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2023 (3) TMI 1195 - AT - Income TaxTDS u/s 192 - payment of remuneration - non deduction of TDS of salary payment - addition being 30% u/s 40 (a)(ia) - salary provision made during the year but not paid during the year under consideration - HELD THAT - Hon ble Delhi High Court in the case of CIT vs. Taj Quebecor Printing Ltd. 2006 (1) TMI 56 - DELHI HIGH COURT has held that the person making the salary payment is required to make a deduction towards tax at source only at the time of making such payment. The accrual of the payment and the actual act of making the payment must both exist in order that a deduction at source may be made. No deduction at source is contemplated under Section 192 in cases where a payment towards salary has accrued but is not made - AO was not justified in making addition u/s 40(a)(ia) - The ground of assessee is allowed.
Issues:
The issues involved in the judgment are related to the disallowance made under section 40(a)(ia) of the Act due to non-deduction of TDS on salary payment and the subsequent appeal against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi for Assessment Year 2017-18. Issue 1: No Proper Opportunity of Hearing Allowed The appellant contended that no reasonable and proper opportunity of hearing was allowed in the case. Issue 2: Ignoring Facts and Lack of Findings The appellant argued that the Commissioner of Income Tax (Appeals) ignored the statements of facts and did not provide any findings in the order. Issue 3: Disallowance under Section 40(a)(ia) The main controversy revolved around the addition made under section 40(a)(ia) of the Act, concerning the non-deduction of TDS on the provision for salary made during the year but not paid. Issue 4: Liability to Deduct TDS u/s 192 The question of liability to deduct TDS u/s 192 on payment of remuneration not paid during the year under consideration was raised. Judgment Details: The appellant, a company engaged in Jewellery dealership, filed its return of income for A.Y. 2017-18, which was later revised with no change in the total taxable income. The assessment was framed u/s 143(3), resulting in a determined total income. The appellant appealed the AO's order, which was dismissed by the CIT(A). The grounds raised by the appellant included issues related to TDS deduction and disallowance u/s 40(a)(ia) of the Act. During the assessment proceedings, it was observed that TDS was not deducted on the provision for Director's Remuneration. The AO disallowed a specific amount under section 40(a)(ia) due to the non-deduction of TDS on the balance amount. The CIT(A) upheld the AO's decision, leading to the appellant's appeal before the ITAT. The ITAT considered the arguments presented by both parties. The key issue was whether the appellant was liable to deduct TDS on the provision for salary not paid during the year. Relying on the decision of the Hon'ble Delhi High Court, the ITAT concluded that TDS deduction is required only at the time of making the payment, not when the provision accrues. As there was no contrary binding decision provided by the Revenue, the ITAT allowed the appellant's appeal and directed the deletion of the addition made u/s 40(a)(ia) of the Act. In conclusion, the ITAT allowed the appeal of the assessee, emphasizing the requirement of TDS deduction at the time of payment and not on accrual basis, as per the provisions of the Act and relevant judicial decisions.
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