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TMI Blog2017 (6) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... 0(a)(ia) of the Act not to be attracted. The ld. CIT(A) followed his own order in the assessee’s case for A.Ys. 2007-08 and 2009-10 in deleting the disallowance.- Decided against revenue Addition in respect of disallowance of depreciation on wooden partitions - Held that:- Assessee to be entitled to 100% depreciation, observing that the structure in the form of wooden partition was purely a temporary wooden structure on a rented premises, giving no advantage of enduring nature; and that similar disallowances have been deleted in the assessee’s own cases for A.Ys. 2005-06 to 2009-10. Addition u/s.40(a)(ia) on account of short TDS as reported in Annexure “J” of the Tax Audit Report of the assessee bank - Held that:- Section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s. 201 of the Act and no disallowance can be made by invoking the provisions of section 40{a)(ia) of the Act. Accordingly, we confirm the order of CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent year and paid, then deduction would be allowed in that year. It may be important for accounting purposes, passing of a debit entry in the books of account, concerning the expenses in the year in which the expenses were incurred, for the purposes of section 40(a)(ia) of the IT Act, it is not determinative of the deductibility – particularly the year thereof. In view of the above, the grievance raised by the assessee is quite justified and it is accepted as such. The CIT(A)’s order is reversed. The addition is deleted. - ITA Nos. 74 And 137(Asr.)/2015, And ITA Nos. 76(Asr.)/2015 - - - Dated:- 28-2-2017 - SHRI A.D. JAIN, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER For The Assessee : Sh. R.K. Gupta, CA For The Revenue : Sh. Bhawani Shanker, D.R. ORDER Per A.D. Jain, Judicial Member: ITA Nos. 74 137/Asr./2015: These are department s appeals for A.Ys. 2010-11 and 2011-12. Common issues are involved and, therefore, these appeals are being decided together. For convenience, facts are taken from ITA No. 74/Asr./2015. 2. The first issue concerns disallowance u/s. 40(a)(ia) of the Income-tax Act, made on account of Clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard, first of all, it is seen that the ld. CIT(A), while deleting the disallowance, has observed that MICR charges representing Magnetic Ink Charter Recognition , are cheque clearing charges. It is an undisputed fact that the machine involves recognized numeric data printed with magnetic charged ink. This is done with the help of ultraviolet rays, which scans the genuineness of the cheques. Apparently, human intervention is not required in MICR clearing of cheques, which involves examining technical data, analyzing them and making them useful for subsequent use. MICR clearance of cheques is possible only by a mechanized system, considering that the processing is of cheques in bulk. A similar situation had presented before the Hon ble Supreme Court in the case of CIT vs. Bharti Cellular Ltd. , (2010)234CTR(SC)146, following which it was, that the ld. CIT(A) held the provisions of section 40(a)(ia) of the Act not to be attracted. The ld. CIT(A) followed his own order in the assessee s case for A.Ys. 2007-08 and 2009-10 in deleting the disallowance. 6. The ITAT, in its order dated 28.05.2013 (supra) in the asessee s case for A.Y. 2008-09, and in its order dated 15.12.2015, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as involved, the appeal was being dismissed. The reasoning of the Tribunal is as follows : In the present case before us the assessee has deducted tax u/s. 194C(2) of the Act being payments made to sub-contractors and it is not a case of non-deduction of tax or no deduction of tax as is the import of section 40a(ia) of the Act. But the revenue's contention is that the payments are in the nature of machinery hire charges falling under the head 'rent' and the previous provisions of section 1941 of the Act are applicable. According to revenue, the assessee has deducted tax @ 1% u/s. 194C(2) of the Act as against the actual deduction to be made at 10% u/s. 1941 of the Act, thereby lesser deduction of tax. The revenue has made out a case of lesser deduction of tax and that also under different head and accordingly disallowed the payments proportionately by invoking the provisions of section 40(a}(ia) of the Act. The Ld. C1T, DR also argued that there is no word like failure used in section 40(a)(ia) of the Act and it referred to only non-deduction of tax and disallowance of such payments. According to him, it does not refer to genuineness of the payment or otherwise b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for short deduction of tax as reported in Annexure J of the audit report of the assessee bank. The ld. CIT(A) followed his order of A.Y. 2009-10 in the assessee s case while deleting the addition. As per the Department, the ld. CIT(A) has erred in deleting the addition on account of non- TDS on interest paid to JDA, as JDA is a taxable entity, assessed as a local authority and as such, it was the liability and responsibility of the assessee bank to deduct TDS on interest paid to JDA. 15. Here also, the Tribunal, in the assessee s case of A.Ys. 2008-09 and 2007- 08 (supra), has upheld the deletion of the additions for those years. For A.Y. 2007-08 (APB 161 163), the Tribunal has held as follows : 29. It has not been disputed that Jammu Development Authority stands incorporated by the J K Development Act, 1970. C.B.D.T. Notification no.3439, dated 27.10.1970, issued, in pursuance of the provisions of section 194A(3)(f) of the Act, provides that no tax was required to be deducted on interest on deposit paid to a Corporation incorporated under a State Act. The position is not any different so far as regards J.D.A. incorporated under the said State Act, too. