2016 (11) TMI 535 - AT - Income Tax

Disallowance u/s 40(a)(ia) - amount paid during the year - Held that - We do not find any infirmity in the order of the CIT(A) in sustaining only the amount of ₹ 15,22,373/-, which is payable at the end of the year i.e. outstanding as on 31st March, 2015, as against the addition of ₹ 89,16,387/- made by the Assessing Officer, following the special bench decision of the ITAT in the case of Merlyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ). - Decided against revenue

Summary

Issues:
1. Disallowance of payments under section 40(a)(ia) of the Income Tax Act.
2. Applicability of TDS on promotional expenses.
3. Interpretation of section 40(a)(ia) regarding outstanding amounts.
4. Appeal against the order of the CIT(A) by the Revenue.

Issue 1: The appeal by the Revenue was against the order of the Commissioner of Income-tax(A) regarding disallowance of certain payments made by the assessee company under section 40(a)(ia) of the Income Tax Act for the assessment year 2009-10. The AO observed that the assessee had made payments without deducting TDS, leading to the disallowance of the said amount.

Issue 2: The assessee contended before the CIT(A) that the payments made towards promotional expenses were not liable to TDS, especially in the case of purchasing seeds. The assessee argued that section 40(a)(ia) should not apply as the payments were made during the financial year itself. An alternate plea was made, citing a decision of the Allahabad High Court, to restrict the disallowance to outstanding amounts at the end of the year.

Issue 3: The CIT(A), after considering the submissions and various case laws, sustained only the outstanding amount of ?15,22,373 out of the total addition of ?89,16,387 made by the Assessing Officer. The CIT(A) held that the liability to deduct TDS out of promotional charges did not arise, following the special bench decision of the ITAT in a specific case.

Issue 4: The Revenue, aggrieved by the order of the CIT(A), appealed before the ITAT. However, the Revenue did not raise or file any grounds of appeal despite obtaining approval for the appeal. The ITAT, after considering the arguments of both parties and the relevant case laws, upheld the order of the CIT(A) in sustaining only the outstanding amount of ?15,22,373. The ITAT dismissed the appeal of the Revenue, concluding the case in favor of the assessee.