SAHARAYN UNIVERSAL MULTIPURPOSE SOCIETY LIMITED,BHOPAL vs. THE COMMISSIONER OF INCOME TAX (APPEALS), BHOPAL

ITA 425/IND/2024Status: DisposedITAT Indore07 May 2025AY 2015-1628 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the assessee's claim for deduction of "deferred co-operative educator expenses" of Rs. 6,44,29,77,492/- needed to be examined and allowed by the AO if found to be verifiable and relatable to the year under assessment, despite being treated as deferred revenue in the books. Consequently, the issue of disallowance under section 40(a)(ia) out of these expenses was remanded to the AO. The AO was directed to re-visit the disallowance only if the deduction for these expenses was ultimately allowed. Furthermore, the AO was instructed to restrict the disallowance to an appropriate amount after granting the benefit of the threshold limit prescribed in section 194H. The Tribunal did not decide on the validity of the disallowance under section 40(a)(ia) in isolation but linked it to the allowability of the primary deduction. Grounds 1 and 10 were not pressed or considered general. The Tribunal did not explicitly decide on the argument that the AO travelled beyond the reasons for limited scrutiny.

What were the facts?

The assessee, Saharayn Universal Multipurpose Society Limited, is challenging the order dated 28.03.2024 passed by the CIT(A), which upheld the assessment order dated 30.12.2017 passed by the ITO, Bhopal, under section 143(3) of the Income-tax Act, 1961, for Assessment Year 2015-16. The assessee initially filed a return declaring an income of Rs. 8,23,095. During scrutiny, the Assessing Officer (AO) made additions, including disallowances under section 40(a)(ia) for non-deduction of TDS on various expenses. The total assessed income was Rs. 1,95,69,61,360. The assessee appealed to the CIT(A) and partly succeeded. The present appeal before the ITAT concerns the remaining grievances.

What were the issues?

1. Whether the CIT(A) erred in upholding the AO's action of not allowing the assessee's claim of deduction of Rs. 6,44,29,77,492/- in respect of "deferred co-operative educator expenses" as per the mercantile system of accounting, despite it being related to the year under assessment and verifiable from records. 2. Whether the CIT(A) erred in confirming the disallowance under section 40(a)(ia) of Rs. 193,28,93,248/- in respect of Co-operative Educator Expenses. 3. Whether the CIT(A) erred in confirming the addition of Rs. 12,75,60,094/- under section 40(a)(ia) for Co-operative Educator Expenses paid to individuals where the payment did not exceed the threshold limit under section 194H, thus not requiring TDS. Assessee's Contentions: - The case was selected for limited scrutiny, but the AO travelled beyond the reasons for reopening, making the order void. - Expenses claimed in a revised computation filed during assessment should be allowed as per the mercantile system. - The AO was not justified in ignoring a legal claim made in the revised computation. - The AO acted selectively by taxing voluntary offers while ignoring expense claims from the same revised computation. - The disallowance under section 40(a)(ia) should not arise if the deduction for the expenses is not allowed. - If disallowance is to be made, it should be restricted to Rs. 180,53,33,154/- after considering expenses below the threshold limit under section 194H. Revenue's Contentions (as per CIT(A)'s order and AO's reasoning): - Section 40(a)(ia) is a preliminary disqualification clause and not contingent upon an allowance being made. - A revised computation cannot substitute a revised return under section 139(5), and the AO was not obligated to act upon it. - The assessee failed to provide sufficient evidence (ledgers, party lists, etc.) to support claims of payments falling below the threshold limit under section 194H. - Treating Rs. 644.29 crores as deferred revenue expenditure in the books conflicts with the claim for its deduction in the same year; the assessee cannot approbate and reprobate. - Reliance on the mercantile system of accounting is not assisted by selective application without consistency in book entries.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 40(a)(ia),Section 194H,Section 139(5)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI PAWAN SINGH & SHRI B.M. BIYANI

For Appellant: Shri Pravin Kumar Bansal, AR
For Respondent: Shri Ram Kumar Yadav, CIT-DR
Hearing: 13.02.2025Pronounced: 07.05.2025

Per B.M. Biyani, A.M.:

Feeling aggrieved by order of first-appeal dated 28.03.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 30.12.2017 passed by learned ITO-1(2), Bhopal [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the assessee has filed this appeal on following grounds:

Saharayn Universal Multipurpose Society Limited, ITA No. 425/Ind/2024 - AY 2015-16

“1. That the Ld. CIT(A) has erred in law and on facts and circumstances of the case in not considering the fact that the case was selected for limited scrutiny und

The order continues below.

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