Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SMT BEENA A. PILLAI & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is the appeal filed by the ld AO as well as the cross objection filed by the assessee against the order of the ld Commissioner of Income Tax (Appeals)-7, New Delhi dated 02/12/2015 for Assessment Year 2010-11. 2. The grounds of appeal raised by the revenue is as under:-
The grounds of appeal raised by the assessee in cross objection is as under:-
4. The brief facts of the case are that the assessee is a company who filed its return of income on 05/10/2010 at nil income. The assessee is engaged in providing back office mortgage processing services to their client being lenders, financial institutions, and law firms. The loan processing is automated through computer software. During the year, the assessee has incurred expenditure under the head allocable Capex Cost for the use of assets such as furniture and fixture, leasehold improvements, air-conditioning unit, DG sets, gym equipments, CCTV etc. The assessee stated that above charge is recovered by its holding company on a fixed rate per annum, par seat basis. The assessee has deducted tax at source on the above payments @2% u/s 194 I of the act considering it as payment for rent of plant and machineries. The ld AO was of the view that the above amount is in the nature of rent of furniture and therefore under section 194I it attracts TDS @ 10% and not @2%. Therefore, the ld AO disallowed sum u/s 40 (a) (ia) of the act. Out of total expenditure incurred of Rs. 17191605/ - proportionate disallowances was worked out at Rs. 1, 37, 53,284/-. During the year the assessee also paid interest on service tax for Assessment Year 2007-08 and 2008-9 amounting to Rs 1105515/- which was disallowed by the ld AO considering it as prior period expenses. Further, addition of Rs. 333999/- was made as unexplained cash credit u/s 68 of the Act. Consequently, the assessment under section 143(3) of the Act was passed on 21/3/2013 making certain other additions of Rs. 38147971/-. The assessee challenged the same before the ld Commissioner of Income Tax (Appeals) who deleted the impugned addition therefore the revenue is in appeal before us.
5. Ground No. 1 of the appeal is with respect to the deletion of the addition of Rs. 13753281/- because of lower tax deduction at source. The contention of the assessee is that it has paid the rent for the work station having computer which are used by the employees as a tool in the Page | 2 assessee’s business and therefore they fulfill the function of plant in the business activity and hence as it is a rent for the plant and machinery the TDS is required to be deducted under section 194I of the Act @ 2%. The AO was of the view that the above rent is for the furniture and hence under section 194I tax was required to be deducted @ 10%. The ld Commissioner of Income Tax (Appeals) deleted the disallowances relying on the decision of the Hon’ble Kolkata High Court in the case of the CIT Vs SK Tekriwal wherein it has been held that with regard to the shortfall it cannot assume that there is a default of failure to deduct tax at sources.
The ld DR relied upon the order of the ld AO, whereas the ld AR vehemently submitted that the issue is also raised in the cross objection of the assessee that tax is not required to be deducted @ 10% but @ 2%. She insisted upon the issue that this bench should first decide whether on the payment made by the assessee tax is required to be deducted @ 10% as contested by the assessee or @ 2% as contested by the ld AO.
We have carefully considered the rival contentions and find that the issue is squarely covered in favour of the assessee, so far as the disallowances under section 40(a) (ia) of the Act is concerned by the decision of the Hon’ble Kolkata High Court in case of CIT vs SK Tekriwal 361 ITR 432 as well as by the decision of coordinate bench in case of the assessee itself for the Assessment Year 2011-12, wherein the identical issue is decided and disallowances is deleted. In view of the above ground No. 1 of the appeal of the revenue is dismissed.
As the cross objection of the assessee is on the issue that tax should have been required to be deducted by the assessee @ 10% as per the contention of the ld AO and @ 2% as claimed by the assessee. We are not adjudicating appeal against the order of the ld AO under section 201 of the Act where the assessee is asked to pay shortfall of tax deduction at source or failure to deduct the tax at source. The issue before us is limited to the disallowances under section 40(a) (ia) of the Act. As stated by the ld AR that no action has been taken by the ld AO under section 201(1) and (1A) of the Act in the impugned Assessment Year, Therefore, Page | 3