M/S. HAL OFFSHORE LTD.,NEW DELHI vs. ACIT, NEW DELHI

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ITA 5069/DEL/2016Status: DisposedITAT Delhi03 September 2019AY 2011-124 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that disallowance under Section 40(a)(ia) is not permissible in cases of short deduction of TDS due to a difference of opinion on taxability. The proper course is to declare the assessee as an assessee in default under Section 201.

What were the facts?

The assessee made short deduction of TDS on foreign payments, deducting at 4.22% instead of the AO's opined 20%. The AO disallowed a proportionate amount of Rs.39,38,400/- under Section 40(a)(ia), which was confirmed by the CIT(A).

What were the issues?

Whether disallowance under Section 40(a)(ia) is applicable for short deduction of TDS on foreign payments, or if the assessee should be treated as an assessee in default under Section 201.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 201

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI

Before: SHRI PRASHANT MAHARISHI & SHRI K. NARASIMHA CHARY

For Appellant: Shri Somi Aggarwal, Advocate
For Respondent: Shri Amit Katoch, Sr. DR
Hearing: 13.08.2019Pronounced: 03.09.2019

ORDER PER NARASIMHA K. CHARY, JM Aggrieved by the order of the Commissioner of Income- tax(Appeals) -4, New Delhi{“CIT(A)”} for Assessment Year 2011-12, assessee preferred this appeal on the following grounds:

1.

“1. That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in not deleting the disallowance of Rs.39,38,400/- made by ld. AO u/s 40(a)(i) and further erred in directing the ld. AO to verify the claim and that too without observing the principles of natural justice.

2.

That in any case and in any view of the matter, action of ld. CIT(A) in not deleting the disallowance of Rs.39,38,400/- made by ld. AO u/s 40(a)(ia) is bad in law and against the facts and circumstances of the case.

3.

That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in confirming the action of ld. AO in making addition of Rs.11,63,500/- on account of interest income.

4. That the appellant craves the leave to add, amend or delete any of the grounds of appeal

at the time of hearing and all the above grounds are without prejudice to each other.”

2. At the outset, at the time of arguments, ld. AR submitted that Ground No.4 is general in nature, and that they are not pressing Ground No.3. Therefore, what remains for our adjudication are ground Nos. 1 & 2 in respect of Rs.39,38,400/- by making disallowance u/s 40(a)(ia) of the Income-tax Act, 1961 (‘the Act’). On this aspect assessment order speaks that during the course of assessment proceedings, ld. AO found that the assessee made short deduction of TDS of Rs.7,87,680/- on foreign payments, deducted TDS at 4.22% instead of 20% and, therefore, the total payment made by the assessee to the foreign party to the tune of Rs.49,92,585/- proportionately was disallowed which comes to Rs.39,38,400/- u/s 40(a)(ia) of the Act.

3. In appeal, ld. CIT(A) confirmed the same. Assessee is, therefore, before us challenging the same and placing reliance on the decision of the Hon’ble Calcutta High Court in the case of S.K. Tekriwal (2013) 260 CTR 73 (Cal) followed by the coordinate benches of this Tribunal in the case of ITO vs Quatro Mortgage Solution P. Ltd. for Asstt. Year 2010-11 in by order dated 25.1.2019 and for AY 2011-12 in ITA No. 5044/Del/2015 by order dated 18.8.2017.

4.

It is an admitted fact that it is not a case of non-deduction of TDS but it is a case of short deduction of TDS on foreign payments. Instead of 20% as opined by the ld. AO, assessee effected the TDS at 4.22% on the payment of Rs.49,92,585/-.

5.

In the case of S.K. Tekriwal (supra), Hon’ble High Court held that in the case of shortfall in deduction due to any difference of opinion as to the taxability of any item or nature of payments falling under various TDS provisions, the proper course for the revenue is to declare the assessee as an assessee in default u/s 201 of the Act but no disallowance can be made by invoking the provisions of Section 40(a)(ia) of the Act. In these circumstances, while respectfully following the said decision, we hold that it is not open for the revenue to disallow any amount u/s 40(a)(ia) of the Act and the addition is directed to be deleted.

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