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2024 (1) TMI 1029 - AT - Income TaxTDS u/s 194J or 194C - short deduction of TDS - assessee expended certain expenditure towards Managerial and Technical services - no TDS has been made and in respect of some cases, grant of TDS deducted has not been remitted before the specified due date stipulated and in respect of payments made against bill management services TDS has been made u/s 194C instead of deducting the rate applicable for such managerial and technical services u/s 194J - HELD THAT - As per provisions of section 40(a)(ia) of the Act, disallowance cannot be made if the tax is short deducted at sources - if the assessee is liable to deduct tax, and failed to deduct tax then only the section 40(a)(ia) of the Act to be applied, not for short deduction. In the present case, the claim of the assessee is that the assessee is liable to deduct TDS u/s 194J of the Act only and same has been deducted. Contention of the ld. D.R. is that the assessee is required to deduct TDS u/s 194C of the Act, however, the same has been deducted u/s 194J - In our opinion, if there is shortfall of deduction of TDS by applying wrong provisions i.e. section 194J of the Act instead of 194C of the Act, then the disallowance u/s 40(a)(ia) of the Act cannot be made. This view of ours is fortified by the judgement of Future First Info Services Pvt. Ltd. 2022 (7) TMI 748 - DELHI HIGH COURT wherein held that where there was short deduction of tax at source, disallowance could not be made u/s 40(a)(ia) of the Act and correct course of action would have been to invoke the provisions of section 201 of the Act . Hence, to the expenditure wherein assessee deducted the TDS, however, there was a short deduction of TDS to that extent, the disallowance u/s 40(a)(ia) of the Act cannot be made. Other amount wherein TDS has not been deducted or not remitted to the government account before the specified date. With regard to this, we are of the opinion that if the TDS is deducted but not remitted to the government account before the specified date, and the recipient of that income, furnished the return of income u/s 139 of the Act after taking into account that income for computing the income of the assessee for that assessment year and paid tax due thereon, the income declared by that recipient in its return of income, then second proviso to section 40(a)(ia) of the Act is applicable and which is required to be examined at the end of ld. AO. Hence, this issue is remitted to the file of ld. AO to examine the same afresh in the light of above observations. Ground Nos.2 3 are partly allowed for statistical purposes. Disallowance u/s 43B - payments not made to government within due date - submission of the Appellant that the expenses can only be claimed in the year of payment and section 43B provisions disallow the sum not paid in the financial year or before the due date of filing tax returns, thus, the disallowance made has to be deleted - whether above payment is liable for disallowance u/s 43B of the Act or not, which is not paid before the due date of filing the return of income? - HELD THAT - As per the provisions of section 43B of the Act, any sum payable by assessee by way of tax, duty, cess or fee by whatever name called, no in law for the time being in force not paid within due date of filing return of income to be disallowed computing the income of the assessee. Now the question is that when the assessee is not claimed it as an expenditure in the P L account, could it be disallowed u/s 43B of the Act. This was considered by the Hon ble Supreme Court in the case of Chowringhee Sales Bureau Pvt. Ltd 1972 (10) TMI 4 - SUPREME COURT in which was held that sales tax collected by assessee is revenue receipt even if it is shown by the assessee not non-revenue head and such treatment by the assessee is not decisive. No hesitation to hold that non- payment of above amount to government account before the due date of filing the return is to be disallowed, though it was not charged to the P L account and it attracts the provisions of section 43B of the Act and the provisions of section 145A of the Act cannot be applied in view of the non-obstante clause in section 43B of the Act. Same view has been taken in the case of ACIT Vs. Kunnel Engineers Contractors Pvt. Ltd 2020 (5) TMI 576 - ITAT COCHIN and Mr. Asrah Nafisa Althaf 2023 (11) TMI 1214 - ITAT BANGALORE - In view of this, we dismiss these grounds taken by the assessee. Nature of expenses - expenditure incurred in decommissioning the dismantling is towards capital assets and such expenditure is capital in nature - HELD THAT - This expenditure incurred towards labour charges for dismantling of old and faulty assets ad by incurring this expenditure, no new asset has been created and the