By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi, Chartered Accountants
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Section 40(a)(ia) – Provisions of section 40(a)(ia) do not apply to a case where there is shortfall in deduction of tax at source.
Facts: The assessee engaged in the business of making T.V. serials and ad films had incurred certain expenses on which tax was deductible at source but the assessee had either not deducted tax at source at all or had deducted it at a lower rate. The Assessing Officer disallowed a sum of Rs. 71,30,633 u/s. 40(a)(ia) – Rs. 62,33,890 for short deduction of tax at source and Rs. 8,96,743 for non-deduction of tax at source.
Aggrieved, the assessee preferred an appeal to CIT(A) who on the basis of some additional evidence deleted certain disallowances and confirmed the remaining.
Aggrieved, the assessee preferred an appeal to the Tribunal.
Held:
The Tribunal noted that in some cases the assessee treated the payment to be covered u/s. 194C of the Act whereas the authorities below treated the same payment as being covered u/s. 194I of the Act thereby resulting in short deduction of tax at source. It held that the issue whether disallowance u/s. 40(a)(ia) can be made where assessee short deducted tax at source instead of non-deduction of tax at source is no mere res integra in view of several orders passed by various benches of the Tribunal across the country holding that no disallowance u/s. 40(a)(ia) can be made in such cases. The Tribunal made a mention of U.E. Trade Corporation (India) Ltd. vs. DCIT (2012) 54 SOT 596 (Del) and DCIT v. Tekriwwal (2011) 48 SOT 515 (Kol). It also noted that the Calcutta High Court has vide its judgment dated 03-12-2012 in the case of CIT vs. S. K. Tekriwal (2012 – TIOL- 1057-HC-KOL) upheld the view of the Kolkata Bench of the Tribunal. Following these, it held that CIT(A) was not justified in sustaining disallowance u/s. 40(a)(ia) in respect of expenses on which short deduction of tax at source was made.
