2023 (3) TMI 1344 - AT - Income Tax

Non deduction of TDS - Addition u/s 40(a)(ia) - disallowance of the ocean freight, survey expenses, testing charges and legal charges - HELD THAT - In the case of Om Sri Nilamadhab Builders (P) Ltd 2022 (11) TMI 1337 - ITAT CUTTACK the coordinate bench of the Tribunal restricted the disallowance to 30% as against 100% - Thus disallowance u/s.40(a)(ia) as made by the AO and as confirmed by the ld. CIT(A) stands restricted to 30%. Appeal of the assessee is partly allowed.

Summary

Issues involved: Appeal against order of ld. CIT(A)-II, Bhubaneswar for assessment year 2007-2008. Recall of Tribunal's order due to change in decision following Supreme Court ruling.

Issue 1: Disallowance of expenses without TDS deduction

The main issue is the disallowance of ocean freight, survey expenses, testing charges, and legal charges where TDS was not deducted. AO invoked Section 40(a)(ia) to tax 100% of the disallowance. Assessee argued for restriction to 30% based on precedent (Om Sri Nilamadhab Builders (P) Ltd., ITA No.296/CTK/2018, order dated 14.11.2022). Revenue contended that disallowance at 100% was correct as per Supreme Court ruling in Shree Choudhary Transport Company (2020) 426 ITR 289 (SC).

Decision:

The Tribunal referred to the case of Om Sri Nilamadhab Builders (P) Ltd. where disallowance was restricted to 30% citing amendments to Section 40(a)(ia) to remove hardship for the assessee. The Tribunal held that the amendment was clarificatory in nature and directed the AO to limit the disallowance to 30%. The argument that the amendment was not retrospective was not accepted, and the appeal of the assessee was partly allowed. The disallowance u/s. 40(a)(ia) was restricted to 30% in line with the earlier decision.

Conclusion:

The Tribunal partially allowed the appeal of the assessee, restricting the disallowance of expenses without TDS deduction to 30% based on the clarification provided by the Supreme Court ruling and previous Tribunal decisions.