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2021 (8) TMI 1147 - AT - Income TaxAddition u/s 40A(2) - unreasonable professional fees to spouse - commission/professional fees paid the husband of the assessee - HELD THAT - Once the assessee has placed all the relevant materials before the Assessing Officer and submitted that the assessee's spouse is having specialized knowledge and looking after all the medical, technical and administration of all the Hitech Diagnostic Centre and discharge all the duties and responsibilities in conducting various tests and therefore, the agreed payment was made, in our opinion, the assessee has discharged the burden casted upon her to satisfy with the payment is reasonable as per the MOU. If at all the AO is not agreed, he should have brought comparable case and by giving reasons, the disallowance ought to have been made. Assessing Officer has not examined any details and has not given any valid reason and no comparable was brought on record and simply rejected the submissions made by the assessee. Therefore, we are of the opinion that the disallowance made by the Assessing Officer under section 40A(2) of the Act is not correct. Unexplained expenditure u/s. 69C - CIT(A) has given a categorical finding that the assessee has paid professional fees to her husband. However, the ld. CIT(A) has not discussed anything about the 69C addition. Once the assessee has shown payment made to her spouse as professional fees and the same was offered by the assessee's spouse for taxation by filing the return of income, the provisions of section 69C of the Act has no application. Whether the assessee is in default under section 201 of the Act on account of failure to deduct TDS under section 194J of the Act warranting invocation of section 40a(ia)? - whether the operation of second proviso to section 40a(ia) of the Act introduced through Finance Act. 2012 with effect from 01.04.2013 is prospective or retrospective? - The effect of the said proviso is to introduce a legal fiction where an assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such assessee is deemed not to be an assessee in default in terms of the first proviso to sub-section (1) of section 201 of the Act, then, in such event, it shall be deemed that the assessee has deducted and paid the tax on such sum on the same of furnishing of return of income by the resident payee referred to in the said proviso. In the present case, the assessee's spouse filed return of income offering the professional fee receipt for taxation. Thus, the assessee cannot be considered as an assessee in default under section 201 of the Act. Therefore, we are of the considered opinion that no disallowance can be made under section 40(a)(ia) of the Act. Addition on account of capital gains - according to the assessee, the capital gain has to be taxed in the assessee and her spouse in the assessment year 2013-14 and not in the assessment year 2009-10 - HELD THAT - The case of the Assessing Officer is that the acquisition as well as sale consideration received by her and recorded in her books of accounts and therefore, the same is taxed in her hands alone. We have gone through the sale agreement and find that in the sale agreement, both the wife and husband i.e., the assessee and her spouse are vendees. Not only that, the said property was purchased by the assessee along with her husband. The transaction towards sale consideration reflected in her books of account. It does not mean that the same is taxed in assessee's hands alone for the reason that the assessee along with her husband both purchased the property and both entered into sale agreement. Whether capital gain has to be taxed in the assessment year 2009-10 or in the assessment year 2013-14 - Before the authorities below, the AR of the assessee has not filed copy of the assessment order of the assessee reflecting the advance tax paid by her when she has offered the sale consideration for taxation. Under these facts and circumstances of the case, we are of the considered opinion that once the Assessing Officer has already taxed the same amount in the assessment year 2013-14, again it cannot be taxed in the assessment year 2009-10, which amounts to double taxation. Therefore, we set aside the orders of authorities below on this issue and remit the matter back to the file of the Assessing Officer to decide the issue afresh in accordance with law by considering the above observations after affording sufficient opportunities of being heard to the assessee. Thus, the ground raised by the assessee is allowed for statistical purposes.
Issues Involved:
1. Disallowance of Commission paid to Dr. S.P. Ganesan. 2. Disallowance of loss on sale of shares. 3. Disallowance of asset write-off. 4. Addition on account of capital gains. Issue-wise Detailed Analysis: 1. Disallowance of Commission paid to Dr. S.P. Ganesan: The appellant contested the disallowance of commission paid to Dr. S.P. Ganesan, arguing that the payment was fully reflected in the books and justified based on his role and responsibilities. The Assessing Officer (AO) questioned the reasonableness of the payment, noting discrepancies in the financial records and the lack of TDS deduction under section 194J. The AO invoked sections 40A(2) and 69C, disallowing the commission as unexplained expenditure. The CIT(A) upheld the AO's decision, emphasizing the absence of TDS and the disproportionate payment. However, the Tribunal found that the AO did not adequately examine the responsibilities and qualifications of Dr. Ganesan, nor did he provide comparable cases to justify the disallowance. The Tribunal concluded that the disallowance under section 40A(2) was incorrect and that section 69C did not apply since the payment was documented and taxed as professional income by Dr. Ganesan. Additionally, the Tribunal ruled that the second proviso to section 40(a)(ia) should be applied retrospectively, following the Supreme Court's judgment in CIT v. Calcutta Export Company, thus negating the disallowance under section 40(a)(ia). 2. Disallowance of loss on sale of shares: The appellant's claim for a loss on the sale of shares amounting to ?18,22,127/- was disallowed by the AO. The Tribunal noted that the appellant did not press this ground during the appeal, and thus, no adjudication was required. Consequently, the disallowance was upheld. 3. Disallowance of asset write-off: The appellant claimed a write-off of ?29,63,848/- due to obsolescence in technology. The AO disallowed this claim, arguing that the appellant failed to provide sufficient justification and did not allow depreciation on the written-off assets. The Tribunal observed that this ground was not pressed by the appellant during the appeal, and thus, no further adjudication was required. The disallowance was upheld. 4. Addition on account of capital gains: For the assessment year 2009-10, the AO added ?5,11,00,000/- as capital gains from the sale of jointly owned property, attributing the entire amount to the appellant. The appellant argued that the property was jointly owned with her spouse, and the possession was not complete to recognize the capital gains. The Tribunal found that the sale agreement included both the appellant and her spouse, and the capital gains were reflected in the assessment year 2013-14. The Tribunal ruled that the same amount could not be taxed twice and remitted the matter back to the AO to decide afresh, considering the observations and ensuring no double taxation. Conclusion: The Tribunal partly allowed the appeals for the assessment years 2008-09, 2010-11, and 2011-12, reversing the disallowance of commission and ruling in favor of the appellant regarding the retrospective application of the second proviso to section 40(a)(ia). For the assessment year 2009-10, the Tribunal remitted the issue of capital gains back to the AO for reconsideration, ensuring no double taxation. The disallowances of loss on sale of shares and asset write-off were upheld as they were not pressed by the appellant.
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