2016 (9) TMI 589 - AT - Income Tax

TDS u/s 194C - default in deducting and paying proper TDS as per law - Disallowance under section 40(a)(ia) - retrospectivity - Held that - Hon ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township Private Limited (2015 (9) TMI 79 - DELHI HIGH COURT ) has categorically held that Second proviso to section 40a(ia) is declaratory and curative in nature and has retrospective effect from Ist April, 2005 . We, therefore, in the interest of justice and fair play, restore this issue to the file of the Assessing Officer for the purpose of limited verification on the aspect as to whether Dainik Bhaskar has included the receipt in its profit and loss account in computing the business income offered to tax and if it is found to be so, the Assessing Officer is directed to delete the disallowance. Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee.

Summary

Issues:
- Disallowance under section 40(a)(ia) of the Income Tax Act

Detailed Analysis:
1. The issue in this case revolves around the disallowance under section 40(a)(ia) of the Income Tax Act. The Assessing Officer disallowed the assessee's claim for revenue expenditure amounting to ?154.80 lacs due to a default in deducting TDS. The Assessing Officer held that the advertisement expenses paid to a newspaper were professional payments and that the TDS deduction was not done correctly. The CIT(A) deleted this disallowance based on various precedents and the decision of the Hon'ble High Court of Calcutta in a similar case. The revenue appealed to the Tribunal against this deletion.

2. The revenue contended that the CIT(A) erred in deleting the disallowance under section 40(a)(ia) without proper discussion and reasoning. On the other hand, the assessee argued that the deletion was justified based on legal precedents and decisions. The assessee also highlighted the retrospective effect of the second proviso to section 40(a)(ia) as per the decision of the Hon'ble Delhi High Court in a related case.

3. The Tribunal considered the arguments and legal precedents cited by both parties. It noted the decision of the Hon'ble Delhi High Court regarding the retrospective effect of the second proviso to section 40(a)(ia). In light of this, the Tribunal decided to restore the issue to the Assessing Officer for limited verification. The Assessing Officer was directed to check if the payee had included the receipt in its profit and loss account for tax purposes. If so, the disallowance was to be deleted. The Tribunal emphasized providing the assessee with a fair opportunity to present its case during this verification process.

4. Ultimately, the Tribunal allowed the appeal for statistical purposes, indicating that the issue needed further verification by the Assessing Officer. The decision was pronounced openly on 3 August 2016, emphasizing the importance of ensuring a just and fair resolution in tax matters.