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2015 (7) TMI 69 - AT - Income TaxAddition on account of non-deduction of TDS - Payment made to sub-contractors for erecting telecommunication towers - No payment outstanding at the year end - Held that - The facts are not disputed. Admittedly assessee did not deduct the tax as required under the provisions of section 194C. However, it is also not disputed that no amount was payable at the end of the year to sub-contractors. Under such circumstances, the majority view decision of Special Bench in the case Merilyn Shipping & Transports 2012 (4) TMI 290 - ITAT VISAKHAPATNAM , is squarely applicable to the facts of the case. However, the Special Bench decision was examined by various High Court. Since no decision of Hon ble Jurisdictional High Court directly on the issue has been brought to our notice, therefore, considering the conflict of opinion between various High Court and the decision of Special Bench of the ITAT, we do not find any infirmity in the order of CIT(A) on the issue in question. A perusal of CIT(A) s order reveals that issues raised by the assessee related to disallowance of various expenses were not contested before the CIT(A). Since the issues raised in cross objection do not arise out of the order of CIT(A), therefore, we decline to admit the cross-objection filed by the assessee. - Appeal filed by the revenue as well as the cross objection preferred by the assessee stand dismissed.
Issues:
1. Disallowance of soil testing expenses under section 40(a)(ia) for non-deduction of TDS. 2. Interpretation of provisions of section 40(a)(ia) regarding deduction of TDS on payable amounts. 3. Applicability of Special Bench decision in Merilyn Shipping & Transports case. 4. Conflict of opinion among different High Courts on the interpretation of section 40(a)(ia). 5. Disallowance of various expenses in cross-objection by the assessee. Analysis: Issue 1: The Assessing Officer disallowed soil testing expenses under section 40(a)(ia) for non-deduction of TDS on the amount paid to sub-contractors. The CIT(A) deleted the addition based on the decision of ITAT, Vishakhapatnam, Special Bench in Merilyn Shipping & Transports case. The CIT(A) held that section 40(a)(ia) applies to payable amounts as of 31st March and not to expenses actually paid during the previous year without TDS deduction. The Revenue appealed against this decision. Issue 2: The Revenue contended that the CIT(A) erred in deleting the addition under section 40(a)(ia) and argued that the provision should apply to all expenses irrespective of when they were paid. The Revenue pointed out that the decision of the Special Bench in Merilyn Shipping & Transports case was not accepted by the Calcutta High Court and the Gujarat High Court. Issue 3: The Tribunal examined the Special Bench decision in the Merilyn Shipping & Transports case and noted the conflict of opinion among different High Courts. The Allahabad High Court dismissed the Revenue's appeal in a similar case, emphasizing that disallowance under section 40(a)(ia) applies to payable amounts and not to expenses already paid without TDS deduction. Issue 4: The Tribunal considered the conflicting decisions of various High Courts and the Special Bench, ultimately upholding the CIT(A)'s decision based on the lack of a direct ruling from the Jurisdictional High Court. The Tribunal found no infirmity in the CIT(A)'s order regarding the interpretation of section 40(a)(ia). Issue 5: In the cross-objection, the assessee challenged the disallowance of various expenses as revenue expenses incurred for business purposes. However, the Tribunal declined to admit the cross-objection as these issues were not contested before the CIT(A), and they did not arise from the CIT(A)'s order. In conclusion, the Tribunal dismissed the Revenue's appeal and the assessee's cross-objection based on the interpretation of section 40(a)(ia) and the conflicting opinions among different High Courts regarding the applicability of TDS deduction on payable amounts. The Tribunal upheld the CIT(A)'s decision in favor of the assessee.
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