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2019 (8) TMI 1405 - AT - Income TaxTDS u/s 194C - Disallowance of expenses u/s 40(a)(ia) - flight handling charges - HELD THAT - Second proviso to section 40(a)(ia) read with first proviso to section 201(1) which has been inserted in the statute w.e.f. 1.4.2013, is a beneficial provision and has to be given retrospective effect. Here in this case, the disallowance u/s 40(a)(ia) has been made by the AO on the ground that assessee while making the payment to Air India has not deducted TDS. The assessee s case has been that, it is purely reimbursement of expenses given on behalf of its clients which has been reimbursed. At the stage of CIT (A) assessee has filed certificate in Form No. 26A of the Chartered Accountant of Air India certifying that amount paid to Air India by the assessee has been credited by the Air India in its books of accounts for the financial year 2011-12 and has been taken into account the return of income filed by Air India for Asstt. Year 2012-13 and same has been included in the gross total income. Once there is a categorical finding of fact based on material placed before CIT (A), i.e., certificate in Form No. 26A of the Chartered Accountant which is the statutory requirement, then there is no point to sending it back to the AO once again. Accordingly the order of the Ld. CIT (A) is confirmed and the grounds raised by the revenue are dismissed.
Issues:
Disallowance of expenses under section 40(a)(ia) of the Income Tax Act, 1961. Analysis: The appeal was filed by the revenue against the order dated 12.4.2016, passed by the Ld. CIT (Appeals)-1, New Delhi for the assessment year 2012-13. The revenue contested the deletion of the addition of ?1,75,76,690 made on account of disallowance of expenses under section 40(a)(ia) of the Income Tax Act, 1961. The Assessee Company, engaged in aviation services, made a payment to Air India Ltd. for ground handling services, booked under 'flight handling charges'. The assessee claimed it made the payment on behalf of its clients and was later reimbursed, therefore no actual expense was incurred. However, the AO contended that TDS should have been deducted under section 194C, leading to the disallowance under section 40(a)(ia). Before the Ld. CIT (A), the assessee argued that Air India had shown the amount as income and offered it for tax, thus no disallowance should be made. A certificate from Air India's Chartered Accountant was submitted, confirming the amount credited by Air India in its books and included in its income return. The Ld. CIT (A) deleted the disallowance based on this evidence. The revenue argued that the certificate from Air India's Chartered Accountant was not presented before the AO, requesting the matter to be sent back for verification. However, it was established that the certificate fulfilled the statutory requirements, rendering the AO's re-examination unnecessary. The judgment emphasized that the second proviso to section 40(a)(ia) read with the first proviso to section 201(1) is a beneficial provision with retrospective effect. Since the certificate from Air India's Chartered Accountant met the statutory requirements, the Ld. CIT (A)'s decision was upheld, dismissing the revenue's grounds. In conclusion, the appeal of the revenue was dismissed, confirming the Ld. CIT (A)'s order.
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