DCIT 14(2)(2), MUMBAI vs. A.C. NEILSON ORG P.LTD, MUMBAI

O R D E R

Per Sandeep Gosain, JM

D C I T - 14(2)(2)/M/s. A.C. Neilson ORG P. Ltd. of assessment under Section 143(3) r.w.s. 147, 250 & 254 of the Act was passed on 24.12.2010 thereby making additions/disallowances under different heads. Aggrieved by the order of the AO assessee preferred appeal before the CIT(A). The CIT(A), after considering the case of the assessee, partly allowed the appeal. Against the order of the CIT(A) Revenue is in appeal before us.

by the Revenue challenges the order of the CIT(A) in deleting the disallowances of `2,08,44,164/- and 47,41,000/- under Section 40(a)(ia) of the Income Tax Act, 1961 (hereinafter "the Act") on account of service and consultancy charges and hire charges without appreciating the fact that the assessee has not substantiated claim by filing evidence of having paid the TDS on the expenses incurred in compliance with the provisions of Chapter XVII of the Act.

4. We have heard the rival contentions, perused the material placed on record and the orders of the authorities below. Before deciding the merits of the case it is necessary to evaluate the order passed by the CIT(A) leading to these grounds. The learned CIT(A) has dealt with these grounds in paras 6 & 7 of his order, which are extracted below: - “6. The background of the case is as under: - The appellant is a Pvt. Ltd. Co. engaged in the business of-market research, media research & consultancy services. The appellant had filed its return declaring total income at Rs.8,55,87,325/- and the said return was processed u/s.143(l) and assessment order was passed u/s.143(3) of the Act on 15.12.2006 determining taxable income of Rs.9,08,40,124/-. Re-assessment proceedings were initiated and notice u/s.148 were issued. In response to notice u/s.148 of the Act, the appellant vide letter dt.27.10.2009 requested the A.O. to consider the original return as the return filed in response to the aforesaid notice. The A.O completed the reassessment of the appellant and passed the reassessment order dt.24.12.2010 u/s.143(3) r.w.s. 147, 250 & 254 of the Act. In the said re- assessment order, the A.O. assessed the total income of the appellant at Rs.12.18.40,739/- disallowing expenditure of Rs.3,45,66,461/- u/s.40(a)(ia) of the Act and Rs.2,21,206/- u/s.43B of the Act. Aggrieved by the additions/disallowances made by the A.O. the appellant is in appeal.

7. Ground of appeal No.1 and 2 : ' .

D C I T - 14(2)(2)/M/s. A.C. Neilson ORG P. Ltd. Consultancy and professional fees of Rs.2,08,44,164/- has been disallowed on account of non-deduction of tax. However, it is seen that as per schedule XII of the accounts the appellant has deducted tax u/s.194J of the Act on its professional fees and consultancy as per the e-TDS return filed for the year. Out of the total amount of Rs.2,94,61,545/- debited to the P&L A/c the appellant company has deducted tax on Rs.2,50,75,824/-. Thus it is held that no disallowance is warranted on the consultancy and consultancy fees on account of non deduction of tax. 7.1 Rs.89,81,297/- has been disallowed on account of royalty u/s.40(a)(ia). However, it is seen that for the F.Y. 2003-04 which is relevant to this A.Y. i.e. A.Y. 2004-05 no tax is deductible under this head. TDS on royalty payments u/s.194J was introduced under chapter XVII-B only with effect from 13.7.2006. Thus it is held that no disallowance is warranted u/s. 40(a)(ia) on account of on deduction of tax since the appellant company has not violated the TDS provisions of the Act. Hire charges of Rs.47,41,000/- has been disallowed on account of non deduction of tax under section 194C. It is seen that the appellant company has deducted tax u/s.194C of the Act as per the e-TDS return filed for the A.Y. Against an amount of Rs.47,41,000/- which is debited to its P&L A/c on account of hire charges it has deducted tax U/S.194C on a much higher amount of Rs.3,19,47,766/-. Thus it is held that the disallowance is unwarranted. Thus in the light of the discussion above ground of appeal

No.l & 2 are allowed.”

5. After having gone through the orders passed by the Authorities below and hearing the parties at length we found that the AO, while deciding these grounds has mentioned that the assessee could not produce copy of challan evidencing payment of the amounts. On the contrary he CIT(A) has categorically mentioned that as per schedule XII of the account the assessee has deducted tax under Section 194J of the Act on its professional fees and consultancy as per the e-TDS return filed for the year. It has also been categorically mentioned that out of the total amount of `2,94,61,545/- debited to the Profit & Loss Account, the assessee company has deducted tax of `2,50,75,824/-. Therefore, under these circumstances no disallowance was warranted on consultancy and consultancy fees on account of non deduction of tax. Now as far as hire charges are concerned a sum of `47,41,000/- has been disallowed by the AO on account of non deduction of tax under Section 194C of the Act

D C I T - 14(2)(2)/M/s. A.C. Neilson ORG P. Ltd. whereas from the records the learned CIT(A) has found that the assessee company has deducted tax under Section 194C of the Act as per the e-TDS return filed for the assessment year. Against an amount of `47,41,000/- which is debited to its Profit & Loss Account on account of hire charges assessee has deducted tax under Section 194C of the Act on a much higher amount of `3,19,47,766/-. Thus it was correctly held that the disallowance made by the AO is unwarranted.

Order pronounced in the open court on 26th September, 2018.