Section 40(a)(ia) is not applicable to a case where tax has been deducted u/s. 194C instead of u/s. 194I or u/s. 194J.
Facts I:
The assessee was in the business of production and distribution of advertising films. It also provided other assistance like making available locations, equipments, models and crew to the foreign as well as domestic companies. The assessee claimed depreciation on certain paintings purchased by it on the ground that these are utilised in the said preparation/advertising films, etc.
The AO was of the view that the presence of paintings is immaterial for the conduct of business. He, accordingly, disallowed depreciation claimed by the assessee on paintings. Aggrieved, the assessee preferred an appeal to CIT(A) who upheld the action of the AO. Aggrieved, the assessee preferred an appeal to the Tribunal.
Held I:
The Tribunal agreed with the contentions made by the assessee viz. that hiring of the painting for original shoots was unaffordable. Considering the nature of the assessee’s business, they have purchased and utilised the paintings which were either hung in the office or given to the producer for the original shoots, or used in various settings. Therefore, the paintings were also part of furniture. The Tribunal relied on the decision of Chennai Bench of ITAT in the case of Tribunal news Burnside Investments & Holdings Ltd. vs. DCIT (61 ITD 601) where it was held as under
“From the dictionary meaning of the word `furniture’ it is clear that all articles of convenience or decoration used for the purpose of furnishing a place of business or an office are articles of furniture. In the instant case, there was no dispute that these paintings were used as decorations in the office and the office was used for the purpose of business. Therefore, these paintings constitute interior decoration to give a good look to the place of business. Therefore, the assessee was entitled to depreciation on these paintings.”
Following the ratio of the above mentioned decision, the Tribunal decided the issue in favour of the assessee. This ground of appeal was allowed.
Facts II:
In the course of assessment proceedings the Assessing Officer (AO) noticed that the assessee had in respect of certain items of expenditure deducted tax u/s. 194C whereas the applicable provision, according to the AO, was section 194I or section 194J. The AO held that the assessee has short deducted tax. The AO relying on the decisions in the case of CIT vs. Prasar Bharti (292 ITR 580)(Del) and Chambers of Commerce of Income-tax Consultant vs. CBDT 75 Taxman 669 (Bom) and All Gujarat Federation vs. CBDT (214 ITR 2) disallowed the expenditure on which there was short deduction. Aggrieved, the assessee preferred an appeal to CIT(A) who confirmed the action of the AO. Aggrieved, the assessee preferred an appeal to the Tribunal where interalia relying on the ratio of Calcutta High Court decision in the case of CIT vs S. K. Tekriwal (2012-TIOL-1057-HC-KOL-IT) it was contended that provisions of section 40(a)(ia) can be only invoked if there is no deduction of tax but not in a case where there was short deduction.
Held II: Section 40(a)(ia) can be invoked only when tax has not been deducted or has not been paid as per the provisions. Since the assessee had deducted tax u/s. 194C instead of section 194I or section 194J, the Tribunal held that it is not a case of non-deduction of tax. The Tribunal held that when tax was deducted by the assessee, even under bonafide impression under wrong provisions of TDS, provisions of section 40(a) (ia) cannot be invoked. It observed that this principle is being uniformly followed by various co-ordinate Benches and has approval of Calcutta High Court in the case of CIT vs. S. K. Tekriwal (supra). Therefore, disallowance u/s. 40(a)(ia) cannot be upheld. It was also observed that the revenue had not taken any steps u/s. 201 wherein the issue whether the deduction has to be made u/s. 194I or 194J or 194C can be considered /examined. This ground was decided in favour of the assessee.
