2018 (2) TMI 512 - AT - Income Tax

Disallowance u/s 40(a)(ia) for non-deduction of tax at source based on tax audit report u/s 44AB - Held that - The scheme of taxation is primarily governed by the principles laid down in the Constitution of India and as per Article 265 of the Constitution of India, no tax shall be levied or collected unless by an authority of law. When a particular item is not to be taxed as per the statute, then taxing the same would amount to violation of constitutional principles and revenue would be unjustly enriched by the same. Hence in the process of verification by the AO, if the stand of the assessee is found to be correct and if it results in income being assessed lower than the returned income, that would be the true and correct income of the assessee and it would be the duty of the revenue to assess the correct tax liability of the assessee. We deem it fit and appropriate, in the interest of justice and fairplay. Addition being amortization of premium paid for purchase of securities - Held that - We find that this issue is covered in favour of the assessee by the order of this tribunal in assessee s own case for the Asst Year 2008-09 2016 (6) TMI 181 - ITAT KOLKATA wherein held AO disallowed the claim of the assessee on the assumption that full purchase consideration of all the securities was included in the said investment trading account and amortization amount is charged separately in the Profit and Loss Account again and he therefore held that the claim of the Assessee cannot be allowed in computation of total income. This factual assumption of the AO is wrong as found by the CIT(A) which has not been disputed before us. In these circumstances, we are of the view that the order of the CIT(A) does not call for any interference.

Summary

Issues:
1. Disallowance of interest and rent for non-deduction of tax at source under sections 194A and 194I respectively.
2. Amortization of premium paid for purchase of securities.

Issue 1 - Disallowance of Interest and Rent:
The appeal arose from the disallowance of ?3,17,32,734 under section 40(a)(ia) for non-deduction of tax at source. The assessee contended that interest of ?77,90,374 and rent of ?21,41,903 did not require TDS under sections 194A and 194I, respectively. The Tribunal allowed the additional ground raised by the assessee for statistical purposes. It cited the principle that no tax should be levied unless authorized by law and emphasized that the revenue cannot benefit from an assessee's mistake. The issue was remanded to the Assessing Officer for adjudication on merits.

Issue 2 - Amortization of Premium Paid for Securities:
The dispute revolved around the deletion of ?91,30,00,000 as amortization of premium paid for securities. The Tribunal noted that a similar issue was decided in favor of the assessee for the assessment year 2008-09. The Tribunal upheld the order of the Commissioner of Income Tax (Appeals) based on the assessee's claim of amortization of premium on securities held to maturity. The Tribunal dismissed the revenue's appeal, citing the precedent set in the earlier assessment year.

In conclusion, the Tribunal allowed the assessee's appeal for the assessment year 2007-08 regarding the disallowance of interest and rent for non-deduction of tax at source. However, the revenue's appeal for the assessment year 2009-10 concerning the amortization of premium paid for securities was dismissed. The Tribunal emphasized the importance of adjudicating tax matters in accordance with the law and upheld the principles of fair play and justice in tax assessments.