2015 (10) TMI 69 - AT - Income Tax

Disallowance u/s 40(a)(ia) - payment of interest and brokerage without deduction of TDS - CIT(A) deleted the addition - Held that - The decision of Hon ble ITAT Special Bench, Vishakhapatnam, in the case of Merilyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) will hold good in this issue also, since, the amounts of brokerage have already been paid by the appellant during the year under consideration. Therefore, these amounts would not be hit by the regors of the provisions of Section 40(a)(ia) - as find that there are contrary judgements of Allahabad High Court as compared to Calcutta and Gujarat High Courts. However, appeal filed by the Department with Hon ble Supreme Court against the order of Hon ble Allahabad High Court has been dismissed by Hon ble Supreme Court in limine. Moreover, as per the Hon ble Supreme Court order in the cases of Vegetable Products 1973 (1) TMI 1 - SUPREME Court as relied upon by Ld. A. R. in the case of conflicting judgements that judgment is to be applied to an assessee which is beneficial to it. Therefore, we do not see any infirmity in the order of Ld. CIT(A) in this context - Decided in favour of assessee. Addition of rebate and discount - CIT(A) deleted the addition - Held that - The total amount of goods sold to M/s. B.L. Goyal & Co. during the year under consideration was to the tune of ₹ 3,08,39,874/-, on which the amount of rate difference was only ₹ 1,04,757/-, i.e. only 0.34%. This claim also was duly supported with the details submitted during the course of proceedings along with the copy of account of M/s. B.L. Goyal & Co., showing the deductions, and hence, the appellant claimed that this disallowance was totally uncalled for. Rate difference of 0.34% in a transaction of more than ₹ 3 crores is nothing unusual and therefore, the addition is hereby deleted. - Decided in favour of assessee.

Summary

Issues Involved:
- Disallowance of interest payment without TDS deduction
- Disallowance of brokerage payment without TDS deduction
- Disallowance of rebate and discount claimed

Analysis:

Issue 1: Disallowance of Interest Payment without TDS Deduction
The Revenue appealed against the CIT(A)'s order deleting the addition of interest payment made without deduction of TDS under section 40(a)(ia) of the Income Tax Act, 1961. The CIT(A) relied on the decision of the Special Bench of ITAT Vishakhapatnam, emphasizing that the provisions of Section 40(a)(ia) apply only to amounts payable as of 31st March each year and not to expenditures actually paid during the previous year without TDS deduction. The CIT(A) noted the legislative intent behind the amendment and concluded that disallowance under section 40(a)(ia) is applicable only to outstanding amounts or provisions for expenses liable to TDS. Consequently, the addition of interest payment was deleted.

Issue 2: Disallowance of Brokerage Payment without TDS Deduction
The Revenue challenged the CIT(A)'s decision to delete the addition of brokerage payment without TDS deduction under section 40(a)(ia). The CIT(A, again referring to the Special Bench decision, held that since the brokerage amounts were already paid during the relevant year, they could not be disallowed under section 40(a)(ia). The CIT(A) emphasized that the A.O. did not dispute the reasons for payment of brokerage, and the disallowance was solely due to non-deduction or lower deduction of TDS. Consequently, the addition of brokerage payment was also deleted.

Issue 3: Disallowance of Rebate and Discount Claimed
The Revenue contested the disallowance of rebate and discount claimed by the assessee in his proprietorship concern. The CIT(A) examined the details submitted during the proceedings and found the disallowance of the rate difference claimed in the account of a specific entity to be arbitrary and unjustified. The CIT(A) agreed with the appellant's submission that a rate difference of 0.34% in a transaction exceeding Rs. 3 crores was not unusual. Therefore, the CIT(A) deleted the disallowance of rebate and discount claimed by the assessee.

In the final judgment, the Tribunal upheld the CIT(A)'s decision, considering the conflicting judgments from different High Courts and the Supreme Court's order in the case of Vegetable Products Ltd., which emphasized applying the judgment beneficial to the assessee. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal.

This comprehensive analysis covers the key issues involved in the legal judgment, detailing the arguments, decisions, and legal principles applied in each aspect of the case.