THE ITO, WARD-2(1)(1), AHMEDABAD vs. M/S. EMINEMT INFRACON PVT. LTD, AHMEDABAD
What did the Tribunal hold?
The Tribunal upheld the deletion of the disallowance, agreeing with the CIT(A) that no disallowance under Section 40(a)(ia) is warranted when the payee has paid taxes on the income and provided proof. The Revenue's inability to controvert these facts or distinguish relied-upon judgments led to this decision.
What were the facts?
The Revenue appealed against the deletion of a disallowance made under Section 40(a)(ia) for non-deduction of TDS. The assessee had not deducted TDS on a processing fee, but the payee had included the income and paid taxes on it, providing a certificate to this effect.
What were the issues?
Whether disallowance under Section 40(a)(ia) is justified when the payee has paid taxes on the income, despite the payer's failure to deduct TDS.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(3)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT576 citing163 Taxmann 355 · 2007 · SC
- CIT v. Ansal Landmark Township (P.) Ltd.177 citing61 Taxmann.com 45 · 2015 · HC
- ACIT v. Esaote India (NS) Ltd.4 citing96 Taxmann.com 624 · 2018
Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Applicant) (Responent) : None Assessee by : Shri A.P. Singh, CIT-DR Revenue by सुनवाई क� तार�ख/Date of Hearing : 13/12/2022 घोषणा क� तार�ख /Date of Pronouncement: 23 /12/2022 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the Revenue against order passed by the ld.Commissioner of Income Tax (Appeals)-2, Ahmedabad [hereinafter referred to as “the ld.CIT(A)”] dated 28.6.2019passed under section 250(6)of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short]for the Asst.Year 2013- 14.
The appeal of the Revenue was earlier dismissed by the Tribunal vide order dated 23.2.2022 as withdrawn on account of low tax effect in view of CBDT Circular No.17 of 2019 dated 8.8.2019. But subsequently the Revenue filed Misc. Application pointing out that the case falls under the exceptions laid down in CBDT Circular No.3 of 2018 since the addition in dispute was made on the basis of audit objection which was accepted by the department. The order in the MA filed by the Revenue recalling the impugned order was passed in MA No.49 of 2022 dated 26.8.2022. In pursuance thereto, the present appeal was fixed for hearing before us.
None appeared on behalf of the assessee despite notice being served on the assessee. Therefore, we decided to proceed with the adjudication of the appeal ex parte qua the assessee-respondent as no application for adjournment was filed.
Sole ground raised by the Revenue is as under:
“1. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,97,194/- u/s.40(a)(ia) of the Act made by the AO.”
As is evident, the sole issue for adjudication relates to the disallowance made under section 40(a)(ia) of the Act of Rs.1,97,194/- on account of non-deduction of tax at source. The ld.CIT(A) dealt with the issue and deleted the impugned disallowance at para 3.3 of hisorder as under:
“3.3. I have carefully considered the facts of the case, assessment order and submission of the appellant. The Assessing Officer has made the addition of Rs.1,97,194/- on the ground that appellant has not deducted IDS on the processing fee of loan of Rs.1,21,00,000/- taken from India Infoline Investment Service Limited. The appellant before the Assessing Officer has submitted the copy of certificate as per Rule 31ACB to the effect that above income has been included by M/s. Infoline Investment Services Limited in its income tax return and tax has been paid on it. Appellant contended that as per decision of Honourable Delhi High Court in the case of CIT Vs. Ansal Landmark Township Limited [61 taxman.com 45] and proviso to section 201, no disallowance can be made u/s. 40(a)(ia). I agree with the submission made by the appellant, that appellant's case is covered by decision of Honourable Supreme Court in the case of Coca-Cola Beverages Pvt. Ltd..[163 Taxman 355] and decision of Honourable Delhi High Court in the case of CIT Vs. Ansal Landmark Township Limited [61 taxman.com 45],
3 The Honourable Ahmedabad Tribunal in the case of DCIT, Cir. 2(1 )(1) Vs. Esaote India (NS) Limited [2018] [96 Taxmann.com 624] has also held that if payee has included the interest income in its total income and paid taxes, no disallowance is to be made u/s. 40(a)(ia). Respectfully, following the judgments cited above, the disallowance made by Assessing Officer cannot be sustained and the same is accordingly deleted. The ground of appeal is accordingly allowed.”
6. On going through the above, it is evident that the ld.CIT(A) has noted that though the assessee had failed to deduct TDS on the impugned amount of Rs.1,97,194/-, the payee on other hand had paid taxes on the same and the assessee had filed the stipulated certificate as per Rule 31ACB of the Income Tax Rules certifying the fact of taxes have been paid by the payee (India Infoline Investment Services Ltd. in the present case) on the impugned payment. The ld.CIT(A) thereafter noted that Hon’ble Delhi High Court in the case of CIT Vs. Ansal Landmark Township Ltd., 61 taxmann.com 45 has held that in such circumstances, where taxes are shown to have been paid by the payee, no disallowance under section 40(a)(ia) of the Act was called for in the hands of the payer for default in taxes deduction at source. The ld.CIT(A) followed several other judgments laying down similar ratio,both of the Hon’ble High Courts and the ITAT, Ahmedabad Bench also as noted in para 3.3. above. The ld.DR was unable to convert this factual finding of the ld.CIT(A) that the payer in the impugned case had paid taxes on the impugned sum involved and the certificate, as per Rule 31ACB of IT Rules 1962,certifying the aforesaid fact, had been filed to the AO. He was also unable to controvert or distinguish the decision relied upon by the ld.CIT(A) in the case of Ansal Landmark Township Ltd. (supra).
7. In view of the above, we see no reason to interfere in the order of the ld.CIT(A) deleting disallowance of Rs.1,97,194/- by invoking
4 provisions of section 40(a)(ia) of the Act. The ground raised by the Revenue is dismissed.
In the result, appeal of the Revenue isdismissed.
Order pronounced in the Court on 23rd December, 2022 at Ahmedabad.
More judgments on Section 40(a)(ia)
- Rekha Agarwal, Jaipur vs ITO WD 4(1), JaipurITA 844/JPR/2025[2021-22]Status: Disposed21 Oct 2026AY 2021-22
- Cdg Petchem Limited, Hyderabad vs ITO, Ward - 1(1), HyderabadITA 1900/HYD/2025[2018-2019]Status: Disposed16 Oct 2026AY 2018-2019
- M/S. Shree Laminators Ltd., Kolkata vs DCIT, Circle 4(4), KolkataITA 1534/KOL/2026[2011-2012]Status: Disposed15 Oct 2026AY 2011-2012
- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1493/KOL/2026[2015-2016]Status: Disposed15 Oct 2026AY 2015-2016
- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1492/KOL/2026[2013-2014]Status: Disposed15 Oct 2026AY 2013-2014
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