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TMI Blog2014 (4) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the CIT(A) is upheld in deleting the disallowance made by the A.O. u/s 40(a)(ia) of the Act for short deduction of tax at source – Decided against Revenue. Addition on account of un-reconciled entries of AIR – Held that:- The contention of the assessee is accepted that the addition on account of un- reconciled difference in AIR should be restricted to Rs. 10,830/- as the assessee is admittedly following cash system of accounting – thus, the addition made by the AO and confirmed by the CIT(A) is restricted to that extent – Decided partly in favour of Assessee. Disallowance on payment to legal heir of the deceased partner – Held that:- The decision in M/s KS Aiyar & Co. Versus The Asst. CIT Rg. 11(2), Mumbai [2013 (6) TMI 570 - ITAT MUMBAI] followed - the payment has been made by the firm to the legal heir of its deceased partner, as per the clauses of the partnership deed dated 1.4.2000 having unequivocal covenants – thus, the amount paid to the legal heir of the deceased partner is an allowable expense – Decided in favour of Assessee. Disallowance of 1/5th of telephone and conveyance expenses – Held that:- some disallowance on account of personal use of the telephones ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,01,463/- was debited by the assessee on account of membership fees paid to BTI. According to the A.O., the assessee was required to deduct tax at source from the said payment and since the same was not done by the assessee, he disallowed the membership fees of Rs. 1,01,463/- paid by the assessee to BTI by invoking the provisions of section 40(a)(ia) of the Act. On appeal, the ld. CIT(A) deleted the said disallowance. 5. At the time of hearing before us, the ld. Representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of the Tribunal rendered in assessee s own case for A.Y. 2005- 06 and followed in A.Y. 2006-07 2007-08 by a common order dated 19th June, 2013 passed in ITA No. 384/Mum/2009, 1271/Mum/2010 and 4930/Mum/2011 wherein a similar issue is decided in favour of the assessee for the following reasons given in para No. 41 to 43:- 41. We have heard the arguments of both the sides and have also perused the material placed before us and the case laws cited by both the parties. We find that both the parties, i.e. revenue authorities and the assessee have treaded simply on the path of deductibility of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . u/s 40(a)(ia) of the Act. Ground no. 1 is accordingly dismissed. 7. The next issue involved in ground No. 2 of the Revenue s appeal relates to the addition of Rs. 29,31,618/- made by the A.O. by way of disallowance u/s 40(a)(ia) of the Act on account of payment made to sub contractor and international affiliates for short deduction of tax at source which has been deleted by the ld. CIT(A). 8. During the course of assessment proceeding, it was noticed by the A.O. that the assessee has made payments on account of sub-contracting of audit work on which there was short deduction of tax. He, therefore, invoked the provisions of section 40(a)(ia) of the Act and disallowed the corresponding amount paid to the sub-contractor to the tune of Rs. 29,31,618/-. On appeal, the ld. CIT(A) deleted the said disallowance. 9. At the time of hearing before us, the ld. Representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of Hon ble Calcutta High Court in the case of CIT vs. S.K. Tekriwal, 361 ITR 432 (Cal) wherein it was held that the disallowance by invoking the provisions of section 40(a)(ia) of the Act can be made only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the following reasons given in para 53:- 53. We have heard the arguments and have perused the material on record and case cited before us. The issue, in so far as the assessee is concerned, can be said to in favour and covered by an order of the coordinate Bench in its own case in assessment year 1981-82. We also find that the AO has himself conceded that the Hon ble Bombay High Court in the case of Mulla Mulla has held that an overriding charge to have been created over the assessee, where, by the obligation, income is diverted before it reaches the assessee, it is deductible . Since the payment has been made by the firm to the legal heir of its deceased partner, as per the clauses of the partnership deed dated 1.4.2000 having unequivocal covenants. In our opinion, the amount so paid to the legal heir of the deceased partner is an allowable expense. 14. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of assessment years 2005- 06, 2006-07 and 2007-08, we respectfully follow the order of the Tribunal for the said years and delete the disallowance made by the A.O. and confirmed by the ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to make such disallowance at 1/10th of the total expenses claimed by the assessee towards telephone and conveyance expenses. Accordingly, we modify the impugned order of the ld. CIT(A) and sustain the disallowance of 1/5th of the conveyance and telephone expenses to 1/10th. Ground no. 3 of the assessee s appeal is thus partly allowed. 18. Now, we shall take up the cross appeals for A.Y. 2009-10 which are directed against the order of ld. CIT(A)- 3, Mumbai dated 22-10-2012. 19. The first issue involved in ground No. 1 of the Revenue s appeal relates to the disallowance of Rs. 3,71,625/- made by the A.O. u/s 40(a)(ia) of the Income Tax Act, 1961 on account of subscription paid by the assessee to M/s Baker Tilley International (BTI) which has been deleted by the ld. CIT(A). 20. At the time of hearing before us, the ld. Representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of the Tribunal rendered in assessee s own case for A.Y. 2005- 06 and followed in A.Y. 2006-07 2007-08 by a common order dated 19th June, 2013 passed in ITA No. 384/Mum/2009, 1271/Mum/2010 and 4930/Mum/2011 wherein a similar disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of Rs. 2,17,594/- made to BTI. 21. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to A.Y. 2005-06, 2006-07 2007- 08, we respectfully follow the order of the Tribunal in assessee s own case and uphold the impugned order of the ld. CIT(A) deleting the disallowance made by the A.O. u/s 40(a)(ia) of the Act. 22. The next issue involved in ground No. 2 of the Revenue s appeal relates to the addition of Rs. 7,74,253/- made by the A.O. by way of disallowance u/s 40(a)(ia) of the Act on account of payment made to sub contractor and international affiliates for short deduction of tax at source which has been deleted by the ld. CIT(A). 23. At the time of hearing before us, the ld. Representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of Hon ble Calcutta High Court in the case of CIT vs. S.K. Tekriwal, 361 ITR 432 (Cal) wherein it was held that the disallowance by invoking the provisions of section 40(a)(ia) of the Act can be made only when there is failure on the part of the assessee to deduct the tax at source and not in case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord and case cited before us. The issue, in so far as the assessee is concerned, can be said to in favour and covered by an order of the coordinate Bench in its own case in assessment year 1981-82. We also find that the AO has himself conceded that the Hon ble Bombay High Court in the case of Mulla Mulla has held that an overriding charge to have been created over the assessee, where, by the obligation, income is diverted before it reaches the assessee, it is deductible . Since the payment has been made by the firm to the legal heir of its deceased partner, as per the clauses of the partnership deed dated 1.4.2000 having unequivocal covenants. In our opinion, the amount so paid to the legal heir of the deceased partner is an allowable expense. 28. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of assessment years 2005- 06, 2006-07 and 2007-08, we respectfully follow the order of the Tribunal for the said years and delete the disallowance made by the A.O. and confirmed by the ld. CIT(A) on account of payment made by the assessee to the legal heir of the deceased partner. Ground No. 2 of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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