2015 (6) TMI 277 - AT - Income Tax

Disallowance u/s 40(a)(ia) - non deduction of TDS on internal audit fee - Held that - In each of the case audit fee did not exceed Rs.,20,000/-. The relevant assessment year involved is 2006-07 relevant to financial year 2005-06. In view of the proviso of section 194J of the Act fee for professional or technical services the assessee is not liable to deduct TDS in case the payment does not exceed the monetary limit prescribed i.e. ₹ 20,000/- in that year in each of the case. Thus assessee is not liable to deduct tax as the payment in all the three cases is less than ₹ 20,000/- each. - Decided in favour of assessee. Disallowance of interest on loan - Held that - From the above decision of the Co-ordinate Bench of Mumbai Tribunal in the case of Vipin Mehta (2011 (5) TMI 503 - ITAT MUMBAI) and the fact in this case is that the assessee has received Form 15G from the respective payees to whom interest is paid, the AO has no authority to make any disallowance for non deduction of TDS u/s 40(a)(ia) of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of internal audit fee for non-deduction of TDS under section 40(a)(ia) of the Income Tax Act.
2. Disallowance of interest on loan under section 40(a)(ia) of the Income Tax Act.

Issue 1: The first issue pertains to the disallowance of internal audit fee due to non-deduction of TDS under section 40(a)(ia) of the Income Tax Act. The assessee contested the disallowance, arguing that the audit fee paid was below the threshold for TDS deduction. The tribunal noted that the audit fee in question did not exceed Rs. 20,000 per case, and as per the proviso of section 194J, TDS deduction was not required if the payment was below the prescribed limit. Consequently, the tribunal held that the disallowance by the Assessing Officer and CIT(A) was erroneous, and the assessee's appeal on this issue was allowed.

Issue 2: The second issue involved the disallowance of interest on a loan under section 40(a)(ia) of the Income Tax Act. The Assessing Officer disallowed the interest expenditure as TDS had not been deducted while crediting the interest amount. The CIT(A) upheld a partial disallowance of the interest. However, the tribunal found that the assessee had submitted Form 15G from the payees, relieving them of the obligation to deduct TDS. Referring to a decision by the Mumbai Tribunal, the tribunal ruled that once the assessee received Form 15G from the payees, the responsibility for TDS deduction shifted to the payees, absolving the assessee of any liability. Therefore, the tribunal allowed the appeal of the assessee on this issue, concluding that the disallowance by the authorities was unjustified.

In conclusion, the tribunal allowed both issues raised by the assessee, overturning the disallowances made by the Assessing Officer and confirmed by the CIT(A). The judgment emphasized compliance with TDS provisions and the impact of Form 15G submissions on the obligation to deduct TDS, leading to a favorable outcome for the assessee in both instances.