expenditure incurred to remove the non-useful assets from the gross block. It is nothing but expenditure incurred for maintaining the existing asset. Being so, in our opinion, it is just like repairs maintenance incurred for dismantling of old assets. Accordingly, we are of the opinion that it is to be allowed as revenue expenditure only and this ground of assessee is allowed. Grants and Contributions received during the year - HELD THAT - The assessee has received the total grant in the assessment year which is the gross amount and that to be deducted from the gross block of plant machinery and not the only amount as the balance amount which has not gone into the computation of income and resulted in excess allowance of depreciation - The error crept in the computation of the gross block of assets has been correctly rectified by the ld. AO while framing assessment and we do not find any infirmity in the order of the lower authorities on this count and the same is confirmed in computing the actual cost of assets to be arrived by deducting the grant-in-aid received by the assessee as per section 43(1) of the Act. More so, this ground was not pressed before ld. AO, now it cannot press the same. This ground of appeal of the assessee is dismissed. Depreciation on assets not in use - HELD THAT - According to the depreciation u/s 32 of the Act, the assets to be owned by the assessee and should be used for the purpose of business of the assessee. In the present case, it is an admitted fact that these assets are not in use. As such, the depreciation was denied by the ld. AO. Same has been confirmed by the ld. CIT(A). We do not find any infirmity in the order of the lower authorities and the same is confirmed. This ground of assessee is dismissed.
Issues Involved:
1. Confirmation of disallowance under Section 40(a)(ia) of the Income-tax Act, 1961. 2. Disallowance under Section 43B of the Income-tax Act, 1961. 3. Classification of decommissioning and dismantling expenses as capital or revenue expenditure. 4. Treatment of payments to KPTCL and SLDC regarding TDS deductions. 5. Depreciation on small and low-value items. 6. Reduction of grants and contributions from the cost of assets for depreciation calculation. 7. Depreciation on assets not in use. Summary: 1. Confirmation of disallowance under Section 40(a)(ia) of the Income-tax Act, 1961: The assessee's appeal against the disallowance of Rs. 8,30,87,468/- for non-deduction of TDS under Section 194J was partly allowed. The Tribunal held that disallowance under Section 40(a)(ia) cannot be made for short deduction of TDS, citing the Delhi High Court's judgment in PCIT Vs. Future First Info Services Pvt. Ltd. However, for amounts where TDS was not deducted or not remitted before the due date, the issue was remitted back to the AO for fresh examination. 2. Disallowance under Section 43B of the Income-tax Act, 1961: The Tribunal upheld the disallowance of Rs. 73,13,171/- under Section 43B for non-payment of outstanding amounts before the due date. It was held that even if the amounts were not claimed as expenditure in the P&L account, they still attract the provisions of Section 43B. 3. Classification of decommissioning and dismantling expenses as capital or revenue expenditure: The Tribunal allowed the assessee's claim that the expenditure incurred on decommissioning and dismantling old and faulty assets is revenue in nature. It was considered akin to repairs and maintenance and hence allowable as revenue expenditure. 4. Treatment of payments to KPTCL and SLDC regarding TDS deductions: The Tribunal referred to the High Court's decision in the assessee's own case, which held that payments to KPTCL and SLDC are not for technical services and hence not subject to TDS under Section 194J. This ground was allowed in favor of the assessee. 5. Depreciation on small and low-value items: The Tribunal dismissed this ground as it was not pressed before the NFAC and no new circumstances were presented. 6. Reduction of grants and contributions from the cost of assets for depreciation calculation: The Tribunal upheld the AO's decision to deduct the entire amount of grants and contributions received during the year from the cost of assets for calculating depreciation. The assessee's contention that part of the grants related to earlier years was not accepted. 7. Depreciation on assets not in use: The Tribunal confirmed the disallowance of depreciation on assets not in use, holding that depreciation under Section 32 requires the assets to be used for business purposes. Conclusion: The appeal was partly allowed for statistical purposes, with specific issues remitted back to the AO for fresh examination and others decided based on existing legal precedents and factual findings.
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