2016 (2) TMI 832 - HC - Income Tax

Revision u/s 263 - as per CIT(A) AO has not disallowed the expenditure under Section 40a(ia) of the Act as per the audit report submitted by the statutory auditors in Form 3-CD wherein it was specifically made clear that the assessee has not considered CBDT Circular No.715 in respect of Section 194C of the Act pertaininig to deduction of TDS on advertisement contract with M/s TLG India Pvt. Ltd - Held that - The Tribunal having considered the explanation furnished by the assessee before the Assessing Officer which forms part of the assessment records, has come to a conclusion that the assessee has deducted TDS under Section 194H of the Act and the provisions of Section 194C of the Act are not applicable to the present case. On law, it has followed the Judgment of the Calcutta High Court reported in 2012 (12) TMI 873 - CALCUTTA HIGH COURT . As regards the binding nature of the CBDT Circular, the Tribunal has followed the Judgment of the Apex Court in Hindustan Aeronautics Limited reported in 2000 (5) TMI 3 - SUPREME Court Thus, Tribunal having considered the case on facts and law, has come to a correct conclusion that the Commissioner had no jurisdiction to invoke the provisions of Section 263 of the Act as the twin conditions which are mandatorily required to be satisfied for invoking the provisions of Section 263 of the Act i.e., (i) order to be revised is erroneous and (ii) prejudicial to the interest of the revenue are not satisfied. - Decided in favour of assessee

Summary

Issues:
1. Correctness of quashing order u/s. 263 by Tribunal
2. Applicability of CBDT Circular No.715 in deduction of TDS on advertisement contract

Analysis:
1. The appeal was filed by the revenue under Section 260 A of the Income Tax Act 1961 against the order passed by the Income Tax Appellate Tribunal, Bangalore Bench "A", for the assessment year 2007-08. The substantial questions of law raised included the correctness of quashing the order u/s.263 by the CIT without appreciating the auditor's report on non-consideration of CBDT Circular No.715 in deduction of TDS on advertisement contract. The Tribunal concluded that the Commissioner had no jurisdiction to invoke Section 263 as the order was not erroneous and prejudicial to the revenue, citing relevant case laws. The High Court dismissed the appeal after considering the arguments and relevant judgments referred by the Tribunal.

2. The case involved the applicability of CBDT Circular No.715 in deduction of TDS on an advertisement contract. The CIT set aside the assessment order as the Assessing Officer did not disallow the expenditure under Section 40a(ia) based on the auditor's report. However, the Tribunal, after considering the explanation provided by the assessee and relevant case laws, concluded that TDS was deducted under Section 194H, not 194C, and the CBDT Circular was not applicable. The High Court upheld the Tribunal's decision, stating that no substantial questions of law arose based on the precedents set by the Calcutta High Court and the Apex Court regarding Section 40(a)(ia) and the binding nature of CBDT Circulars.

This detailed analysis of the judgment provides an overview of the issues involved, the arguments presented, and the legal reasoning behind the decisions made by the Tribunal and the High Court.