Loading judgment…
Facts
The assessee appealed against the CIT(A)'s order confirming the disallowance of INR 56,916,238 under Section 40(a)(ia) of the Income Tax Act, 1961, and the disallowance of INR 8,930 for employee's contribution to Labour Welfare Fund. The assessee argued that the disallowance under Section 40(a)(ia) should be 30% for resident payments, not 100%, and the LWF disallowance resulted in double disallowance.
Held
The Tribunal directed the Assessing Officer to recompute the disallowance under Section 40(a)(ia) at 30% for resident payments. For the LWF amount, the Tribunal directed the AO to ensure no double addition is made in the assessee's hands.
Key Issues
Whether the disallowance under Section 40(a)(ia) for resident payments should be 30% or 100%, and whether the disallowance of employee's contribution to LWF amounts to a double disallowance.
Sections Cited
40(a)(ia), 36(1)(va), 143(1), 250, 253(1)(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
This assessee’s appeal for assessment year 2018-19, arises against the Commissioner of Income Tax (Appeals)/Addl./JCIT(A)- 12, Mumbai’s DIN and order no. ITBA/APL/S/250/2023- 24/1061122525(1), dated 19.02.2024, involving proceedings under section 143(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
This assessee’s appeal raises the following substantive grounds: “Appeal under section 253(1)(a) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"), against the order dated 19 February 2024 passed by National Faceless Appeal Centre, Commissioner of Income Tax (Appeals), Addl/JCIT(A)-12 Mumbai under Section 250 of the Act in relation to intimation order passed under section 143(1) of the Act. GROUNDS OF OBJECTION The following grounds are independent of and without any prejudice to one another Disallowance of INR 56,916,238 under section 40(a)(ia) of the Act
1. On the facts and circumstances of the case and in law the Hon'ble Commissioner of Income Tax (Appeals) ['Hon'ble CIT(A)] has erred in confirming the disallowance of INR 56,916,238 under Section 40(a)(i) of the Act without appreciating the facts that INR 56,916,238 relates to payments made to residents, hence only INR 17,074,871 (i.e., 30% of INR 56,916,238) is required to be disallowed instead of INR 56,916,238.
2. That on the facts and circumstances of the case and in law, The Ld. AO/Hon'ble CIT(A) failed to appreciate that the Appellant has correctly disallowed expenses of INR 17,074,871 (being 30% of INR 56,916,238) in the income tax return as per provisions of section 40(a)(ia) of the Act.
3. That on the facts and circumstances of the case and in law, the Appellant has inadvertently disclosed the amount of INR 56,916,238 in clause 21b(i) [relating to non-residents] instead of clause 21b(ii) [relating to residents] of the Tax Audit Report ('TAR') filed online on e- filing portal resulting into variance between the return of income (ITR- 6) vis-a-vis 143(1) intimation order. However, bona fide claim should not be denied merely because the Appellant has made incorrect reporting in online Tax Audit Report.
4. On the facts and circumstances of the case and in law, The Hon'ble CIT(A) failed to appreciate that it has correctly disclosed the amount of INR 56,916,238 in clause 21b(ii) [relating to residents] of the physically signed tax audit report uploaded as an attachment along with online Tax Audit Report on income tax e filing portal. 2 | P a g e Disallowance of labour Welfare Fund of INR 8,930 under section 36(1) (va) of the Act Poupe Ald 5. On the facts and circumstances of the case and in law the Hon'ble CIT(A) has erred in confirming the disallowance of employee's contribution to Labour Welfare Fund ('LWF') of INR 8,930.
On the facts and circumstances of the case and in law the Hon'ble CIT(A) has failed to appreciate that the Appellant has already disallowed the said amount of INR 8,930 in the income tax return and therefore disallowance made in 143(1) intimation is leading to double disallowance of the same amount. The Appellant craves leave to alter, amend, or withdraw all or any of the Grounds of Appeal
herein or add any further grounds as may be considered necessary and to submit such statements, documents and papers as may be considered necessary either before or during the appeal hearing The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.”
3. Coming to the assessee first and foremost substantive ground challenging section 40(a)(ia) disallowance, learned counsel’s solitary substantive argument is that its corresponding computation had already disallowed the same @30%; involving payments to the resident recipients going by the statutory substitution in the Act vide Finance Act, 2014 w.e.f. 01.04.2015. And that, the same has been again disallowed @ 100%. The Revenue is equally fair in not disputing the assessee’s foregoing fair submissions that the impugned disallowance involving resident payees, has to be computed @ 30% only. We thus direct the learned 3 | P a g e Assessing Officer to compute the impugned disallowance afresh in very terms, as per law.
4. Learned counsel next submits that the assessee had suo motu disallowed the latter sum of Rs.8,930/- under section 36(1)(va) of the Act, and, it amounts to a double disallowance/addition therefore.
5. Faced with this situation, we direct the learned Assessing Officer to ensure in his consequential computation that there is no double addition made in the assessee’s hands, in very terms. Ordered accordingly.