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Facts
The appeal challenged a disallowance made under Section 40(a)(ia) of the Income-tax Act, 1961, arising from an assessment under Section 143(1). The assessee contended that the payees had already offered the receipts to tax in their returns, thereby invoking the 2nd Proviso to Section 40(a)(ia) read with the 1st proviso to Section 201(1).
Held
The Tribunal stated that the matter requires factual verification. If it is found that the payees have reflected the amounts as their income, then the disallowance of expenditure under Section 40(a)(ia) in the assessee's hands cannot be made. The grounds raised by the assessee were allowed for statistical purposes.
Key Issues
Whether disallowance under Section 40(a)(ia) is valid when the payees have already offered the income to tax, considering the provisions of the 2nd Proviso to Section 40(a)(ia) read with 1st proviso to Section 201(1).
Sections Cited
Section 143(1), Section 40(a)(ia), Section 201(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2020-21, arises out of the order of the ld. Commissioner of Income Tax (Appeals),-24, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. CIT(A); Delhi-24/10395/2019-20 dated 14.06.2023 against the order of assessment passed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 24.12.2021 by the Assessing Officer, ADIT, CPC, Bengaluru (hereinafter referred to as ‘ld. AO’).
Though the assessee has raised several grounds before us, the 2. only effective issue to be decided is challenging the disallowance made u/s 40(a)(ia) of the Act.
We have heard the rival submissions and perused the material 3. available on record. We find that the assessee vide ground No. 2.1 had specifically raised a plea that the payees of the amount had already offered the receipts from assessee to tax in their respective returns and consequentially in terms of 2nd Proviso to Section 40(a)(ia) of the Act read with 1st proviso to Section 201(1) of the Act, there cannot be any disallowance of expenditure u/s 40(a)(ia) of the Act in the hands of the assessee. This matter, in our considered opinion, requires factual verification. If, on verification, it is found that the payees have already reflected the amounts received from the assessee as their income then the said expenditure in the hands of the assessee cannot be disallowed u/s 40(a)(ia) of the Act. With this direction, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical 4. purposes.
Order pronounced in the open court on 10/12/2024.