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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEYAND SHRI N.K. PRADHAN
The aforesaid appeal has been filed by the assessee challenging the order dated 17thNovember 2016, passed by the learned Commissioner of Income Tax (Appeals)-10, Mumbai, pertaining to the assessment year 2012-13.
It needs to be mentioned that the present appeal was earlier heard and disposed off vide order dated 19th November 2018.
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Subsequently, the assessee filed a misc. application seeking recall/rectification of the aforesaid order on the ground that the submissions made and the decisions relied upon were not considered by the Tribunal while deciding ground no.2, raised in the memorandum of appeal. Finding the aforesaid pleading of the assessee to be correct, the Tribunal, vide order dated 5th February 2020, passed in M.A. no. 94/Mum./2019, recalled the appeal order to the limited extent of deciding the ground no.2, only. In the aforesaid scenario, the appeal has again come up for hearing before us only for the limited purpose of deciding ground no.2, raised by the assessee.
In ground no.2, the assessee has challenged the disallowance of expenditure of `1,21,834, on account of TDS on export commission.
Brief facts are, the assessee, a resident company, is engaged in the business of manufacturing piston ring, semi finished castings, etc. In course of assessment proceedings, the Assessing Officer noticed that the assessee has debited an amount of ` 1,21,834, to the Profit & Loss Account towards TDS on export commission. Being of the view that TDS being in the nature of income tax is not allowable as expenditure as per section 40(a)(ii) of the Income Tax Act, 1961 (for short “the Act”), disallowed the claim made by the assessee. Being aggrieved with such disallowance, the assessee preferred appeal
3 Anand I–Power Ltd. before learned Commissioner (Appeals), however, learned Commissioner (Appeals) also sustained the disallowance made by the Assessing Officer.
Learned Authorised Representative submitted, the assessee has paid the TDS amount on export commission as per the terms of the agreement. Thus, he submitted, the assessee having incurred such expenditure as per contractual obligation, it is allowable under section 37 of the Act. In support of such contention, learned Authorised Representative relied upon a decision of the Co-ordinate Bench in ACIT v/s BOB Cards Ltd., [2013] 29 taxmann.com 234.
The learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).
We have carefully considered the rival contentions, perused the orders of the authorities below and the material placed on record. As could be seen from the observations of the Assessing Officer in Para- 6.1 and 6.2 of the assessment order, in spite of a query made by the Assessing Officer, the assessee did not furnished any reply with regard to allowability of the expenditure claimed. Before learned Commissioner (Appeals) it was the case of the assessee that it has paid export commission as a gross amount which included applicable
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TDS and by mistake the assessee has separated the export commission and the TDS payable. The same submission has been reiterated before us. On a perusal of the decision of the Co-ordinate Bench in BOB Cards Ltd. (supra), it is evident that the assessee’s claim of expenditure on account of TDS was allowed because as per the terms of agreement with the payees, the assessee was required to bear the tax liabilities of the payees. Therefore, the Bench relying upon the decision of the Hon'ble Madras High Court in CIT v/s Standard Polygraph Machine Pvt. Ltd., [2000] 243 ITR 788 (Mad.) has allowed the expenditure since it was incurred to discharge a contractual liability. In the facts of the present case, no material has been brought on record to show that the assessee has to bear the TDS liability on account of the payees as per any contractual agreement. At least, no material evidence to indicate existence of such contractual terms and obligations has not been furnished either before the Departmental Authorities or even before us. Therefore, in the absence of any evidence, no factual finding can be recorded to the effect that the assessee has incurred such expenditure in terms of any contractual obligation. If the assessee through proper evidence can prove that the TDS liability was incurred by it in terms of any contractual obligation, the ratio laid down in case of BOB Cards Ltd. (supra) would be squarely applicable and the expenditure has to be 5 Anand I–Power Ltd. allowed. However, the existence of a contractual obligation requires factual verification by the Assessing Officer. Therefore, we restore the issue to the Assessing Officer for factual verification and if it is found that the expenditure was incurred on account of contractual obligation, it has to be allowed. Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee. Ground is allowed for statistical purposes.
In the result, appeal is allowed for statistical purposes. Order pronounced through notice board under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963, on 17.09.2020