2021 (10) TMI 875 - AT - Income Tax

Disallowance of expenditure incurred on account of provisions for advertisement expenses u/s. 40A(IA) - whether CIT(A) erred in allowing relief on expenditure which has neither been ascertain or crystallized during the year and nor was the TDS deducted during the year? - HELD THAT - CIT(A) has given a clear cut finding wherein it is categorically mentioned that the Assessing Officer never disputed the fact of deposit of tax deducted at source before the due date of filing the Income Tax Return for the subject year. CIT(A) rightly held that once the AO was directed to verify the amount on which tax has been paid before the due date of filing the return of income and allow the same in the first round of appeal before the Tribunal. AO was not right in disallowing the deduction under Section 40(a)(ia) of the Act for failure to deduct and deposit the tax at source. Hence, there is no need to interfere with the finding of the CIT(A). Hence, appeal of the Revenue is dismissed. Appeal of the Revenue is dismissed.

Summary

Issues:
Appeal against order dated 01/02/2018 passed by CIT(A)-42, New Delhi for assessment year 2008-09 regarding disallowance of expenditure on provisions for advertisement expenses u/s. 40A(IA) and disallowances u/s. 14A.

Analysis:
The assessee, a Public Limited Company engaged in manufacturing and sale of two wheelers, filed a return of income for the assessment year 2008-09 declaring total income of ?1307,37,84,038. The draft assessment order was passed on 13/6/2012 proposing additions/disallowances, leading to a final assessment order on 30/05/2013 determining total income at ?4585,87,70,541 after various adjustments. The assessee appealed before the Tribunal, resulting in deletion of major additions/disallowances and setting aside of some for reconsideration. The remaining additions/disallowances of ?38.57 crores were confirmed by the Tribunal, leading to the appeal before the CIT(A).

The CIT(A) partly allowed the appeal of the assessee, leading to the Revenue's appeal against the relief of ?38.57 crores on expenditure not ascertained or crystallized during the year and TDS not deducted. The CIT(A) held that the Assessing Officer failed to dispute the deposit of tax deducted at source before the due date of filing the Income Tax Return, directing to verify the amount and allow the same. The CIT(A) rightly concluded that the disallowance under Section 40(a)(ia) was unwarranted, as the tax was paid before the due date, thus dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal against the relief granted on expenditure disallowances. The order was pronounced on 11th October 2021.