2015 (4) TMI 616 - AT - Income Tax

Disallowance u/s 40(a)(ia) - Non deduction of TDS - amount was not payable at the end of year - Held that - orders of the Calcutta High Court 2013 (5) TMI 510 - CALCUTTA HIGH COURT and the Gujarat High Court 2013 (5) TMI 457 - GUJARAT HIGH COURT are against the assessee. In such circumstances, the rule of Judicial Precedence demands that the view favourable to the assessee must be adopted, as held by the Hon ble Supreme Court in the case of CIT vs. Vegeta ble Products Ltd., 1973 (1) TMI 1 - SUPREME Court . Following the fundamental rule declared by the Hon ble Supreme Court, we have to follow the judgment of the Hon ble Allahabad High Court, which is in favour of the assessee. Accordingly, we hold that the disallowance under section 40(a)(ia) applies only to those amounts payable and not to those amounts paid . Accordingly, we uphold the order of the Commissioner of Income- tax(Appeals) in the present case. The appeal filed by the Revenue is liable to be dismissed. - Decided against Revenue.

Summary

Issues:
Appeal by Revenue and cross objection by assessee against Commissioner of Income-tax (Appeals) order for assessment year 2009-10 regarding disallowance of expenditure under section 40(a)(ia) due to non-deduction of tax at source.

Analysis:
1. The Assessing Officer disallowed certain expenditure by the assessee under section 40(a)(ia) for non-deduction of tax at source, but the Commissioner of Income-tax (Appeals) deleted the disallowance, stating that only amounts 'payable' attract the provision, not amounts already paid. This led to the Revenue appealing the decision.

2. The Income-tax Appellate Tribunal, Visakhapatnam Special Bench, clarified that section 40(a)(ia) applies only to amounts remaining payable at the end of the previous year, not to amounts already paid. This view was supported by the Allahabad High Court in a judgment. Hence, the appeal by Revenue was deemed to be dismissed based on this precedent.

3. However, the Revenue cited judgments from the Calcutta High Court and Gujarat High Court that contradicted the Special Bench's interpretation. These courts held that the law stated by the Special Bench was not acceptable, emphasizing that there is no distinction between amounts 'paid' and 'payable' under section 40(a)(ia).

4. The Tribunal considered conflicting judgments but followed the principle of Judicial Precedence, as established by the Supreme Court, to adopt the view favorable to the assessee. Citing the case of CIT vs. Vegetable Products Ltd., the Tribunal upheld the Allahabad High Court's judgment, ruling that disallowance under section 40(a)(ia) applies only to amounts 'payable', not 'paid'. Consequently, the Revenue's appeal was dismissed.

5. The cross objection by the assessee was rejected as not pressed and time-barred. Ultimately, both the appeal by Revenue and the cross objection by the assessee were dismissed by the Tribunal in its order pronounced on September 18, 2013, at Chennai.