2011 (6) TMI 984 - AT - Income Tax

Summary

Issues involved: Disallowance u/s.40(a)(ia) of the Income-tax Act,1961 and arbitrary disallowance of 10% of the claimed salary expenses.

Disallowance u/s.40(a)(ia): The appellant contested the disallowance made by the Assessing Officer under Section 40(a)(ia) for not deducting tax at source on various expenses claimed. The Assessing Officer disallowed amounts related to commission, brokerage, interest, and legal fees for non-compliance with TDS provisions. The appellant argued that tax was still payable on these expenses and should be allowed when paid. The CIT(A) upheld the disallowance, stating that failure to deduct tax at source makes the payments disallowable, with no exceptions provided by the statute. The Tribunal agreed with the CIT(A) and dismissed the appeal, confirming the disallowance of these expenses.

Arbitrary Disallowance of Salary Expenses: The appellant also challenged the arbitrary disallowance of 10% of the claimed salary expenses. The Assessing Officer disallowed this amount due to unserved notices and lack of employee details. The appellant argued that 90% of the salary had been paid, and the remaining 10% should not be disallowed without proper identification of the employees. The Tribunal, finding no clarification on the identification of the employees, confirmed the 10% salary disallowance, ultimately dismissing the appeal.

Conclusion: The Tribunal upheld the disallowance u/s.40(a)(ia) for non-compliance with TDS provisions on various expenses. Additionally, the Tribunal confirmed the arbitrary disallowance of 10% of the claimed salary expenses due to lack of employee identification. The appeal filed by the assessee was dismissed on both grounds.