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2021 (7) TMI 1007 - AT - Income TaxDisallowance u/s. 14A - HELD THAT - As categorically mentioned by the AO that there is no exempt income and by the assessee during the year. In absence of any exempt income the disallowance u/s.14A of the act cannot be made as has been held by the honorable Delhi High Court income in Cheminvest Ltd 2015 (9) TMI 238 - DELHI HIGH COURT - We direct the AO to delete the disallowance u/s. 14A. Disallowance invoking the provisions of Section 40(a)(ia) - short deduction of tax or non-deduction of tax at source - tax deduction at source is deposited before the due date of filing of the return or not? - HELD THAT - As given a correct direction if the tax deduction at source is deposited before the due date of filing of the return of income that no disallowance can be made. Otherwise, the disallowance is correctly made. We do not find any infirmity with such direction as it is purely a factual matter, which needs to be verified. Before us no evidences have been produced that the about tax has been deposited before the due date of filing of the returned by the assessee. Therefore we do not find any infirmity in the direction of the CIT - A. With respect to the claim of the assessee that there is only a short deduction of tax and the disallowance can only be made for non-deduction of tax at source we find that issue squarely covered in favour of the assessee by the decision of the honourable Calcutta High Court in CIT v. SK Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT However, it is a matter of investigation and verification that whether it is a short deduction of tax or non-deduction of tax at source. For this reason, we set aside the whole issue back to the file of the learned assessing officer with a direction to verify and if it is found that there is a shorter deduction of tax and not non-deduction of tax, the disallowance may be deleted. Accordingly, ground number 5 of the appeal is also allowed for statistical purposes.
Issues Involved:
1. Validity of the CIT(A)'s order. 2. Proportionate disallowance of interest on security deposit. 3. Disallowance under Section 14A of the Income Tax Act. 4. Disallowance under Section 40(a)(ia) due to short deduction of TDS. 5. Verification of TDS payment. Detailed Analysis: 1. Validity of the CIT(A)'s Order: The first ground of appeal challenged the validity of the CIT(A)'s order. However, this ground was not pursued before the Tribunal and was consequently dismissed. 2. Proportionate Disallowance of Interest on Security Deposit: The assessee contested the confirmation of the proportionate disallowance of interest amounting to ?4,111,348 on security deposits. The AO had added this interest to the income, considering it as the assessee's own income, based on the assessment year 2006-07 where the entire deposit was taxed. The CIT(A) followed his order from the previous year and reduced the addition to 11.01% of ?4,111,348. The Tribunal noted that this issue had been previously set aside to the AO by the coordinate bench for assessment years 2008-09 and 2009-10. Therefore, the Tribunal also set aside this issue to the AO for fresh consideration, allowing grounds 2 and 3 of the appeal. 3. Disallowance under Section 14A: The assessee contested the disallowance of ?179,15,000 under Section 14A, arguing that no administrative expenses were incurred in relation to exempt income. The AO had computed the disallowance under Rule 8D, despite the assessee receiving no exempt income during the year. The CIT(A) retained the disallowance to the extent of 0.5% of the average investment. The Tribunal, referencing the Delhi High Court's decision in Cheminvest Ltd. v. CIT, held that in the absence of exempt income, no disallowance under Section 14A could be made. Consequently, the Tribunal directed the AO to delete the disallowance, allowing ground 4 of the appeal. 4. Disallowance under Section 40(a)(ia) Due to Short Deduction of TDS: The AO disallowed ?180,029,000 under Section 40(a)(ia) due to short deduction of TDS, assuming the shortfall represented 1% of the amount on which tax should have been deducted. The CIT(A) confirmed the addition of ?7,002,000 but directed the AO to verify the payment of TDS for ?12,80,400. The Tribunal noted that the issue of short deduction of TDS was covered by the Calcutta High Court's decision in CIT v. S.K. Tekriwal, which held that disallowance could only be made for non-deduction, not short deduction, of TDS. The Tribunal set aside the issue to the AO for verification and directed that if it was a case of short deduction, the disallowance should be deleted, allowing ground 5 for statistical purposes. 5. Verification of TDS Payment: The CIT(A) directed the AO to verify whether the TDS payment of ?12,80,400 was made after the due date. The Tribunal upheld this direction, noting that if the TDS was paid before the due date of filing the return, no disallowance should be made. The Tribunal found no infirmity in the CIT(A)'s direction, as it was a factual matter needing verification. Consequently, ground 6 was also addressed with the same direction for verification. Conclusion: The appeal filed by the assessee was allowed with specific directions for verification and reconsideration by the AO on the issues of interest on security deposits, disallowance under Section 14A, and short deduction of TDS. The Tribunal's order was pronounced in the open court on 06/07/2021.
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