2019 (1) TMI 1640 - AT - Income Tax

Short deduction of TDS - disallowances u/s 40(a) (ia) - HELD THAT - The issue is squarely covered in favour of the assessee, so far as the disallowances under section 40(a) (ia) of the Act is concerned by the decision of the Hon ble Kolkata High Court in case of CIT vs SK Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT as well as by the decision of coordinate bench in case of the assessee itself for the Assessment Year 2011-12, wherein the identical issue is decided and disallowances is deleted. In view of the above ground No. 1 of the appeal of the revenue is dismissed. Cross objection of the assessee on the issue that tax should have been required to be deducted by the assessee @ 10% as per the contention of the AO and @ 2% as claimed by the assessee - HELD THAT - As stated by the ld AR that no action has been taken by the ld AO u/s 201(1) and (1A) of the Act in the impugned Assessment Year, Therefore, the ground raised by the assessee in the cross objection are hypothetical and when we have already deleted the addition in the case of the assessee, we do not find it appropriate at this stage to decide it. Assessee is at liberty to raise such question at the appropriate stage but not in this appeal where the assessee has succeeded based on the decision of the co-ordinate bench in assessee s own case. Accordingly, cross objection of the assessee is dismissed. Addition of interest on service tax considered as prior period expenses by the assessee - HELD THAT - CIT (A) has deleted the above disallowances holding that interest on service tax has crystallized during the year and therefore it is allowable as expenditure during the year. We confirm the finding of the ld Commissioner of Income-Tax (Appeals) and dismiss Ground No. 2 of the appeal of the revenue. Unexplained cash credit u/s 68 - HELD THAT - Whatever credit balance appearing in the books of account of the assessee, the assessee substantiating the same by filing a confirmation letter of the party. DR also could not show how the AO has worked out the addition of ₹ 333999/-. In view of the above facts, we do not find any reason to interfere with the order of CIT (Appeal). Accordingly, we confirm his finding. Ground number 3 of The Appeal of the revenue is dismissed.

Summary

Issues involved:
- Appeal by the ld AO and cross objection by the assessee against the order of the ld Commissioner of Income Tax (Appeals).
- Disallowance of expenses under section 40(a)(ia) of the Act.
- Deletion of addition due to lower tax deduction at source.
- Treatment of interest on service tax as prior period expenses.
- Addition of unexplained cash credit under section 68 of the Act.

Analysis:
1. The appeal and cross objection were filed regarding the disallowance of expenses under section 40(a)(ia) of the Act. The assessee, engaged in providing back office mortgage processing services, incurred expenditure under the head allocable Capex Cost for assets like furniture, fixture, and equipment. The ld AO disallowed a proportionate amount under section 40(a)(ia) due to differences in tax deduction rates. The ld Commissioner of Income Tax (Appeals) deleted the disallowance, citing precedents. The tribunal upheld the decision, dismissing the revenue's appeal and the assessee's cross objection.

2. The revenue challenged the deletion of an addition due to lower tax deduction at source. The dispute arose regarding the nature of rent paid by the assessee for workstations with computers. The ld AO argued for a higher TDS rate, while the assessee contended for a lower rate. Citing relevant case law, the tribunal found in favor of the assessee, dismissing the revenue's appeal.

3. The revenue contested the deletion of an addition related to interest on service tax treated as prior period expenses. The ld CIT (A) allowed the expenditure, considering it crystallized during the year. The tribunal affirmed this decision, dismissing the revenue's appeal.

4. Another issue was the addition of an unexplained cash credit under section 68 of the Act. The ld AO made an addition based on discrepancies in the appellant's balance sheet. The tribunal found in favor of the assessee, noting the substantiation provided for the credit balance. As a result, the tribunal confirmed the ld Commissioner of Income Tax (Appeal)'s decision, dismissing the revenue's appeal.

In conclusion, the appeals filed by the revenue and the cross objection by the assessee were dismissed, with the tribunal upholding the decisions of the ld Commissioner of Income Tax (Appeals) on various issues raised in the case.