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TMI Blog2022 (10) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... ally justified in deleting disallowance of Rs. 6,57,572/- u/s 14A of the Act without considering a legal principle that allowability or disallowability of expenditure under the Act is not conditional upon the earning of the income as upheld by Hon'ble Supreme Court in case of CIT Vs. Rajendra Prasad Moody [1978] 115 ITR 519? 3. Whether on facts and in circumstances of the case, Ld. CIT(A) is legally justified in not holding that application of Rule 8D of the Income Tax Rule,1962 (the Rule) to compute quantum of disallowance u/s 14 A of the Act is mandatory ? 4. That the appellant craves leave to add, amend, alter or forgo any ground/(s) of appeal either before or at the time of hearing of the appeal." 2. At the time of hearing, no one attended the proceedings on behalf of the assessee. It is seen from the records that there was no representation on behalf of the assessee since 09.09.2021. Therefore, the appeal of the assessee is taken up for hearing in the absence of the assessee and being disposed off on the basis of material available on record. BRIEF FACTS OF THE CASE 2. Brief facts of the case are that in this case, the assessee company filed its return of income thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at payments are made to non residents, that tax has been duly deducted at source, said tax deduction is not called in question, only limited aspect on basis of which subject disallowance is made by the assessing officer is belated payment of tax deducted at source before the time limit prescribed under section 200(1) of the act, whereas in similar provision time limit given for depositing the tax deducted at source for payments made to residents is extended up to the return filing time limit under section 139(1) of the act. Therefore, whether said extended time limit which was available for resident payments can be extended to non-resident recipients is one issue and secondly whether said amendment subsequently made in section 40(a)(i) by Finance No. 2 act 2014 can be treated to be retrospective in nature is 2nd issue. On aforesaid narrow controversy I am reproducing the memorandum explaining the provisions of Finance No. 2 act 2014/ related notes on clauses to have complete idea of the issue involved. CBDT CIRCULAR NO. 01/2015 Relevant Extract of Memorandum explaining provisions of Finance No. 2 Act, 2014 14. Disallowance of expenditure for non- deduction of tax at source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tax so deducted on payments made to residents as specified in section 40(a)(ia) of the Income-tax Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed. 14.5 Further, the first proviso to section 40(a)(ia) of the Income-tax Act, prior to its amendment by the Act, provided that sum, which was disallowed due to non-deduction of tax at source or non-payment of tax so deducted, shall be allowed deduction in the previous year in which such tax deducted at source has been paid. As the disallowance under the amended section 40(a)(ia) of the Income-tax Act has been restricted to 30% of the amount of expenditure, the first proviso to the said section 40(a)(ia) has also been amended to provide that deduction of 30% of the amount of expenditure shall be allowed in the previous year in which the tax so deducted has been paid. In this regard, it is hereby clarified that in respect of the amount disallowed for assessment year commencing on or before 1st day of April 2014, the deduction for the whole of the amount disallowed under section 40(a)(ia) of the Income-tax Act, shall be allowed under the first proviso to section 40(a)(ia) in the previous year in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee. Respectfully following the judgment of Vatika Township Private Limited (supra), the amendment brought in by Finance (No.2) Act of 2014 in Section 40(a)(ia), the same is held to be retrospective in nature; therefore, the amount to be disallowed u/s 40(a)(ia) should be restricted to 30% of the impugned amount" ii) DELHI BENCH - 'D' NEW DELHI ITA No. 6312/Del/2016 ASSESSMENT YEAR : 2012-13 Smt. Kanta Yadav, "We have considered rival submissions and find that issue is covered in favour of the assessee by order of HAT Jaipur Bench in the case of Shri Rajendra Yadav vs. ITO and Smt. Sonu Khandelwal vs. ITO. In these orders it was held that the disallowance u/s 40(a)(ia) to be restricted to 30% of the addition. In these orders the Tribunal has considered the amended provisions of section 40(a)(ia) of I.T. Act. In these orders the assessment year's involve was 2007- 08 and 2008-09. In the present appeal the assessment year is 2012-13. Therefore facts are identical In this view of the matter and following the above decisions of Jaipur Bench, we set aside and modify the orders of the authorities below and direct the Assessing Officer to restrict the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r seen that the violation made by the appellant is marginal delay in deposit of tax which has resulted in hundred percent disallowance of the said expenditure. However, once tax has been deposited with the due interest etc. further disallowance of hundred percent expenditure is against the intent of law. Legislative intent is to foster compliance of tax deduction provisions and inculcate discipline in the deductors. In present facts tax has been deducted and has been deposited which is not called in question. Only marginal delay in deposit of tax deducted at source has attracted hundred percent disallowance of the concerned expenditure which is not in accordance with context of provisions of section 40(a)(i) of the act. Even otherwise since the appellant is also engaged in the business of providing uplinking and down linking services, stated disallowance of expenditure pertaining to transmission and uplinking expenses, being directly and inextricably connected with the receipts being direct and overriding costs, may not be disallowed under section 40(a)(i). Further, genuineness of the expenditure is never called in question. In present facts the belief harboured by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words setting out the elements of an offence; in requiring the fulfillment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction." 18. The aforesaid principles and interpretations can apply to taxing statutes. In the present case we further feel the said principle should be applied as HDFC would necessarily have acted as per law and it is not the case of the Revenue that the bank had not paid taxes on their income. It is not a case of loss of revenue as such or a case where the recipient did not pay their taxes." Accordingly the disallowance made by the assessing officer under section 40(a)(i) cannot be sustained. Other pleas raised by the assessee to support its additional round becomes academic in nature in view of my finding above. After considering all the facts in holistic manner as discussed above in line with the legal position as explained in Hon'ble Supreme Court decisions, I am of the considered view that disallowance made of Rs.2,22,64,353/- is incorrect and accordingly the same is directed to be deleted. Therefore the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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