2015 (2) TMI 889 - HC - Income Tax

Addition u/s 68 - Tribunal deleted the addition - Held that - Tribunal has decided this point on fact that the company received the amount of capital from the Managing Director.Hence, the addition cannot be made on account of the company. This decision has been rendered on factual finding. No reason to interfere with the same, as no element of law is involved. - Decided in favour of assessee Disallowance made u/s. 40(a)(ia) - Tribunal deleted the disallowance - Held that - Tribunal by following the decision of the Kolkata High Court in CIT vs. Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT ), wherein it has been held that the amendment to the provisions of Section 40(a)(ia) is retrospective in operation and consequently in respect of any payment of TDS made before the due date for the filing of the return of income, the provisions of Section 40(a)(ia) cannot be invoked. No reason to interfere. - Decided in favour of assessee

Summary

Issues:
1. Justification of deletion of addition under section 68 of the Income Tax Act, 1961.
2. Justification of deletion of disallowance under section 40(a)(ia) of the Income Tax Act, 1961.

Analysis:

1. Deletion of Addition under Section 68:
The Hon'ble Chief Justice noted that the appeal questioned the Tribunal's decision to delete the addition made by the assessing officer under section 68 of the Income Tax Act, 1961, due to the failure of the assessee to prove the creditworthiness of the creditor. The Tribunal's decision was based on the fact that the company received the capital amount from its Managing Director. The Chief Justice emphasized that this decision was a factual finding and did not involve any legal element. Consequently, the Court found no reason to interfere with the Tribunal's decision, leading to the dismissal of the appeal on this issue.

2. Deletion of Disallowance under Section 40(a)(ia):
Regarding the deletion of disallowance under section 40(a)(ia) of the Income Tax Act, 1961, the Tribunal relied on a decision of the Kolkata High Court in CIT vs. Virgin Creations. The Kolkata High Court decision established that the amendment to the provisions of Section 40(a)(ia) had retrospective operation. As a result, for any TDS payment made before the due date for filing the return of income, the provisions of Section 40(a)(ia) could not be invoked. The Chief Justice concurred with this interpretation and found no necessity for further deliberation on this point. Consequently, the Court dismissed the appeal on this issue as well.

In conclusion, the High Court of Andhra Pradesh upheld the Tribunal's decisions on both issues raised in the appeal, leading to the dismissal of the appeal. The judgment highlighted the importance of factual findings in tax matters and the retrospective application of statutory amendments, providing clarity on the interpretation of relevant provisions of the Income Tax Act, 1961.