2024 (6) TMI 64 - AT - Income Tax

Addition on account of 40(a)(ia) - deductions for expenses disallowed in earlier years due to non-deduction and non-deposit of TDS - assessee failed to provide necessary details to justify the deduction - HELD THAT - It is settled law that the assessee is entitled for the deduction of the expenses which were subject to TDS based on the deduction and deposit of TDS in the Government Treasury. Admittedly, the onus lies upon the assessee to furnish the supporting documents. As such, the assessee is under the obligation to furnish the necessary information of the expenses along with the party details which were disallowed in the earlier year on account of non-deduction of TDS. The assessee has to furnish the details of the expenses along with the party details to demonstrate deduction of TDS and the payment to the Government treasury thereof. This establishes that the law is clear that such expense will be allowed as deduction on actual payment basis. As not out of place to mention that the benefit of the expense disallowed on account of non-deduction of TDS should be allowed on an actual payment basis in pursuance to the provision of section 40(a)(ia) of the Act. It is also important to note that if the assessee makes the payment of TDS of the lesser amount, than the amount which he was supposed to deposit with Government treasury, then the corresponding expenses should only be allowed as deduction. There is no confusion with finding of the Ld. CIT(A), as observed that the assessee has made the payment but there was no break-up of such amount indicating the amount of TDS and the interest thereon. Admittedly, the assessee has made deposits of TDS belatedly and therefore it is onus upon the assessee to furnish the break-up of the TDS deposited by him. Revenue in the absence of necessary details from the side of the assessee about the interest and the amount of TDS, was very much empowered to re-workout interest embedded in such amount of TDS by doing reverse working. However, we find that the revenue authority has not carried out such an exercise. Therefore, in the interest of justice and fair play, we are of the view that the assessee should be given one more opportunity to represent his case before the AO. Assessee before the Ld. CIT(A), has submitted that the disallowance of the expenses was made in the AYs 2010-11 and 2011-12 merely on account of non-deduction of TDS. As such the genuineness of the expenses was not doubted by the authorities below, therefore, it was contended that once the payment of TDS amount has been made, the genuineness of such expenses cannot be questioned. It is because the genuineness of the expenses has already been established during the relevant AYs except the deduction and deposit of TDS into Government Treasury. We are of the view that the assessee should be given one more opportunity to represent his case before the AO. Ground of appeal of the assessee is partly allowed for the statistical purposes. Addition u/s 36(1)(va) - assessee deposited employee contribution towards the provident fund after the due date specified under PF Act - HELD THAT - We note that the impugned issue has been covered against the assessee in the case of CIT vs. Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT Therefore, respectfully following the order of the Hon ble Jurisdictional High Court the ground of appeal raised by the assessee is hereby dismissed. Unsecured loan written back which is not chargeable to taxN- waiver of loan chargeable to tax either u/s 28(iv) or 41(1) - HELD THAT - To attract the provisions of section 28(iv) of the Act there must be some benefit to the assessee in any form other than the cash arising from business or the exercise of profession. In the present case, the benefit arising to the assessee is in the form of cash, i.e., waiver of loan represents the benefit in the form of cash. There remains no ambiguity to the fact that the waiver of loan cannot be made subject to tax under the provisions of section 28 (iv) of the Act. Applicability of section 41(1) - AO treated the impugned waiver of loan as income of the assessee for the reason that the assessee has not furnished the explanation regarding why the amount has been waived off as well as assessee failed to furnish necessary details regarding genuineness of the transaction and creditworthiness of the party. On the other hand, CIT(A) confirmed the addition made by the AO on the reasoning that the waiver of loan falls under the benefit arising to the assessee on running the business, hence the same is taxable under the provision of section 28(iv) - neither the AO nor the learned CIT(A) in their respective findings invoked the provision of section 41(1) of the Act. Accordingly, we set aside the findings of the ld. CIT-A and direct the AO to delete the addition made by the AO. Hence, the ground of appeal of the assessee is hereby allowed.

Summary

Issues Involved:
1. Disallowance under section 40(a)(ia) of the Income Tax Act, 1961.
2. Disallowance under section 36(1)(va) of the Income Tax Act, 1961.
3. Addition of unsecured loan write-back.

Issue-wise Detailed Analysis:

1. Disallowance under section 40(a)(ia) of the Income Tax Act, 1961:

The first issue raised by the assessee concerns the confirmation of an addition of Rs. 1,44,21,556/- under section 40(a)(ia) of the Act. The assessee, a private limited company engaged in manufacturing glass, claimed deductions for expenses disallowed in previous years due to non-deduction and non-deposit of TDS. The AO disallowed these deductions, citing insufficient documentation from the assessee. The Ld. CIT(A) upheld this decision, noting the lack of detailed TDS payment breakdowns and relevant supporting documents. The Tribunal acknowledged the assessee's right to deductions upon actual TDS payment but emphasized the need for proper documentation. The Tribunal remitted the issue back to the AO for fresh adjudication, allowing the assessee another opportunity to present the necessary details.

2. Disallowance under section 36(1)(va) of the Income Tax Act, 1961:

The second issue involves the confirmation of an addition of Rs. 1,50,202/- under section 36(1)(va) of the Act. The AO found that the assessee deposited employee contributions towards the provident fund after the due date specified under the PF Act, leading to the addition of the amount to the assessee's total income. The Ld. CIT(A) upheld this decision. Both parties agreed that the issue was covered against the assessee by the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj). Consequently, the Tribunal dismissed the ground of appeal raised by the assessee.

3. Addition of unsecured loan write-back:

The third issue pertains to the addition of Rs. 2,58,30,000/- representing the unsecured loan written back. The assessee argued that the waiver of the loan from M/s Haryana Sheet Glass Limited should not be taxable. The AO disagreed, citing a lack of necessary details and justification for the loan waiver. The Ld. CIT(A) confirmed the AO's decision, referencing several judgments that supported the addition under section 28(iv) of the Act. However, the Tribunal noted that the benefit arising from the loan waiver was in the form of cash, which does not satisfy the conditions of section 28(iv). Additionally, the Tribunal highlighted that if the loan was for capital assets, it could not be taxed under section 41(1) of the Act, as established by the Hon'ble Supreme Court in CIT vs. Mahindra and Mahindra Ltd. The Tribunal directed the AO to delete the addition, as neither the AO nor the Ld. CIT(A) invoked section 41(1) in their findings.

Conclusion:

The appeal of the assessee is partly allowed for statistical purposes, with the Tribunal remitting the first issue back to the AO for fresh adjudication and directing the deletion of the addition concerning the unsecured loan write-back. The disallowance under section 36(1)(va) is upheld, following the jurisdictional High Court's precedent.