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TMI Blog2018 (11) TMI 1795X X X X Extracts X X X X X X X X Extracts X X X X ..... business of running hotels at various locations in India. The return of income was filed declaring income of Rs. 4,28,30,390/-. The case was selected for scrutiny assessment and the Assessing Officer, along with other additions, made a disallowance of Rs. 21,60,000/- u/s 40(a)(ia) of the Income Tax Act, 1961 (hereinafter called 'the Act') on account of licence fee paid by the assessee to M/s SRK Travels & Tours Pvt. Ltd. The assessee had deducted tax @2.26% on the payment made to M/s SRK Travels & Tours Pvt. Ltd. whereas the Assessing Officer was of the opinion that tax should have been deducted @22.6%. The issue was carried to the Ld. Commissioner of Income Tax (Appeals) and the Ld. Commissioner of Income Tax (Appeals) upheld the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as further submitted that the impugned payment was treated as business income by the recipient of the amount. It was further submitted by the Ld. AR that no disallowance could be made u/s 40a (ia) of the Act if there was a short deduction of tax and the provisions would apply only if no tax was deducted. It was further submitted that the stand of the department that the payment was in the nature of rent and, therefore, would attract provisions of section 194I of the Act was incorrect. The Ld. AR placed reliance on the judgment of Hon'ble High Court of Calcutta in the case of CIT vs. S.K. Tekriwal reported in 361 ITR 432 (Cal) wherein it had been held that in case of any shortfall due to any difference of opinion as to the taxability of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act but no disallowance can be made by invoking provisions of section 40a(ia). The Hon'ble High Court of Calcutta observed that the provisions of section 40a(ia) have two limbs; one is where, inter alia, the assessee has to deduct tax and second where after deducting tax, inter alia, the assessee has to pay the same into government account. The Hon'ble High Court of Calcutta went to observe that there was nothing in the said section to treat, inter alia, the assessee as defaulter where there is a shortfall in deduction and further, section 40a(ia) refers only to the duty to deduct tax and pay to government account. Undisputedly, in the present appeal also, there is no allegation that the tax deducted was not paid into the government accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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