July 2013
Apollo Tyres vs. DCIT ITAT Cochin Bench Before N. R. S. Ganesan (JM) and B. R. Baskaran (AM) ITA No. 31/Coch/2010 A.Y.: 2006-07. Decided on: 29th May, 2013. Counsel for assessee/revenue: Percy J. Pardiwala, T. P. Ostwal and Indra Anand, Madhur Agarwal/M. Anil Kumar
By Jagdish D. Shah, Jagdish T. Punjabi, Chartered Accountants
fiogf49gjkf0d
Section 40(a)(ia) – Section 40(a)(ia) does not envisage a situation where there was short deduction/lesser deduction as in case of section 201(1A) and therefore in case of short/lesser deduction of tax, the entire expenditure whose genuineness was not doubted by the AO cannot be disallowed.
Facts: The assessee made payments on which tax deductible at source was deducted at a rate lower than the rate at which tax ought to have been deducted. The short deduction was due to surcharge not being considered in some cases and in some cases rate applicable to sub-contractors was applied instead of applying the rate for payment to contractors. The AO disallowed a sum of Rs. 68,68,556 u/s. 40(a)(ia) of the Act.
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.
Held:
The Tribunal after having considered the provisions of section 40(a)(ia) and section 201(1A) of the Act held as follows :
In section 201(1A) the legislature intended to levy interest even in case of short deduction of tax. In other words, if any part of the tax which was required to be deducted was found to be not deducted then interest u/s. 201(1A) can be levied in respect of that part of the amount which was not deducted whereas the language of section 40(a)(ia) does not say that even for short deduction disallowance has to be made proportionately. Therefore, the legislature has clearly envisaged in section 201(1A) for levy of interest on the amount on which tax was not deducted whereas the legislature has omitted to do so in section 40(a)(ia) of the Act. In other words, provisions of section 40(a)(ia) do not enable the AO to disallow any proportionate amount for short deduction or lesser deduction.
The Mumbai Bench found that short deduction of TDS, if any, could have been considered as liability under the Income-tax Act as due from the assessee. Therefore, the disallowance of the entire expenditure, whose genuineness was not doubted by the AO is not justified. A similar view was also taken by the Kolkatta Bench of the Tribunal in the case of CIT vs. S. K. Tekriwal. In this case, on appeal by the revenue, the Calcutta High Court confirmed the order of the Kolkatta Bench of the Tribunal (ITA No. 183 of 2012, GA No. 2069 of 2012 judgment dated 3.12.2012).
Section 40(a)(ia) does not envisage a situation where there was short deduction/lesser deduction as in case of section 201(1A) of the Act. Therefore, in case of short/lesser deduction of tax, the entire expenditure whose genuineness was not doubted by the AO cannot be disallowed.
This ground of appeal was decided in favour of the assessee.
