COMMISSIONER OF INCOME TAX-I, CHD. vs. M/S RAJA FORGINGS AND GEARS LTD

of 2011

-1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No. 5 of 2011 Date of decision: 28.3.2011 Commissioner of Income-Tax-I, Chandigarh ...Appellant Versus M/s Raja Forgings & Gears Ltd. ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms. Urvashi Dhugga, Senior Standing Counsel for the appellant.

**** AJAY KUMAR MITTAL, J.

-2- *** to be allowed in subsequent year is only what is disallowed in the relevant year? ii) Whether on the facts and circumstances of the case, the Hon'ble ITAT has erred in allowing the late payments of employees contribution of ESI & PF beyond the grace period to the respective funds, in violation of provisions of Section 36(1)(va) of the Income Tax Act, 1961?”

-3- *** challenged the findings recorded by the Tribunal deleting the addition made by the assessing officer with regard to the interest paid to Smt. Gargi Goel for the period upto 31.3.2005 during the financial year relating to the assessment year 2006-2007. 5. The Tribunal while deciding question No.1 in favour of the assessee observed that in terms of proviso to Section 40(a)(ia) of the Act, where the assessee in any subsequent years deducts tax at source and pays before the due dates then such expenditure is admissible as a deduction in the year in which such tax has been paid. It was further noticed that the assessee had deducted and paid tax at source on the interest expenditure relating to the period 1.4.2004 to 31.3.2005 during the period ending 31.3.2006 and within the specified due dates and was thus entitled to deduction in terms of Section 40(a)(ia) of the Act. The finding recorded by the Tribunal reads as under:- “7. Section 40 of the Act starts with a non obstante clause. Under the provisions of section 40(a)(ia) of the Act, it is provided that where any interest, commission or brokerage, rent, royalty, fees for professional or technical services, amounts payable to a contractor or sub contractor for carrying out any work (including supply of labour for carrying out any work), is payable to a resident and on which tax is deductible at source under chapter XVII B and where such tax has either not been of 2011

-4- *** deducted or after deduction not been paid before the due dates as specified in the said sub section, then no deduction shall be allowed in computing the income chargeable under the heads profits & gains of business or profession. The provisio to section 40(a)(ia) of the Act, however, provides that where tax has been deducted in any subsequent years and paid, then such expenditure is to be allowed as a deduction in the year in which such tax has been paid. The incidence of tax payments are recognized in the proviso itself.

-5- *** Act, which mandated that where payment of specified items of expenditure are exigible to deduction to tax at source and where such tax has not been deducted, then the assessee is not entitled to the claim of deduction in respect of such expenditure on which TDS has not been deducted and paid within the previous year. The proviso to the said sub section further mandates that in case of payments of TDS in subsequent year's then the claim of the assessee is to be allowed in the year when the tax deducted has been paid in the account of the treasury. In the facts of the present case before us, the assessee had deducted and paid the tax at source on the interest relatable to the period 1.4.2004 to 31.3.2005 in the year ending 31.3.2006 and within specified due dates, the assessee is entitled to the claim of expenditure in the year under consideration in view of the provisions of section 40 (a)(ia) of the Act, which expenditure is otherwise relatable to the preceding year.”

of 2011

-6- ***

( Ajay Kumar Mittal) Judge March 28, 2011

(Adarsh Kumar Goel) Pka

Judge