2015 (7) TMI 437 - AT - Income Tax

Disallowance u/s 40(a)(ia) - Payment of professional fees - TDS not deducted - Held that - Issue has been decided in favour of the assessee inasmuch as the provisions of section 40(a)(ia) have no application when the amounts were paid by the assessee before the end of the accounting year. - Following decision of ITO Vs. Theekathir Press 2015 (4) TMI 616 - ITAT CHENNAI order of the Commissioner of Income Tax (Appeals) is upheld. Disallowance of 50% land travelling expenses - assessee has not produced proper evidence in support of the expenses - Held that - Commissioner of Income Tax (Appeals) considering the submissions of the assessee where the assessee submitted that evidences were produced and these expenses were incurred for levelling the access road to a property which was sold from which commission income was also returned by the assessee. The Commissioner of Income Tax (Appeals) also considered that invoices are self-made. Considering these submissions, the Commissioner of Income Tax (Appeals) restricted the disallowance to 50% of ₹ 7,60,150/- to ₹ 3,80,075/-. On reading of the order of the Commissioner of Income Tax (Appeals), we do not find any good reason to interfere with the same. - Decided against Revenue.

Summary

Issues:
1. Disallowance under section 40(a)(ia) for non-deduction of TDS on professional fees.
2. Disallowance of land levelling expenses due to lack of evidence.

Analysis:

*Issue 1: Disallowance under section 40(a)(ia) for non-deduction of TDS on professional fees*

The Revenue appealed against the Commissioner of Income Tax (Appeals)'s decision to delete the disallowance made under section 40(a)(ia) in relation to professional fees paid without TDS deduction. The Revenue contended that the disallowance was justified as the assessee did not deduct TDS on architect fees paid. However, the Commissioner of Income Tax (Appeals) relied on a Special Bench decision and held that if the amounts were paid before the end of the year, section 40(a)(ia) would not apply. The Tribunal concurred with this view, citing precedents and decisions of High Courts. Notably, the Allahabad High Court supported the assessee, while the Calcutta and Gujarat High Courts were against it. Following the principle of Judicial Precedence, the Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal.

*Issue 2: Disallowance of land levelling expenses due to lack of evidence*

The second issue involved the disallowance of land levelling expenses by the Assessing Officer due to the lack of evidence provided by the assessee. The Commissioner of Income Tax (Appeals) partially allowed the expenses after considering the submissions made by the assessee. The Tribunal noted that the Commissioner's decision was based on the assessee's explanation that the expenses were for levelling an access road to a property that was sold. Despite the self-made nature of the invoices, the Commissioner reduced the disallowance to 50% of the total expenses. Upon review, the Tribunal found no reason to interfere with the Commissioner's decision and upheld the allowance of &8377; 3,80,075. Consequently, the Revenue's appeal on this issue was dismissed.

In conclusion, the Tribunal upheld the Commissioner's decisions on both issues, emphasizing the importance of timely payments and providing adequate evidence to support expenses to avoid disallowances under the Income Tax Act. The judgment serves as a reminder of the significance of complying with tax deduction requirements and maintaining proper documentation for expenses incurred.