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Facts
The assessee, Mahaonline Ltd., challenged a disallowance of Rs. 31,34,633 made under Section 40(a)(ia) of the Income Tax Act, 1961. This disallowance was 30% of payments made without deducting tax at source. The Assessing Officer observed that certain payments were made without TDS.
Held
The Tribunal held that payments made to the Government of Maharashtra are not subject to TDS provisions. It was also found that certain amounts were not paid or credited in the relevant year, and in other cases, provisions were reversed, or tax was duly deducted. The disallowance for Rs. 15,596 was partly sustained as it included a telephone bill payment.
Key Issues
Whether disallowance under Section 40(a)(ia) is applicable for payments made to the Government, amounts not paid/credited, or provisions reversed? Whether there was a double disallowance of Rs. 15,596?
Sections Cited
40(a)(ia), 115JB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
PER SAKTIJIT DEY, V.P.: The Captioned Appeal has been filed by the assessee assailing the order dated 25.09.2023 passed by the National Faceless Appeal Centre (NFAC), Delhi pertaining to the Assessment Year (A.Y.) 2017-18.
In Ground No.1, the assessee has challenged the disallowance of Rs.31,34,633/- made under Section (u/s.) 40(a)(ia) of the Income Tax Act, 1961 (in short ‘the Act’).
Requisite facts relating to this issue are, the assessee is a resident corporate entity. As stated by the Assessing Officer, the assessee is engaged in the business of development, maintenance of Mahaonline portal for providing web-based services by the Government to Citizens, Government to Business and other portal services of the Government of Maharashtra. For the assessment year under dispute, assessee filed its return of income on 13.10.2017 declaring income of Rs.8,11,25,270/- under the Normal Provisions and book loss of Rs.6,79,22,328/- u/s.115JB of the Act. In the course of assessment proceedings, the Assessing Officer, while verifying the details of various expenditures debited to the P&L account, observed that certain amount has been paid by the assessee during the year without deducting tax at source, though, such payments are subject to TDS provisions. The details of such expenses are as under:
Sr. Particulars Vendor Name Amount 1. Setu Maharashtra Government of 4,320,000 Maharashtra 2. UID-Commission VLE (Village 1,985,969 Level Enterpreneurs) 3. Project Expense- Unity Telecom 672,210 Outsourcing Cost DOP Infrastructure Ltd. 4. Aaple Sarkar Cost Rajya Setu 3,455,000 Jilha Setu (Government of Maharashtra) 5. Other Expenses 15,596 Total 10,448,775 30% disallowed 3,134,633
Being of the view that the assessee has failed to comply with the TDS provisions qua the aforesaid payments made, the Assessing Officer invoked the provisions of Section 40(a)(ia) of the Act and disallowed an amount of Rs.31,34,633/-, being 30% of the total payment made of Rs.1,04,48,775/- without deduction of tax at source. Though, the assessee contested the aforesaid disallowances before learned First Appellate Authority, however it was unsuccessful.
Before us, learned counsel appearing for the assessee submitted that payments amounting to Rs.43,20,000/- and
The learned D.R. strongly relied upon the observations of the Assessing Officer and learned CIT(A).
We have considered rival submissions and perused the material on record. Having factually examined the issue relating to the disallowance made u/s. 40(a)(ia) of the Act, we find that the amounts of Rs.43,20,000/- and Rs.34,55,000/-, part of which have been disallowed by the Assessing Officer u/s. 40(a)(ia) of the Act, have actually been paid by the assessee to the Maharashtra Government. Therefore, such payment would not get covered under the TDS Provisions. In so far as payment of Rs.19,85,969/- to Village Level Entrepreneurs is concerned, the assessee has furnished before us documentary evidence to demonstrate that in the year under consideration neither the amount in dispute was paid nor credited to the concerned vendors. The assessee has further demonstrated that as and when, the amount was paid in subsequent years, TDS provisions have been fully complied
In so far as alleged non deduction of tax at source on payments alleged to have been made of Rs.15,596/-, on factual verification it is observed that out of the said amount, the assessee has made payment of Rs.5,000/- only towards payment of telephone bill, whereas, the balance amount was never paid. Thus, in our view, no disallowance even in respect of payment made of Rs.15,596/- can be made u/s. 40(a)(ia) of the Act. Thus, the Assessing Officer is directed to delete the disallowance at Rs.31,34,633/-. This ground is allowed.
In addition to aforesaid ground, in letter dated 26.09.2024, the assessee has raised an additional ground on the issue of double disallowance of provision made of Rs.15,596/-. Since the additional ground raised by the assessee can be decided based on the facts available on record
Drawing our attention to the computation part of the assessment order, learned counsel for the assessee submitted that the amount of Rs.15,596/- has been disallowed twice as it has already been included in the disallowance made u/s. 40(a)(ia) of the Act.
Having considered rival submissions, we find that out of the amount of Rs.15,596/-, the assessee has actually paid an amount of Rs.5,000/- towards telephone bill. Therefore, no further disallowance of the amount can be made. However, in so far as the balance amount of Rs.10,596/- is concerned, since before us the assessee has asserted that this amount has never been paid, the Assessing Officer is directed to factually verify whether the assessee has reversed the provision subsequently or not. In case the provision has been reversed, the amount should not be added again.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 22/11/2024.