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Facts
The assessee, P.N. Memorial Neuro Centre and Research Institute Ltd., filed its return of income for AY 2016-17. The Ld. AO disallowed 30% of certain expenditures, including miscellaneous expenses (₹8.64 Cr), incentives (₹5.42 Cr), and sales promotion expenses (₹3.41 Cr), totaling ₹5,24,39,964/-. The disallowance was made under Section 40(a)(ia) for alleged non-deduction of TDS under Sections 194H and 194J, which was subsequently confirmed by the Ld. CIT(A).
Held
The Tribunal found that the assessee had submitted detailed explanations, audited accounts, and tax audit reports, demonstrating that TDS was deducted wherever applicable. The tax auditor's report showed tax deducted at source without adverse comments. The Tribunal concluded that the disallowance could not be based on presumptions and that the assessee had furnished all required details. Thus, the orders of the lower authorities were set aside, and the Ld. AO was directed to delete the addition.
Key Issues
Whether disallowance under Section 40(a)(ia) for non-deduction of TDS on miscellaneous expenses, incentives, and sales promotion expenses was justified, given that the assessee provided detailed evidence of TDS compliance.
Sections Cited
40(a)(ia), 194H, 194J, 37(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 24.01.2025 for the AY 2016-17.
At the time of hearing, the ld. Counsel for the assessee pressed the ground nos.3, 5 and 6, which are extracted below:-
“3. That on the facts and in the circumstances of the case the action of the ld. CIT (A) to confirm the addition made by the AO of ₹2,59,40,940/- on account of non- deduction of TDS u/s 40(a)(ia) of the act, being 30% of ₹8,64,69,802/- is contrary to the material evidences on record and the addition is arbitrary excessive and illegal.
That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to confirm addition of Rs.1,62,66,583/- being 30% of the addition of Rs.5,42,21,943/- on account of incentives paid as not allowable u/s 40(a)(ia) for non-deduction of tax u/s 194H is contrary to the material evidences on record and the addition is arbitrary excessive and illegal..
2.2. Similarly, the ld. AO observed that the assessee has shown the incentive under the head miscellaneous expenses for which no details were filed. The ld. AO further noted that no TDS has been deducted therefrom and accordingly, the ld. AO disallowed 30% of the amount of ₹5,42,21,943/-, which comes to ₹1,62,66,583/-. Similarly, in respect of third item the ld. AO noted that the assessee has incurred sales promotion of ₹ 3,41,08,137/- in respect of which the complete details of addresses, names, employees names, email, TDS deducted were not furnished and accordingly, the ld. AO disallowed 30% of the same, which comes to ₹1,02,32,441/-.
2.3. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO by noting that the assessee has not furnished the 2.4. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has made a detailed submission before the ld. AO as well as the ld. CIT (A) furnishing the copy of audited accounts along with tax audit report. We note that the assessee has also furnished the details of expenses incurred during the year which were liable for TDS deduction at source and on which the TDS was also deducted wherever applicable. We note that in para no.34.a of TAR , the tax auditor reported the tax deducted and collected at source and details of deposit thereof by the assessee during the year. We note that there is no adverse comment by the tax auditor in the tax auditor that the assessee has not deducted the tax at source on the expenditure incurred during the
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 02.12.2025.