2018 (7) TMI 2068 - AT - Income Tax

Addition u/s 40(a)(ia) - tax at source on payment made to CKIL - as argued obligation of the assessee to deduct tax at source has been fulfilled by M/s CKIL - HELD THAT - As decided in own case AY 2012-13 CIT(A) has recorded a finding that M/s CKIL has duly complied with TDS provisions at the time of making payments to the concerned payees. Thus, it is noticed that the payment by way of rent and repairs have been duly subjected to deduction of tax at source. The assessee has reimbursed the amount to M/s CKIL on which tax has already been deducted at source. Since the impugned payments have been made M/s CKIL on behalf of the assessee and the tax has been deducted at source there from by M/s CKIL, it should be construed that M/s CKIL has deducted tax at source also on behalf of the assessee. In this view of the matter, the obligation of the assessee to deduct tax at source has been fulfilled by M/s CKIL and hence agree with the view taken by Ld CIT(A) that the provisions of sec. 40(a)(ia) would not get attracted in this factual matrix - Appeal of the assessee is allowed.

Summary

Issues Involved:
Disallowance of payment made to M/s Cox and Kings under section 40a(ia) of the Income Tax Act.

Analysis:
The appeal involved the issue of disallowance of payments made to M/s Cox and Kings amounting to ?8,24,13,778 under section 40a(ia) of the Income Tax Act. The appellant contended that the payments were reimbursements without markup and that M/s Cox and Kings had already deducted tax at source as per the MOU between them. The Assessing Officer disallowed the amount for non-deduction of TDS under various sections of the Act. The CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal.

The Tribunal considered the facts and circumstances of the case, noting that the appellant was in the initial phase of its business and had incurred expenses related to its operations. M/s Cox and Kings, a sister concern, provided assistance through infrastructure and common facilities under a mutual MOU. The Tribunal observed that CKL had complied with TDS provisions and deposited taxes, making any further deduction by the appellant redundant. The appellant argued that since taxes were already paid, the internal arrangement between the parties was irrelevant, and CKL did not claim the expenses as deductions in its return.

The appellant relied on a previous Tribunal decision in a similar case, where the disallowance was deleted based on the reasoning that CKIL had already deducted tax at source on the payments made on behalf of the appellant. The Tribunal, following the precedent and the facts of the case, decided in favor of the appellant, deleting the addition and allowing the issue raised in the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, deleting the disallowance of payments made to M/s Cox and Kings under section 40a(ia) of the Income Tax Act. The decision was based on the fulfillment of TDS obligations by M/s Cox and Kings and the absence of the need for further deductions by the appellant.