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2017 (4) TMI 606 - AT - Income TaxClaim of TDS allowed as deduction only if it is deducted and paid before the due date - Held that - Set aside the order of learned CIT(A) and restore the matter to the file of the AO with a direction to verify whether the payee is identifiable and the amount payable to him is ascertainable. Then the assessee would be required to deduct tax at source in respect of such provision. However in case payee is not identifiable the provision of Chapter XVII B i.e. tax deduction at source cannot be pressed into service and therefore the assessee is not required to deduct tax at source in such a case. The AO will adjudicate the issue afresh after examining the above facts. Liaison work fee - whether in the nature of business income the same was liable to be assessed on accrual basis? - Held that - As reflected in Form 26AS the assessee has been paid 4, 40, 000/- on 31.03.2011 on which TDS of 44, 000/- was deducted. The AO has rightly brought to tax 4, 40, 000/- during the impugned assessment year. In view of the above we set aside the order of the learned CIT(A) and restore the order of the AO.
Issues Involved:
1. Disallowance under section 43B of the Income-tax Act, 1961 regarding provision for BMC charges. 2. Disallowance of expenses under section 40(a)(ia) due to non-deduction of TDS. 3. Addition of income based on TDS certificate and accounting method. Issue-wise Detailed Analysis: 1. Disallowance under section 43B of the Income-tax Act, 1961 regarding provision for BMC charges: The assessee contested the disallowance of ?27,04,976/- under section 43B, arguing that the amount payable to BMC was a premium and not a tax, duty, cess, or fee. The AO disallowed this amount as it was unpaid before the due date of filing the return. The CIT(A) upheld the AO's decision, stating that the payment was for services rendered by BMC, thus falling under section 43B. The Tribunal examined the nature of the payment and concluded that the FSI premium paid to BMC did not qualify as a tax, duty, cess, or fee under section 43B(a). Citing precedents like CIT vs. C.J. International Hotels Ltd. and Garo Devi vs. ITO, the Tribunal noted that such payments are contractual obligations and not statutory levies. Consequently, the Tribunal set aside the CIT(A)'s order and deleted the disallowance of ?27,04,976/-. 2. Disallowance of expenses under section 40(a)(ia) due to non-deduction of TDS: The revenue's appeal focused on the disallowance of ?43,63,515/- for non-deduction of TDS on contractual expenses. The AO had disallowed these expenses as the TDS was paid after the due date. The CIT(A) deleted the disallowance, stating that the provision was made on an ad-hoc basis without identifying the payees or the exact amount payable. The Tribunal referred to the case of Apollo Tyres Ltd. vs. DCIT and similar cases, emphasizing that TDS provisions apply only when the payee is identifiable and the amount payable is ascertainable. The Tribunal restored the matter to the AO to verify these conditions and decide accordingly, allowing the revenue's appeal for statistical purposes. 3. Addition of income based on TDS certificate and accounting method: The AO added ?4,40,000/- to the assessee's income based on Form 26AS, as the amount was paid on 31.03.2011 with TDS deducted. The assessee argued that this income should be recognized in the next year, as he followed the cash system for liaison services. The CIT(A) accepted this argument and deleted the addition. The Tribunal, however, cited cases like CIT vs. Tanjore Permanent Bank Ltd. and others, which establish that income should be assessed in the year it is paid and TDS is deducted. The Tribunal restored the AO's addition of ?4,40,000/-, setting aside the CIT(A)'s order. Conclusion: The assessee's appeal was allowed concerning the disallowance under section 43B, while the revenue's appeal was partly allowed, with the issue of TDS disallowance remanded for further verification and the addition of ?4,40,000/- restored. The Tribunal's decision was pronounced on 11/04/2017.
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