ITO, CHENNAI vs. Q.SOURCE GLOBAL CONSULTING PVT. LTD., CHENNAI

The Revenue filed these appeals against the orders of the Commissioner of Income Tax (Appeals) - 3, Chennai in & 188/16-17/CIT(A)-3 dated 28.02.2017 and 30.05.2017, for assessment years 2013-14 & 2014-15, respectively.

M/s. Q Source Global Consulting Pvt. Ltd., the assessee, is in the business of man power supply & consultancy services. While making the assessments for assessment years 2013-14 & 2014-15, the AO found that the assessee has not remitted the employees contribution towards PF/ESI within the due date under the respective statue, but made it well within the due date of filing the return u/s. 139(1) of the Income Tax Act, 1961. In view of that, he disallowed such sums u/s. 2(24)(x) r.w. 36(1)(va). Further, the Assessing Officer noticed in assessment year 2013-14 that the assessee has remitted rent without deducting TDS and hence he disallowed Rs. 4,35,368/-. Aggrieved, the assessee filed appeals before the CIT(A). Before the CIT(A), the assessee relied the decision of the Supreme Court, the decisions of ITAT and the Jurisdictional High Court viz., 319ITR 306(SC), ACIT vs Shri Kanniyan Kumaraswamy, ITAT, Chennai, Express Publications (Madurai) Ltd vs DCIT, Chennai and CIT vs M/s Industrial Security and Intelligence India Pvt. Ltd., High Court decision in (TCA Nos. 585 & 586/2015 & MP No. 01/2015). Following the above decisions, the CIT(A) allowed the assessee’s appeal for assessment years 2013-14 & 2014-15, respectively. In respect of TDS disallowance on the rent, the assessee pleaded before the CIT(A) that the payees have admitted the impugned rental payments in their returns and paid the taxes. When the genuineness of the expenditure is not doubted, disallowance u/s. 40(a)(ia) cannot be made and it relied on the decision of CIT vs Vector Shipping Services Ltd., (357 ITR 642) (Allahabad) etc. The CIT(A) allowed the appeal. Aggrieved against the orders of the CIT(A), the Revenue filed these appeals.

We heard the rival submissions. On the issue of disallowance on the Employees Contribution towards PF/ESI, u/s.s 2(24)(x) r.w.s 36(1)(va) since, the CIT(A) has applied the Jurisdictional High Court decision and the ITAT decisions, supra, we do not find any reason to interfere with his orders and hence the corresponding grounds of the Revenue are dismissed.

With regard to the disallowance on rental payments without deduction of TDS, the assessee pleaded that these rental payments were already admitted as income by the payees and they have paid their taxes and hence, the disallowance is not warranted in accordance with first proviso of section 201(1) of the Act. We find merit in the submissions of the assessee and hence dismiss the corresponding grounds of the Revenue.

In the result, the Revenue appeals in & 2062/Chny/2017 for assessment years 2013-14 & 2014-15, respectively, are dismissed.