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Facts
The assessee, M/s. Chelikammunications, engaged in Cable TV operations, was subjected to a disallowance of Rs.2,06,04,152/- under Section 40(a)(ia) by the AO for failure to deduct TDS on payments to pay channels. While the assessee claimed that the recipients had accounted for the income and paid taxes, it could not provide documentary evidence before the lower authorities.
Held
The Tribunal acknowledged the assessee's inability to provide proof but recognized the principle that no disallowance under Section 40(a)(ia) is warranted if the recipient has already paid taxes, citing the Supreme Court decision in Hindustan Coca Cola Beverages Pvt. Ltd. Therefore, the matter was remanded to the AO to grant the assessee a fresh opportunity to furnish the necessary evidence.
Key Issues
Whether the disallowance under Section 40(a)(ia) for non-deduction of TDS is sustainable when the assessee claims the recipient has paid taxes, and if the assessee should be given an opportunity to provide documentary evidence for this claim.
Sections Cited
143(2), 143(3), 194J, 40(a)(ia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
(निर्धारण वर्ा/Assessment Year:2014-15) M/s. Chelikammunications, Income Tax Officer, Vs. Tirupati. Ward-1(2), PAN:AAGFC2065B Tirupati. (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri K.A. Sai Prasad, C.A. रधजस् व द्वधरध/Revenue by: Shri D.J.P. Anand, SR-DR सुिवधई की तधरीख/Date of hearing: 02/04/2025 घोर्णध की तधरीख/Pronouncement: 15/04/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Chelikammunications (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 14.08.2023 for the A.Y. 2014-15.
At the outset, it is seen that, there is a delay of 1 day in filing of this appeal for which the assessee has filed a condonation petition along with affidavit explaining the reasons for such delay. After considering the contents of the condonation petition and after hearing the Ld. DR, the delay of 1 day in filing of this appeal is condoned and the appeal is admitted for adjudication.
The assessee has raised the following grounds :
“1. The Ld. CIT(A), in the facts of the circumstances of the case, is not justified in confirming the addition of Rs.2,06,64,152/- 2. The Ld. CIT(A), considering the nature of the appellant’s case, is not justified in not giving further opportunity to obtain the necessary documents from the various channels. 3. The appellant reserves his right to add, amend, delete or substitute any ground or grounds during the course of hearing.”
The brief facts of the case as culled out from the record are that, the assessee is engaged in the business of Cable TV operation, filed its Return of Income (“ROI”) for A.Y. 2014-15 on 30.11.2014 declaring total income of Rs.8,21,280/-. The case of the assessee was selected for scrutiny and notice u/s.143(2) of the Income Tax Act, 1961 (“the Act”) was issued on 03.09.2015.
During the assessment proceedings, the Learned Assessing Officer (“Ld. AO") found that the assessee had paid amount of Rs.2,12,89,981/- to pay channels towards their subscription and Tax Deducted at Source (“TDS”) of Rs.22,37,265/- as per the provisions of section 194J of the Act. However, the assessee deposited an amount of Rs.68,377/- only into the credit of the central government, out of TDS of Rs.22,37,265/-. Therefore, the Ld. AO treated the balance amount on which TDS has been made but not remitted to the credit of the central government to the extent of Rs.2,06,04,152/- as disallowable u/s.40(a)(ia) of the Act. Accordingly, the Ld. AO completed the assessment u/s.143(3) of the Act on 20.12.2016 by making addition of Rs.2,06,04,152/- in the hands of the assessee, apart from other additions which are not subject matter of appeal before us.
4. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). However, the Ld. CIT(A) at para no.6.2 of his order has given he finding that the assessee has made TDS only to the extent of Rs.68,377/- and also deposited the same to the credit of the central government. The balance TDS of Rs.21,68,888/- was neither deducted nor deposited into the account of central government. However, he further held that the assessee had failed to make TDS on balance payment of Rs.2,06,04,152/- and accordingly confirmed the disallowances made by the Ld. AO u/s.40(a)(ia) of the Act on account of no TDS.
Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Ld. AR submitted that, the finding of the Ld. AO alleging that TDS of Rs.22,37,265/- was made but only Rs.68,377/- was deposited is factually incorrect. He supported the findings of the Ld. CIT(A) that only TDS of Rs.68,377/- was made and the same was deposited into the account of central government. However, the Ld. AR contended that the addition sustained by Ld. CIT(A) on the ground of non-deduction of TDS on the balance payment of Rs.2,06,04,152/- ought not to be sustained in view of the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT (2007) 293 ITR 226. The Ld. AR submitted that, the recipient of payment had duly accounted for the receipt and had paid due taxes thereon. However, the assessee could not obtain the documentary evidence in support of the filing of ROI and payment of tax by the recipient. Therefore, the assessee could not furnish those documents before the revenue authorities. Accordingly, the Ld. AR prayed before the bench to set aside the issue to the file of Ld. AO for providing one more opportunity to the assessee to furnish the requisite documentary evidence to prove that the payees have included the amount in their income and have paid the due taxes.
Per contra, the Ld. DR relied upon the order of Ld. AO / Ld. CIT(A) and contended that in the absence of corresponding evidence that the payees have included the amount in their income and paid the applicable taxes, the disallowance u/s.40(a)(ia) of the Act was rightly made and sustained.
We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. The limited dispute before us is whether the disallowance u/s.40(a)(ia) of the Act can be sustained when the assessee failed to make TDS u/s.194J of the Act on amount of Rs.2,06,04,152/- made to pay channels. On the basis of the claim of the assessee, the recipient has already paid the taxes on such income. It is well settled in law, in view of the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT (supra) that no disallowance shall be made u/s.40(a)(ia) of the Act, if the recipient has included the amount in his total income and has already paid the taxes due thereon. In the present case before us, although the assessee claims that the recipient has complied with the condition, the assessee has not furnished any documentary evidence in support of their claim. In the absence of such documentary evidence, the claim of the assessee cannot be accepted. Therefore, in the interest of justice and fair play, we are of the considered opinion that the assessee deserves an opportunity to furnish such evidence before the Ld. AO. Accordingly, we set aside the impugned order of Ld. CIT(A) on this issue and restore the matter to the file of the Ld. AO with a direction to give the assessee a reasonable opportunity to furnish the necessary documentary evidence in support of their claim that the payee has included the income in their returns and paid the requisite taxes. The Ld. AO should verify the correctness of such information and to decide the issue in accordance with law and the principle laid down by the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT (supra).
In the result, the appeal of assessee is allowed for statistical purposes.