2024 (3) TMI 616 - AT - Income Tax

TDS u/s 194I or 194IB - Disallowance u/s 40(a)(ia) - TDS was deducted but the section 194IB was mentioned wrongly instead of section 194I(b) - HELD THAT - The rental expenditure had been duly subjected to deduction of tax at source at the applicable rates and one party RMZ Ecoworld Infrastructure Private Limited had even obtained lower deduction certificate u/s 197 of the Act from the TDS officer. When these facts are staring at us, the action of the lower authorities in making a mamooth disallowance merely on the wrong mentioning of section 194IB instead of section 194I(b) of the Act cannot be sustained. Hence we have no hesitation to delete the disallowance u/s 40(a)(ia) - Ground raised by the assessee are allowed. Additional claim for refund of excess Dividend Distribution Tax (DDT) - HELD THAT - This issue is no longer res integra in view of the recent decision of Total Oil India Pvt Ltd 2023 (4) TMI 988 - ITAT MUMBAI (SB) wherein it was held that Double Taxation Avoidance Agreement (DTAA) does not get triggered at all when a domestic company pays DDT u/s 115O of the Act where contracting states to a tax treaty intend to extend treaty protection to domestic company paying dividend distribution tax, only then, domestic company can claim benefit of DTAA, if any. Ground raised by the assessee are dismissed.

Summary

Issues Involved:
1. Disallowance u/s 40(a)(ia) of the Act on account of non-deduction of tax at source on rental expenditure.
2. Non-grant of additional claim for refund of excess Dividend Distribution Tax (DDT).
3. Chargeability of interest u/s 234B and 234C of the Act.
4. Initiation of penalty proceedings u/s 270A of the Act.

Summary:

1. Disallowance u/s 40(a)(ia) of the Act:
The assessee challenged the disallowance of Rs. 5,55,68,616 made u/s 40(a)(ia) of the Act for non-deduction of tax at source on rental expenditure. The assessee argued that tax was deducted and deposited within the prescribed timelines. The Tribunal found that the rental expenditure of Rs. 18,52,28,719 was duly subjected to TDS at applicable rates. The disallowance was made due to the incorrect mention of section 194IB instead of section 194I(b). The Tribunal held that the disallowance cannot be sustained merely due to this error and deleted the disallowance of Rs. 18,52,28,719. Ground Nos. 2 to 2.2 were allowed.

2. Non-grant of additional claim for refund of excess DDT:
The assessee sought relief for an additional claim for refund of excess DDT of Rs. 4,07,72,163. The Tribunal referred to the decision in the case of DCIT vs Total Oil India Pvt Ltd, where it was held that DTAA does not apply when a domestic company pays DDT u/s 115O of the Act. Thus, the claim for the refund of excess DDT was dismissed. Ground Nos. 3 to 3.4 were dismissed.

3. Chargeability of interest u/s 234B and 234C of the Act:
The issue regarding the chargeability of interest u/s 234B and 234C was deemed consequential in nature. Ground No. 5 was noted as such.

4. Initiation of penalty proceedings u/s 270A of the Act:
The initiation of penalty proceedings u/s 270A was considered premature for adjudication at this stage. Ground No. 6 was dismissed.

Conclusion:
The appeal of the assessee was partly allowed. The Tribunal deleted the disallowance of Rs. 18,52,28,719 u/s 40(a)(ia) but dismissed the claim for refund of excess DDT. The issues regarding interest and penalty proceedings were either consequential or premature. Order pronounced on 12/03/2024.