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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI N. K. BILLAIYA & MS SUCHITRA KAMBLE
This appeal is filed by the assessee against the order dated 04/11/2016 passed by CIT(A)-6, Delhi for Assessment Year 2012-13.
The grounds of appeal are as under:-
1. That the CIT (Appeals) in view of the facts and circumstances of the case and in law, erred in upholding disallowance of Rs 19,20,000/- u/s 40(a)(ia) on account of license fees paid to SRK Travels & Tours Pvt. Ltd.
2. That the CIT (Appeals) has in view of the facts and circumstances of the case, has erred in law and on facts in upholding that there is a short deduction of tax by the assessee/appellant on the amount of Rs 19,20,000/- and erred in upholding the disallowance of the same. 3. That the CIT(A) has failed to appreciate that in fact no TDS was required to be deducted on the amount paid to SRK Tours & Travels Pvt. Ltd. And as such the provisions of section 40(a)(ia) are not applicable 4. That both the lower authorities has failed to appreciate that this is a case where the disallowance is for alleged short deduction of TDS and this is not a case of non-deduction of TDS as per the provisions of section 40(a)(ia) disallowance of expenditure cannot be made if there is a short deduction of TDS.
5. That the CIT (Appeals) failed to consider that “Tax deducted at source” is a vicarious - liability. Therefore, expenditure cannot be disallowed and appellant cannot be treated as “assessee in default” since the tax liability has been discharged by the payee.
6. That that the disallowance u/s 40(a)(ia) is illegal and bad in law and has been wrongly upheld by the C1T (A). In any case, in view of the proviso added by the Finance Act 2012, the assessee could not be treated as ‘assessee in default’ and the disallowance is not sustainable and is liable to be deleted 7. Without prejudice to above, the CIT (Appeals) in view of the facts failed to consider that the provisions of section 40(a)(ia) are applicable only to amounts remaining “payable” as on the last day of previous year.
8. That the disallowances made and the observations made are unjust, unlawful and based on mere surmises and conjectures. The additions/disallowances made cannot be justified by any material on record and in any case they are excessive.
9. That the explanation given and the evidence produced, material placed and available on record has not been properly considered and judicially interpreted and the additions made cannot be justified in view of the said material and explanation.
10. That the AO erred in law and on facts in charging interest u/s 234B, 234C, 234D, & 244A(3) of the Act. The AO has failed to appreciate that the assessee could have never foreseen these additions being made against the assessee.
The above objections are without prejudice to each other. The assessee craves leave to alter, amend or withdraw all or any objections herein or add any further grounds as may be considered necessary either before or during the hearing.”
The assessee is carrying on the business of Hotels at various properties owned by different owners. The assessee filed return of income for assessment year 2012-13 declaring a total income of Rs. 4,82,98,700/- against the total tax due of Rs. 1,57,76,017/- including advance tax, TDS and self assessment tax. The Assessing Officer observed that the assessee company paid license fees amounting to Rs. 3,56,56,068/- to various parties after deducting tax at source at the rate of 10%. However, in case of SRK Travel and Tour, the tax at source was deducted as 2% instead of 10% amounting to Rs. 24,00,000/-. The copies of agreements entered into by the assessee with various persons were also filed. The assessee deducted TDS u/s 194-I in respect of license fee paid to some parties whereas in case of SRK Travels and tour it claims that payments are not covered u/s 194-I. Thus the Assessing Officer made disallowance u/s 40(a)(ia) amounting to Rs. 19,20,000/-.
Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that the CIT(A) relied upon the decision of assessee for earlier year i.e. A.Y. 2008-09 where in the Tribunal upheld the disallowance u/s 40(a)(ia) but the Ld. AR further submitted that the assessee filed M.A. and the said issue was decided in favour of the assessee by the Tribunal vide order dated 27.11.2008 (ITA No. 2893/Del/2013).
We have heard both the parties and perused all the material available on record. The CIT(A) relied upon the non-modified decision of the Tribunal which was subsequently decided in favour of the assessee. The Tribunal held as under: “5.0 We have heard the rival submissions and perused the material available on record. The facts in this case are undisputed and we find that the assessee’s case is squarely covered by the judgment of the Hon’ble Calcutta High Court in the case of CIT vs. S.K. Tekriwal (supra) wherein the Hon’ble Calcutta High Court had held that in case of any shortfall due to any difference of opinion as to the taxability of any item or nature of payments falling under the various TDS provisions, the assessee can be declared to be the assessee in default u/s 201 of the Act but no disallowance can be made by invoking provisions of section 40a(ia). The Hon’ble High Court of Calcutta observed that the provisions of section 40a(ia) have two limbs; one is where, inter alia, the assessee has to deduct tax and second where after deducting tax, inter alia, the assessee has to pay the same into government account. The Hon’ble High Court of Calcutta went to observe that there was nothing in the said section to treat, inter alia, the assessee as defaulter where there is a shortfall in deduction and further, section 40a(ia) refers only to the duty to deduct tax and pay to government account. Undisputedly, in the present appeal also, there is no allegation that the tax deducted was not paid into the government account and the only fault of the assessee is the failure on its part to deduct tax at the prescribed rate. This, as per the judgment of the Hon’ble High Court of Calcutta, does not attract disallowance u/s 40a(ia) of the Act. We also note that a similar view has been taken by the ITAT Mumbai Bench in the case of DCIT vs. Chandabhoy reported in (2012) 17 taxmann. Com 158(Mum.) and Hon’ble High Court of Karnataka in CIT-LTU vs. Hewlett- Packard India Sales (P.) Ltd. reported in 382 ITR 496 (Kar). Accordingy, respectfully following the ratio of the judgments as aforesaid, we allow ground no. 4 of the assessee’s appeal.” The issues are identical in the present case. Therefore the matter is squarely covered and hence appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed. Order pronounced in the Open Court on 10th JULY, 2019.
Sd/- Sd/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 10/07/2019 *Binita* Copy forwarded to:
Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT