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2023 (3) TMI 44 - AT - Income TaxTDS on Works Contract u/s. 40(a)(ia) - Auditor s Report itself the Auditor himself has given a statement that the assessee has not deducted tax at source on payment made towards works contract - assessee submitted copy of challan for payment of Rs.30,426/- made under the MVAT Rules - HELD THAT - The assessee has absolutely taken a new stand by submitting that they have made payment under MVAT Rules and provisions of TDS are not applicable. But, the assessee has failed to establish that even if some amount has been paid under MVAT Rules, how the assessee is absolved from liability of paying TDS as per Act. There is a categorical finding also by the Ld. CIT(A) that nothing has been brought on record by the assessee in the form of any documentary evidences/circular/Rules whereby if the assessee has paid an amount as per MVAT Rules then it was not required to make TDS payment. Even before us also, this was not established. Rather, assessee submitted that the provisions u/s. 40(a)(ia) of the Act is not applicable so far as the transactions of the assessee taken place in the relevant year. Department should be given an opportunity in this regard to verify the contentions of the assessee and readjudicate the issue as per law. In view thereof, we set aside the order of CIT(A) and remand the matter to the file of Ld. AO for readjudication as per law complying with the principles of natural justice. Appeal of the assessee is allowed for statistical purposes.
Issues: Disallowance of expenses on account of non-payment of TDS on works contract u/s. 40(a)(ia) of the Income Tax Act.
Analysis: 1. The appeal pertains to the disallowance of expenses amounting to Rs. 15,21,133 on account of non-payment of TDS on works contract u/s. 40(a)(ia) of the Act for the assessment year 2012-13. The Assessing Officer (AO) disallowed this amount after finding that the assessee had not deducted tax at source on a payment made towards works contract. The assessee contended that as per MVAT Rules, TDS was not required for payments made outside the State of Maharashtra. However, the AO rejected this argument and made the disallowance. 2. The Commissioner of Income Tax (Appeals) upheld the AO's decision, noting that the assessee failed to provide any legal provisions or circulars supporting its claim that TDS was not applicable as per MVAT Rules. The CIT(A) confirmed the disallowance of Rs. 15,21,133 u/s. 40(a)(ia) of the Act. 3. During the appeal before the ITAT Pune, the assessee's counsel could not justify why TDS was not deducted as mandated by the Act, despite deductions made under MVAT Rules. The counsel argued that section 40(a)(ia) was not applicable to the assessee for the transactions in question. The ITAT observed that the assessee failed to establish how it was exempt from TDS liability despite MVAT payments. The ITAT set aside the CIT(A)'s order and remanded the matter to the AO for further adjudication in compliance with natural justice principles. 4. The ITAT's decision to remand the matter for reevaluation by the AO indicates a need for a thorough examination of the legal provisions and factual circumstances surrounding the TDS disallowance. The ITAT emphasized the importance of complying with the law and providing the Department an opportunity to verify the contentions raised by the assessee. The appeal was allowed for statistical purposes, highlighting the procedural nature of the decision without altering the substantive tax liability.
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