COMMISSIONER OF INCOME TAX vs. M/S KURUKSHETRA DARPAN LTD

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ITA/292/2012HC Punjab & HaryanaPHHC01099374201205 May 2015Bench: MR. JUSTICE M.M. AGGARWAL,MR. JUSTICE A.B. CHAUDHARI2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court, by referencing its separate order and judgment dated 29.04.2015 in the case of P.M.S. Diesels Vs Commissioner of Income Tax-2, Jalandhar, stated that the issues concerning the applicability of Section 40(a)(ia) of the Income Tax Act, 1961, had been decided in favour of the revenue. Consequently, the questions of law raised in this appeal were also to be decided in favour of the revenue. However, the High Court found it necessary to remand the matter to the Tribunal for considering the specific facts of the case. This was due to contentions raised by the assessee, such as payments pertaining to a period before Section 40(a)(ia) came into force, and the potential issue of whether payees had made TDS payments to the government. The Tribunal was directed to decide the case on merits in light of the law laid down in the P.M.S. Diesels case. The High Court clarified that all contentions on merits were kept open and that the Tribunal could further remand the matter to the CIT (Appeals) or the Assessing Officer if deemed necessary. No specific issue was left undecided, but the final decision on merits was deferred pending the Tribunal's reconsideration.

What were the facts?

The appeal was filed by the Commissioner of Income Tax, Karnal (appellant/revenue) against M/s Kurukshetra Darpan (P) Ltd. (respondent/assessee). The assessment year(s) are not explicitly stated. The challenge is to an order passed by the Income Tax Appellate Tribunal (ITAT). The core issue revolves around the disallowance of expenditure under Section 40(a)(ia) of the Income Tax Act, 1961, for failure to deduct tax at source. The procedural history indicates that the High Court admitted the appeal on substantial questions of law. The High Court, in a separate order dated 29.04.2015 in a group of appeals, had decided the applicability of Section 40(a)(ia) in favour of the revenue. The amount in dispute is not specified.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. Whether, under Section 40(a)(ia) of the Income Tax Act, 1961, the disallowance of expenditure, for which tax deduction at source was required but not made, is confined only to amounts payable at the end of the previous year, or if it includes all amounts that became payable during the entire previous year? 2. Whether, in the given facts and circumstances, the ITAT was correct in law in allowing the deduction of expenditure under Section 40(a)(ia) despite the assessee not deducting tax at source, as held by the jurisdictional High Court? Assessee's contentions: The assessee contended that the payments in question pertained to a period prior to the introduction of Section 40(a)(ia) of the Act. It was also raised whether the payees had paid the TDS to the government. Revenue's contentions: The revenue's contention, as implied by the High Court's reference to its earlier judgment, is that Section 40(a)(ia) applies broadly to disallow expenditure where tax has not been deducted at source, irrespective of whether the amount was payable at the year-end or throughout the year. The revenue also argued that the ITAT was wrong in allowing the deduction.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA-292-2012 (O&M) Date of decision:- 05.05.2015

The Commissioner of Income Tax, Karnal ...Appellant Versus

M/s Kurukshetra Darpan (P) Ltd. ...Respondent

CORAM: HON'BLE MR. JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE

HON’BLE MR. JUSTICE G.S. SANDHAWALIA

Present: Mr. Yogesh Putney, Advocate,

for the appellant.

Mr. Ravi Shankar, Advocate,

for the respondent. * * * * S.J. VAZIFDAR, A.C.J. (ORAL)

This appeal was admitted on 28.01.2014 on the following substantial questions of law:- “(i) Whether under Section 40(a) (ia) of the Income Tax Act, 1961, disallowance of the expenditure payment of which, though required deduction of tax at source, has not been made, would be confined only to those cases where the amount remains payable till the end of the previous years or would include all amounts which became payable during the entire previous year?

(ii) Whether in the facts and circumstances of the case, the learned ITAT is right in law in allowing deduction of expenditure under Section 40(a) (ia) of the Income Tax Act, 1961 in absence of deduction of tax at source by the assessee as held by the Hon’ble jurisdictional High Court?”

2.

We have by a separate order and judgement dated 29.04.2015 in a group of appeals the first of which is ITA-716-2009 in the case of P.M.S Diesels Vs Commissioner of Income Tax-2, Jalandhar decided the applicability of Section 40(a) (ia) of the Income Tax Act, 1961 AMODH SHARMA 2015.05.08 17:58 I attest to the accuracy and authenticity of this document chandigarh

ITA-292-2012 (O&M)

(in short the Act). By that judgement, we have decided the issues in favour of the revenue. Therefore, the questions of law raised in this appeal must also be decided in favour of the revenue. 3. Having said that, however, it would be necessary to remand the matter to the Tribunal for considering the facts of the case. For instance, one of the contentions raised on behalf of the respondent/assessee is that the payments in respect whereof tax was not deducted at source pertained to a period prior to coming into force of Section 40(a) (ia) of the Act. Further issue may also arise whether the payees had made payments of the TDS to the credit of the government or not. The Tribunal would, therefore, decide the case on merits in view of the law laid down by us in P.M.S. Diesels Vs Commissioner of Income Tax-2, Jalandhar’s case (supra). The appeal is accordingly disposed of with a clarification that all the contentions on merits are kept open. 4. Needless to add that it would be open to the Tribunal to remand the matter either to the CIT (Appeals) or to the Assessing Officer if it thinks it necessary.

(S.J. VAZIFDAR) ACTING CHIEF JUSTICE

(G.S. SANDHAWALIA)

JUDGE 05.05.2015 Amodh

AMODH SHARMA 2015.05.08 17:58 I attest to the accuracy and authenticity of this document chandigarh

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