2017 (7) TMI 303 - AT - Income Tax

Disallowance made u/s 40(a)(ia) - non deduction of tax at source vis- -vis expense incurred on account of display rights payment - Held that - We are in agreement with the contention of the Ld. Counsel of the assessee vis- -vis the proposition of law that where the payee has included the impugned payment in its income and paid taxes on the same and disclosed it in its Return of Income, no disallowance on account of the said payment/ expenses is to be made in the hands of the payer. Also we find that the assessee has adduced evidences before us by way of additional evidences to prove that the payee had included the aforesaid payment in its income and paid taxes on the same also. Since we agree with the Ld. Counsel of the assessee that these evidences go to the root of the matter and are necessary for the adjudication of the issue in the present appeal, we therefore admit the same and further restore the issue to the file of the A.O to examine the issue afresh in the light of the proposition as laid down by the Hon ble Delhi High Court in Ansal Land Mark Township (P) (Ltd)(2015 (9) TMI 79 - DELHI HIGH COURT). Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against CIT(A) order upholding addition made u/s 40(a)(ia) of the Act.

Analysis:
1. The only issue in the appeal is the addition of ?36,50,133/- u/s 40(a)(ia) made by the Assessing Officer. The assessee claimed this amount as "display rights payment" paid to M/s H.P.Bus Stands Management and Development Authority, Shimla. The AO disallowed it for non-deduction of tax at source, which was upheld by the CIT(A).

2. During the hearing, the assessee contended that no disallowance should be made under 40(a)(ia) as the payee had included the payment in its income and paid taxes on it. The assessee sought to submit additional evidence to support this claim, including a certificate from the payee and a copy of their income tax return.

3. The Tribunal agreed with the assessee's contention, citing a Delhi High Court case that held if the payee includes the payment in income and pays taxes, no disallowance should be made. The Tribunal admitted the additional evidence and directed the AO to reexamine the issue in light of this principle and the evidence provided by the assessee.

4. Consequently, the appeal of the assessee was allowed for statistical purposes, and the matter was remanded to the AO for fresh consideration in accordance with the law and the evidences presented by the assessee.

Conclusion:
The Tribunal allowed the appeal, directing the AO to reevaluate the disallowance made under section 40(a)(ia) in light of the evidence showing that the payee had included the payment in its income and paid taxes on it. The Tribunal emphasized the importance of ensuring a fair and just interpretation of the law and providing the assessee with an opportunity to substantiate its claim.