computing taxable income, there should be no further disallowance. As there was no evidence on record regarding the computation of income, the Tribunal remitted the issue back to the assessing officer to determine if the payment was claimed as a deduction while computing taxable income.

Issue 2: Contribution made to staff welfare account:
The departmental appeal focused on the contribution made to the staff welfare account. The CIT(A) had deleted the addition made by the assessing officer, following previous Tribunal orders for similar assessment years. The Tribunal found the facts identical to previous years and upheld the CIT(A)'s decision. Consequently, the appeal of the assessee was allowed for statistical purposes, and the appeal of the revenue was dismissed.

In conclusion, the Tribunal's judgment addressed the issues of disallowance u/s 40(a)(ia) of the Act and the contribution made to the staff welfare account. The decision provided detailed analysis and clarification on the application of relevant provisions, emphasizing the importance of proper examination and documentation in tax matters.