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TMI Blog2022 (12) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... The provisio provided to section 40(a)(ia) further states that said expenditure can be allowed as deduction in the year in which the assessee has deducted TDS and remits to Government account. Assuming for a moment, the assessee has made a provision for interest payment to partner in the earlier assessment year 2013-14, but same cannot be allowed as deduction because of non-deduction of tax at source. Further, it is a tax neutral exercise, because if assessee provides interest in the last financial year, to that extent profits of the assessee would come down and at the same time for non-deduction of TDS if expenses is disallowed then profit would remain same. Therefore, for assessment year 2013-14 there is no net effect on the profit dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T.Act, 1961, during the previous year when the tax was deducted and paid on 25.04.2013, in the facts and the circumstances of the case and in law. 3. The learned CIT(A) has not found that the expenditure, in question, was not allowable, as a deduction, in computing the income, under the head Business , except on the ground of holding that the same cannot be considered, as having accrued on 25.04.2013, but, during the year 31.03.2013, in the facts and the circumstances of the case and in law. 4. For these and other additional grounds of appeal that may be adduced at the time of hearing, the order of the Commissioner of Income Tax (Appeals)-2, Coimbatore, is opposed to Jaw and unsustainable in the facts and the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed in this year, even if the assessee is following mercantile system of accounting. 5. The Ld. DR on the other hand supporting the order of the Ld. CIT(A), submitted that there is no dispute that the assessee is following mercantile system of accounting. But, interest pertains to 01.09.2012 to 31.03.2013 has been accrued in the financial year relevant to assessment year 2013-14 and thus, the AO has rightly disallowed expenditure pertains to earlier year and their order should be upheld. 6. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. There is no dispute with regard to the settled legal position of law that when assessee is following mercantile system of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2013-14 there is no net effect on the profit declared by the assessee. Further, as per provisions of section 40(a)(ia) of the Act, even if assessee debited expenditure, but same needs to be allowed as and when the assessee deducts TDS on said expenditure. In this case, the assessee has deducted TDS on impugned expenditure for the assessment year 2014-15, which has to be allowed irrespective of method of accounting followed by the assessee. Therefore, we are of the considered view that the AO as well as the CIT(A) are erred in disallowing interest paid to outgoing partner s account and thus, we direct the AO to delete additions made towards disallowance of interest paid on partners capital account. 7. In the result, appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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