2016 (11) TMI 877 - AT - Income Tax

Addition u/s 40(a)(ia) - non deduction of tds - Held that - The assessee has made the payments by the end of the relevant financial year and therefore, the provisions of section 40(a)(ia) are not applicable. The CIT (A) has given a correct finding that the payment has already been made and therefore, nothing remained payable at the end of the relevant financial year and therefore, the disallowance is not sustained - Decided in favour of assessee Consideration received on cancellation of the development agreement - Held that - We are satisfied that the individual directors are the actual owners of ₹ 1.35 crores and the sum of ₹ 4.51 crores received by the assessee included the sum of ₹ 1.35 crores belonging to the individual directors. We are of the opinion that the Cit (A) has properly appreciated the contentions of the assessee that the sum of ₹ 1.35 crores does not belong to the assessee, but that it belongs to the individual directors of the company in allowing the assessee s appeal - Decided in favour of assessee

Summary

Issues:
Revenue's appeal against the order of CIT (A) deleting additions made under section 40(a)(ia) of the Act for A.Y 2012-13.

Analysis:
1. The Revenue challenged the CIT (A)'s decision to delete additions under section 40(a)(ia) of the Act. The AO disallowed certain expenses, including contributions to another company and marketing expenses, leading to additions in the assessment. The CIT (A) allowed the appeal based on the Special Bench's decision in Merilyn Shipping & Transport case. The Revenue argued against this decision citing a suspension by the High Court, but previous court rulings upheld the Special Bench's decision, binding the Tribunal. The Tribunal upheld the CIT (A)'s decision, considering the legal precedents.

2. The Revenue contested the deletion of additions related to a development agreement cancellation. The assessee had received a sum in settlement, part of which was to be returned to individual directors as per separate agreements. The Revenue argued that the full settlement amount belonged to the assessee, while the assessee claimed the portion meant for directors. The Tribunal examined the agreements and found that the sum allocated to the directors was distinct, affirming the CIT (A)'s decision to allow the appeal. The Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s order.

By analyzing the issues raised in the Revenue's appeal against the CIT (A)'s decision, the Tribunal upheld the CIT (A)'s rulings based on legal precedents and the specific circumstances of the case. The detailed examination of expenses and settlement amounts led to the dismissal of the Revenue's appeal, affirming the decisions made in favor of the assessee.