2017 (3) TMI 1466 - AT - Income Tax

TDS u/s 194J - incurred expense towards the technical and professional charges without deducting the TDS - addition u/s. 40(a)(ia) - Held that - Since the expenses has not been claimed in the profit and loss account, the question of any disallowance under section 40(a)(ia) of the Act does not arise. A careful analysis to the above provisions of Section 40(a)(ia) reveals that it is applicable to sums allowable u/s 30 to 38 of the Act. Hence, if any capital expense is allowable as deduction u/s 30 to 38 of the Act while computing income under the head Profits and gains from business or profession , the same will be covered u/s 40(a)(ia) of the Act. Now, the issue arises where the claim of depreciation u/s 32 of the Act is covered u/s 40(a)(ia) of the Act. The provisions of Section 40(a)(ia) of the Act is applicable to payments specified therein which are allowable u/s 30 to 38 of the Act. Since the claim of depreciation is not payment or expenditure in strict sense but the same is statutory allowance, so strictly the claim of depreciation will not be covered u/s 40(a)(ia) of the Act. Further, the actual cost and WDV is defined in Section 43 of the Act and provisions of Section 40(a)(ia) of the Act does not override the provisions of Section 43 of the Act. In view of above, we are of the considered opinion that the provisions of section 40(a)(ia) of the Act is not applicable in the instant case. Therefore, there is no question of deducting the TDS on capital expenditure. Short deduction of TDS - Held that - In case of short deduction the Hon ble Calcutta High Court in the case of M/s S.K Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT has held that the disallowances cannot be made under the provisions of section 40(a)(ia) of the Act. Thus, we find no reason to interfere in the order of ld CIT(A). Hence, the ground of appeal raised by the revenue is dismissed.

Summary

Issues Involved:
1. Addition of &8377;9,17,076/- for non-deduction of TDS u/s. 40(a)(ia) of the Act.
2. Addition of &8377;49,05,549/- for short deduction of TDS.
3. Admission of additional evidence against Rule 46A of the Income Tax Rules, 1962.

Analysis:

Issue 1: Addition of &8377;9,17,076/- for non-deduction of TDS u/s. 40(a)(ia) of the Act:
The Revenue challenged the deletion of this addition by the CIT(A). The AO disallowed the expense of &8377;9,17,076/- for non-deduction of TDS under section 40(a)(ia) of the Act. However, the CIT(A) accepted the assessee's argument that the expense was capitalized as work-in-progress and not claimed in the revenue account, hence TDS deduction was not required. The ITAT held that since the claim of depreciation is a statutory allowance and not a payment or expenditure, it is not covered under section 40(a)(ia) of the Act. The ITAT dismissed the Revenue's appeal, stating that no TDS was required on capital expenditure.

Issue 2: Addition of &8377;49,05,549/- for short deduction of TDS:
The Revenue contested the deletion of this addition by the CIT(A). The AO disallowed &8377;49,05,549/- for short deduction of TDS under section 40(a)(ia) of the Act. However, the CIT(A) ruled that the provisions of section 40(a)(ia) are not applicable in cases of short TDS deduction. The ITAT referred to a judgment by the jurisdictional High Court which held that if tax was deducted by the assessee, even under a wrong provision, section 40(a)(ia) cannot be invoked. The ITAT upheld the CIT(A)'s decision, stating that disallowances cannot be made for short TDS deduction.

Issue 3: Admission of additional evidence against Rule 46A of the Income Tax Rules, 1962:
The Revenue raised an issue regarding the admission of additional evidence by the CIT(A) against Rule 46A. The ITAT found that the AO had already noted the written submission filed by the assessee, indicating that the CIT(A) did not admit additional evidence in violation of Rule 46A. The ITAT dismissed the Revenue's ground, stating that there was no contravention of Rule 46A.

In conclusion, the ITAT dismissed the Revenue's appeal, allowed part of the assessee's Cross Objection, and addressed the issues of TDS deductions and admission of additional evidence in accordance with the relevant provisions and judicial precedents. The judgment was pronounced on 22/03/2017.