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the findings of the Tribunal for AY 2008-09 are squarely applicable to the present case also. 33. In view of the above, Ground no. 5 is also found to be without any merit and the same is rejected. 16. In this regard, ground No. 6 states that the ld. CIT(A) erred in not considering the decision of the Hon ble Supreme Court in Appeal (Civil) No.6832/2003, dated 03.06.2006 in the case of Adityapur Industrial Area Development Authority vs. Union of India Others , which is applicable in this case, as the Hon ble Supreme Court has held that the appellant/Authority could not claim exemption from Union Taxation under Article 289(1) of the Constitution of India. However, at the time of argument before us, neither was this argument taken, nor was the decision of the Hon ble Supreme Court filed. 17. Following the Tribunal Orders in the assessee s cases for AY 2008-09 and 2007-08, which have not been shown to have been reversed on appeal, or even stayed, the order of the ld. CIT(A) on this issue is confirmed. Ground Nos. 5 6 are rejected. 18. Ground No.7 challenges the action of the ld. CIT(A) in deleting the addition made on account of disallowance u/s. 14A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has not considered this income as not form of total income. Thus in my considered opinion it was not required from AO to invoke the provisions of sec.!4A.Rather,this aspect of the appellant bank is in the interest of Revenue. Had the appellant claimed this income exempt even then the facts and figures do reveal that these are exactly the same as in the previous years wherein those years the appellate authorities including myself have given a finding that in view of own funds there cannot be any disallowance for interest cost and in view of the fact that management cost is fixed whether or not this exempt income is earned there cannot be any management cost related to earn this exempt income. Under such facts and circumstances, I am not in agreement with the AO to make disallowance u/s 14A by applying Rule 8D Further, there is no need to discuss the contentions of the appellant on other grounds to set off loss from exempt income to taxable income when I have given finding that no disallowance u/s 14A is to be made under such facts circumstances. Similar type of disallowance has been deleted by me in the order passed in appeal no, 346/11-12 pertaining to assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be said to be related to earn income. The management cost shall also remain fixed even if such income is earned. Further, for AYs 2005-06 and 2006-07, again, the CIT(A), vide order (APB 67 to 115) dated 12.02.2014, deleted the similar additions. It has been stated on behalf of the assessee, and not denied by the department, that the department has not filed any appeal against the said CIT(A) s orders for A.Y. 2005-06 and 2006-07. Then, obviously, as held by the Mumbai Bench of the Tribunal, vide order (APB 116-120) dated 01.01.2005, in ITA No. 5592/Mum/2012 in the case of Daga Global Chemicals Ltd. vs. ACIT , disallowance u/s. 14A read with Rule 8D of the IT Rules cannot exceed the exempt income. Moreover, no interest expenditure disallowance made in relation to dividend received from trading in shares is sustainable in law, as held by the Mumbai Bench of the Tribunal in the case of DCIT vs. India Advantage Securities Ltd. , in ITA No. 6711/Mum/2011, vide order (APB 121- 127) dated 14.09.2012. 22. In view of the above, here also, we do not find any error whatsoever in the order of the ld. CIT(A), which is confirmed. Ground No. 7 is rejected. 23. As stated at the beginning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid in the subsequent year, such sum has to be allowed as deduction in the previous year in which such tax has been paid. 28. On the other hand, the ld. DR placed strong reliance on the impugned order. 29. As per proviso to section 40(a)(ia), where in respect of any sum tax has been deducted and paid in the subsequent year, then, such sum has to be allowed as deduction in computing the income of the previous year, in which such sum has been paid. The ld. CIT(A), while confirming the disallowance, has observed that the amount has to be provided for in the books of account in the financial year to which it actually pertains; that it then has to be disallowed u/s. 40(a)(ia) and added back to the income in that year; and that it has to be subsequently allowed in the financial year in which the tax thereon was deducted and deposited. Since the assessee had not done so, the disallowance has been confirmed. 30. The answer to the objection/observation of the ld. CIT(A), as correctly contended, is to be found in Commissioner of Income Tax vs. SMCC construction, Delhi , 320 ITR 534 (Del). The Hon ble High Court, in that case, upheld the observations/findings of the Tribunal that b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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