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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI O.P. KANT
The aforesaid appeal has been filed by the revenue against impugned order dated 12.4.2016, passed by the Ld. CIT (Appeals)-1, New Delhi for the quantum of assessment for assessment year 2012-13. In the grounds of appeal revenue has raised following grounds:- “On the facts and circumstances of the case the Ld. CIT(A) has erred in law in deleting the addition of Rs. 1,75,76,690/- made on account of disallowance of expenses u/s 40(a)(ia) of Income Tax Act, 1961.”
The facts in brief are that Assessee Company is engaged in the business of aviation related services like ground handling, transportation of cargo and other related services. The AO noted that assessee company has made payment of Rs. 1,75,76,690/- to Air India Ltd. on account of ground handling services which have been booked under the head, ‘flight handling charges’. The assessee’s contention has been that it has been made payment to the Air India for and on behalf of its clients, which was later on reimbursed by its client. Thus, the entire nature of services was on account of reimbursement and there is no expense incurred by the assessee on account of payment made to Air India. Therefore, there is no question of disallowance u/s. 40(a)(ia). However, the Ld. AO held that assessee was liable to deduct TDS in terms of section 194C and therefore he has made disallowance u/s 40(a)(ia).
3. Before the Ld. CIT (A), apart from making detail and submissions on merits, assessee, without prejudice submitted that the Air India has shown this amount as its income and has offered it for tax and therefore, in view of proviso to sub section (1) of section 201 and second proviso to section 40(a)(ia), no disallowance can be made. In support, assessee had also filed a certificate in Form No. 26A of the Chartered Accountant of Air India certifying that amount paid to Air India by the assessee has been credited by the Air India in its books of accounts, which has been taken into account in the return of income filed by Air India for the assessment year 2012-13. Ld. CIT (A) has deleted the said disallowance after observing as under:-
“I have considered the submission of the appellant and observation of the Assessing Officer. It is seen that appellant has not deducted TDS on payment of flight handling charges amounting to RS.1,75,76,6901- and freight charges of Rs. 1,62,000/- therefore, the same was disallowed u/s 40(a)(ia). During the course of appellate proceedings, the AR of the appellant has filed a certificate in Form No.26A of the Chartered Accountant of Air India certifying that amount paid to Air India by M/s Air Shagoon Network Pvt. Ltd. of Rs.1,29,07,028/- without deduction of the tax has been credited by the Air India in its books of accounts for the F.Y. 2011- 12 and has been taken into account in the return of income filed by M/s Air India for AY. 2012-13 and the receipt of the amount of Rs.1,29,07,028/- has been included in the gross total income of Rs. 1,00,63,13,65,415/-. The appellant further submitted that the Assessing Officer has disallowed payment of Rs. 1,75,76,690/-. However, the actual payment made to Air India is only Rs.1,29,07,028/-. While framing the assessment order, the Assessing Officer has taken into account the cancelled draft in the calculations. The appellant has filed reconciliation of statement and as per the Reconciliation statement, the total amount paid to Air India without deducting TDS comes to Rs.1,29,07,028/-. In support of its contention, the appellant has filed copies of the accounts where the DDs have been cancelled, the same are placed on record. In view of the above, the actual amount on which TDS was not deducted was Rs.1,29,07,028/-. Under the proviso to Section 201(1), it has been provided that if appellant furnishes a certificate from Chartered Accountant in a prescribed form certifying that the amount credited to the deductee has been taken into account in the gross receipts and the return of income filed for such year then no disallowance u/s 40(a)(ia) is called for. The proviso to Section 201(1) is reproduced hereunder: "Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident - (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. " Since, the appellant has furnished the certificate from M/s Air India in Annexure 'A' which is in conformity with the proviso to Section 201(1), hence, the disallowance of RS.1,75,76,690/- is deleted. 4
Before us, Ld. DR submitted that the certificate in Form No. 26A by the Chartered Accountant of Air India was not placed before the AO and hence it was additional evidence before the Ld. CIT (A,) therefore matter should be restored back to the file of the AO for verification.
Now it is a well settled proposition that second proviso to section 40(a)(ia) read with first proviso to section 201(1) which has been inserted in the statute w.e.f. 1.4.2013, is a beneficial provision and has to be given retrospective effect. Here in this case, the disallowance u/s 40(a)(ia) has been made by the AO on the ground that assessee while making the payment to Air India has not deducted TDS. Whereas, the assessee’s case has been that, it is purely reimbursement of expenses given on behalf of its clients which has been reimbursed. At the stage of Ld. CIT (A) assessee has filed certificate in Form No. 26A of the Chartered Accountant of Air India certifying that amount paid to Air India by the assessee has been credited by the Air India in its books of accounts for the financial year 2011-12 and has been taken into account the return of income filed by Air India for Asstt. Year 2012-13 and same has been included in the gross total income. Once there is a categorical finding of fact based on material placed before CIT (A), i.e., certificate in Form No. 26A of the Chartered Accountant which is the statutory requirement, then there is no point to sending it back to the AO once again.