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2021 (9) TMI 796 - AT - Income TaxTDS u/s 194IA - payment for land advance - non-deduction of TDS in violation of Section 40(a)(ia) - AO disallowed as advance for purchase of property by the assessee for not deducting TDS u/s 194IA and added this amount to the income of the assessee u/s 56(2)(viib) while at the same time referring to the provisions of Section 40(a)(ia) - HELD THAT - Such action of the AO cannot be upheld as the provisions of Section 40(a)(ia) are applicable only to the expenditure claimed while computing income under the head profit and gains of business or profession of the Income Tax Act, 1961. In this case, this amount has not been claimed as expenditure being the amount paid as advance for acquisition of a capital asset. Further, we also find that the provision of Section 56(2)(viib) would not be attracted even remotely in this case. The order of the ld. CIT (A) is affirmed. Appeal of the revenue is dismissed.
Issues:
1. Disallowance of ?3,45,00,000 for non-deduction of TDS under Section 40(a)(ia) read with Section 194-IA of the Income Tax Act, 1961. Detailed Analysis: The appeal was filed by the revenue against the order of the ld. CIT(A)-2, New Delhi dated 27.06.2018, challenging the deletion of the disallowance of ?3,45,00,000 made on account of non-deduction of TDS under Section 40(a)(ia) read with Section 194-IA of the Income Tax Act, 1961 by the AO. The assessee, a joint venture company, advanced an amount of ?3,45,00,000 to another entity for the purchase of land. The AO disallowed this amount as no TDS was deducted under Section 194-IA. The AO added back this amount to the income of the assessee under Section 56(2)(viib) of the Act. The tribunal noted that Section 40(a)(ia) applies to expenditure claimed while computing income under the head "profit and gains of business or profession," whereas the amount in question was paid as an advance for the acquisition of a capital asset. Additionally, the tribunal found that Section 56(2)(viib) was not applicable in this case. Therefore, the order of the ld. CIT(A) deleting the disallowance was upheld. In summary, the tribunal dismissed the revenue's appeal, affirming the order of the ld. CIT(A) that the disallowance of ?3,45,00,000 for non-deduction of TDS under Section 40(a)(ia) read with Section 194-IA of the Income Tax Act, 1961 was not justified. The tribunal clarified that the provisions of Section 40(a)(ia) apply to expenditure under the head "profit and gains of business or profession," which was not the case here as the amount was paid as an advance for a capital asset acquisition. The tribunal also found that Section 56(2)(viib) was not relevant to the situation.
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