2015 (10) TMI 1742 - AT - Income Tax

Disallowance of expenditure u/s 40(a)(ia) - expenditure already Paid during the year - whether as Section 40(a)(ia) disallowance applies only to amounts payable as of 31st March and not to amounts already paid during the year. ? - Held that - We find that the issue is now settled that the provision of Section 40(a)(ia) of the Act shall apply only to the amount payable as on the last day of the relevant accounting year. Accordingly, the Assessing Officer is directed to verify the amount in question and, if the amount was already paid during the year and no expenditure remained payable as on the last day of the relevant accounting period, the provision of Section 40(a)(ia) of the Act shall not apply - Decided in favour of assessee. Disallowance of expenditure u/s 40(a)(ia) - expenditure incurred on which no TDS was required to be deducted at source - Held that - In the facts of the case, we restore this issue to the file of the Assessing Officer with the direction to decide the issue de novo after verification that whether the TDS provisions were applicable on the expenditure after allowing reasonable opportunity of hearing to the assessee - Decided in favour of assessee for statistical purposes. Disallowance of expenditure u/s 40(a)(ia) - expenditure on which TDS was already deducted at source - Held that - In view of the evidence filed by the assessee in the compilation before us to prove that the assessee has made the TDS on the expenditure we decide the issue in favour of the assessee and direct that no disallowance be made under Section 40(a)(ia) of the Act. - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - whether AO erred in making disallowing without holding assessee as assessee in default u/s 201 of the Act - Held that - We find that there is no force in the arguments of the learned counsel for the assessee on this issue and, since the amount of expenditure in question was not paid during the year and was payable as on the last day of the accounting year, the disallowance was rightly made by the Assessing Officer and confirmed by the CIT(A) under Section 40(a)(ia) of the Act. - Decided against assessee.

Summary

Issues Involved:
- Disallowance of expenditure under Section 40(a)(ia) of the Act for already paid amounts
- Disallowance of expenditure under Section 40(a)(ia) of the Act for amounts without TDS deduction
- Disallowance of expenditure under Section 40(a)(ia) of the Act for amounts with TDS already deducted
- Disallowance under Section 40(a)(ia) without holding assessee as "assessee in default" under Section 201

Issue 1: Disallowance of Expenditure for Already Paid Amounts

The assessee challenged the disallowance of expenditure under Section 40(a)(ia) of the Act for amounts already paid during the year. The contention was that the provision applies only to amounts "payable" as of the last day of the relevant accounting period. The Tribunal held that if the amount was already paid during the year and no expenditure remained "payable" at the end of the accounting period, Section 40(a)(ia) would not apply. The Assessing Officer was directed to verify the payment status and apply the provision accordingly.

Issue 2: Disallowance of Expenditure for Amounts without TDS Deduction

Regarding the disallowance of expenditure for an amount of Rs. 4,06,950 that did not require TDS deduction, the Tribunal ordered a fresh assessment by the Assessing Officer to determine if TDS provisions were applicable to the said expenditure. The assessee's argument that no disallowance should occur on this amount due to the absence of TDS deductions was considered for further examination.

Issue 3: Disallowance of Expenditure for Amounts with TDS Deducted

For the expenditure of Rs. 59,438 on which TDS was already deducted, the Tribunal ruled in favor of the assessee. Evidence of TDS deduction was presented, leading to a decision against disallowance under Section 40(a)(ia) of the Act. The Tribunal allowed the revised additional ground raised by the assessee on this issue.

Issue 4: Disallowance without Holding Assessee as "Assessee in Default"

The dispute over disallowance of Rs. 13,72,543 under Section 40(a)(ia) without declaring the assessee as "assessee in default" under Section 201 was addressed. The Tribunal upheld the disallowance as the amount was payable at the end of the accounting year, justifying the Assessing Officer's decision. The revised additional ground raised by the assessee on this matter was dismissed, resulting in a partial allowance of the appeal.

In conclusion, the Tribunal provided detailed analysis and rulings on each issue raised by the assessee, directing further assessment or confirming disallowances based on the specific circumstances and legal provisions of the Income Tax Act. The judgment was pronounced on April 1, 2015, partially allowing the appeal.