2022 (12) TMI 946 - AT - Income Tax

TDS u/s 194J - Non deduction of tax from the payment of Royalty - CIT(A) deleted the addition - DR has submitted that CIT(A) has erred in deleting the disallowance made by the AO u/s 40(a)(ia) without considering th fact that even through the expenditure is amortised under Rule 9A of the Income Tax Rules, disallowance under section 40(a)(ia) of the Act has to be made - HELD THAT - We have gone through the above order passed by the CIT(A). Without considering the issue properly, CIT(A) has deleted the addition made by the AO. Thus, the order passed by the ld. CIT(A) has to be reversed. Accordingly, we reverse the order passed by the ld. CIT(A) and allow the appeal filed by the Revenue.

Summary

Issues:
Appeal against order of CIT(A) regarding disallowance under section 40(a)(ia) of the Income Tax Act, 1961 for assessment year 2008-09.

Detailed Analysis:

Issue 1: Disallowance under section 40(a)(ia) of the Act
The case involved an appeal by the Revenue against the order of the CIT(A) regarding the disallowance made under section 40(a)(ia) of the Income Tax Act, 1961 for the assessment year 2008-09. The assessee had written off an amount towards remake rights of a film, which the Assessing Officer found to be subject to tax deduction under section 194J of the Act. The Assessing Officer made an addition of the amount to the income of the assessee under section 40(a)(ia). The assessee contended that the provisions of section 194J were effective from 13.7.2006, and thus, the disallowance was not warranted. The CIT(A) initially confirmed the addition, but on further appeal, deleted the disallowance based on the timing of the transaction and the absence of a requirement to deduct tax at source. The ITAT, after considering submissions, reversed the decision of the CIT(A) and allowed the appeal filed by the Revenue, reinstating the addition made under section 40(a)(ia).

Conclusion:
The ITAT Chennai, in its judgment, allowed the appeal filed by the Revenue, reversing the order of the CIT(A) and reinstating the addition made under section 40(a)(ia) of the Income Tax Act, 1961 for the assessment year 2008-09. The decision was based on the timing of the transaction and the absence of a requirement to deduct tax at source, ultimately concluding that the disallowance was warranted.