M/S. SHREE LAMINATORS LTD.,,KOLKATA vs. DCIT, CIRCLE 4(4), KOLKATA,, KOLKATA

ITA 1534/KOL/2026Status: DisposedITAT Kolkata15 October 2026AY 2011-20126 pages
AI SummaryAllowed

What were the facts?

The assessee, M/s. Shree Laminators Ltd., filed its return for Assessment Year 2011-12 declaring a total income of Rs. 12,04,820/-. During scrutiny, the Assessing Officer (AO) noted payments of Rs. 78,42,330/- for management consultancy fees and Rs. 32,53,850/- for brokerage/commission. The assessee had deducted TDS at a lower rate, believing it was entitled to such. The AO treated these payments under Sections 194J and 194H respectively, requiring a higher TDS rate. Consequently, the AO disallowed Rs. 40,88,250/- and Rs. 16,96,250/- under Section 40(a)(ia) for TDS shortfall. An additional Rs. 35,045/- was added for interest payments deemed penal. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal, upholding the disallowances and addition, citing the assessee's failure to furnish an accountant's certificate under Section 201(1).

What did the Tribunal hold?

The Tribunal held that Section 40(a)(ia) cannot be invoked for disallowance when TDS has been deducted, even if at a lower rate or under a different provision due to a difference in interpretation. This is based on the binding principle laid down by the Jurisdictional High Court in CIT v. S. K. Tekriwal. The court reasoned that a shortfall or difference in rate does not equate to complete failure or non-deduction of TDS. Therefore, the disallowances of Rs. 40,88,250/- and Rs. 16,96,250/- made by the AO and confirmed by the CIT(A) were deleted. Regarding the interest expense, the Tribunal held that interest on delayed trade payments is compensatory and intrinsically linked to business operations, thus directing the deletion of the Rs. 35,045/- addition. The appeal was allowed.

What were the issues?

1. Whether the disallowance of Rs. 40,88,250/- under Section 40(a)(ia) for alleged lower deduction of TDS on management consultancy fees is valid? 2. Whether the disallowance of Rs. 16,96,250/- under Section 40(a)(ia) for alleged lower deduction of TDS on commission and brokerage is valid? 3. Whether the addition of Rs. 35,045/- towards interest paid on delayed payments for purchase of materials is justified? Assessee's Contentions: The assessee argued that Section 40(a)(ia) applies only to non-deduction or non-payment of TDS, not to shortfalls due to bona fide belief or difference of opinion regarding TDS provisions/rates. They relied on the Kolkata High Court decision in CIT v. S. K. Tekriwal, which held that for shortfalls, an assessee may be deemed in default under Section 201 but disallowance under Section 40(a)(ia) is not permissible. Revenue's Contentions: The judgment does not record specific contentions from the revenue on these grounds, other than what was presented before the lower authorities.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194J,Section 194H,Section 201(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, KOLKATA

Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey

Per Pradip Kumar Choubey, Judicial Member:

This appeal filed by the assessee is directed against the order dated 31.03.2014 of the Office of the Commissioner of Income Tax passed under Section 143(3) of the Assessment Year 2011-12 of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”).

2.

Brief Facts of the Case the assessee filed its return of income for A.Y. 2011-12 on 30.09.2011, declaring a total inc

The order continues below.

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