ASSOCIATED LAW ADVISERS,NEW DELHI vs. ACIT, NEW DELHI

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A)-20, New Delhi dated 13.01.2017 for the Assessment Year 2013-14. 2. The assessee has raised the following grounds of appeal:- “1. That the learned Commissioner of Income-tax (Appeals)-20, New Delhi has erred in sustaining disallowance of Rs. 2,49,381/- representing the amount of tax deducted at source in March, 2013 from expenditure towards rent, professional fess etc. despite the fact that the tax was paid to the Central Government before the due date for filing the return of income for the assessment year 2013-14 as required under section 43(l)(ia) of the Income-tax Act, 1961. 1.1 That the learned Commissioner of Income-tax (Appeals)-20, New Delhi has erred in confirming the aforesaid disallowance on the ground that section 145(1) of the Income-tax Act, 1961 prevails over section 40(a)(ia) of the said Act. 1.2 That the learned Commissioner of Income-tax (Appeals)-20, New Delhi has erred in rejecting the alternative claim of the appellant that the said sum of Rs. 2,49,381/- is deductible under section 43B of the Income-tax Act, 1961.

2. That the learned Commissioner of Income-tax (Appeals)-20, New Delhi has erred in not directing the learned Assessing Officer to give interest under section 244A of the Income-tax Act, 1961 up to the date on which refund is granted. Page | 1

3. It is thus prayed that the addition of the aforesaid sum of Rs. 2,49,381/- may kindly be deleted and directions may kindly be given for payment of interest under section 244A till the date on which refund is granted.” 3. Only issue involved in this appeal is with respect to the deduction of INR 2 49381 representing tax deducted at source from rent, professional fees et cetera and paid to the central government before the due date of the filing of the return of income disallowed by the learned assessing officer.

4. The brief facts of the case shows that assessee is a partnership firm deriving income from the profession of law under the head business or profession and income from other sources. It is following cash method of accounting. It filed its return of income on 28/9/2013 at Rs. 2935080/–. The assessment u/s 143 (3) of the act was passed at Rs. 6666930/– . Assessee on 3/12/2015 filed an application u/s 154 of the act which was rectified. Thus this order is passed. The assessing officer noted that in the balance- sheet the assessee has shown statutory liability of INR 2 49381/– on account of tax deduction at source payable. It was noted that this is payable as a part of the expenses which the assessee has claimed as allowable expenditure in his profit and loss account. As the assessee is following cash system of accounting, whereby only payments which have been made during the year can be claimed as deductible expenditure, therefore, the learned assessing officer was of the view that above tax deduction at source, which has not been paid by the assessee, out of the various expenditure cannot be allowed as a deduction of expenses. Thus he disallowed the above sum of INR 2 49381/–. He also rejected the contention of the assessee that in earlier years the assessing officer has allowed the deduction in respect of tax deducted at source even though it was not paid in the financial year but paid before the due date of filing of the return of income. It was further stated that outstanding tax deduction at source liability is not on account of the persons to whom the expenses have been paid but is on the account of the liability of the assessee himself. By collecting/deducting tax at source the assessee discharges, the recipient of the income from the payment of the above tax and above sum is collected by the assessee from them to be deposited on their behalf to the credit of the government. Consequently the learned AO made the above addition, which was challenged before the learned CIT – A. The learned CIT – A noted that assessee is following the cash system of accounting and therefore whatever is paid by the assessee can only be allowed as a deductible expenditure. As these expenses have not been paid to the extent of tax deduction at source it cannot be allowed as an expenses. The learned CIT – A further justify the above disallowance holding that as the appellant itself shows the income which has been received by the assessee only even though the income has accrued to the assessee. Therefore, the addition made by the learned AO was confirmed.

5. Therefore, assessee aggrieved with the order has preferred this appeal before us. The learned authorised representative reiterated the same submissions as made before the learned lower authorities. It was further stated that the above tax deducted is deposited in time by the assessee. He further submitted that tax deduction at source is the liability of the assessee and the recipient of the income has been discharged. He therefore submitted that the above disallowance made by the lower authorities deserves to be deleted.