M/S VIJAY CHAUHAN & COMPANY,HAMIRPUR vs. ITO, HAMIRPUR

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ITA 965/CHANDI/2016Status: DisposedITAT Chandigarh01 August 2018AY 2007-083 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal restored the matter to the Assessing Officer to allow the assessee to furnish evidence that HRTC, a government undertaking, had accounted for the receipts and paid taxes. If proven, the expenditure would not be disallowed under Section 40(a)(ia) based on the second proviso.

What were the facts?

The assessee claimed expenditure on payments made to Himachal Road Transport Corporation (HRTC) without deducting TDS. The Assessing Officer disallowed this expenditure under Section 40(a)(ia) via a rectification order, which was upheld by the CIT(A).

What were the issues?

Whether expenditure is disallowable under Section 40(a)(ia) for non-deduction of TDS when the payee is a government undertaking that has accounted for the income. Whether a rectification order under Section 154 was appropriate for this issue.

Which sections of the Income-tax Act were involved?

Section 154,Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHANDIGARH BENCHES, ‘A’ CHANDIGARH

Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA

For Appellant: CA & Aditya Kumar, CA
For Respondent: Smt. Chanderkanta, Sr.DR
Hearing: 19.07.2018

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 27.06.2016 of the Commissioner of Income Tax (Appeals), Palampur [hereinafter referred to as CIT(A)].

2.

The sole issue raised by the assessee in this appeal is regarding rectification made by the Assessing officer u/s 154 of Income-tax Act, 1961 (in short 'the Act') in the assessment order. The Assessing officer noted that the assessee had made certain payments to Himachal Road Transport Corporation (in short ‘HRTC’) whereupon the assessee did not deduct tax at source (TDS). He, therefore, was of the opinion that the expenditure claimed

2 ITA No.965-c-2016- M/s Vijay Chauhan & Co., Hamirpuri

on account of payments made to HRTC was not allowable as per the provisions

of section 40(a)(ia) of the Act. He accordingly passed the rectification order

u/s 154 of the Act disallowing the aforesaid expenditure. The Ld. CIT(A)

confirmed the above disallowance of expenditure made by the Assessing

officer.

3.

Before us, Ld. Counsel for the assessee, apart from challenging the

action of the Assessing officer in making the disallowance by way of

rectification of the order u/s 154 of the Act, has also contented that HRTC is

a government undertaking which had accounted for the receipts from the

assessee in the income tax return and paid due taxes as per computation. The

Ld. Counsel has further submitted that the assessee was ready to produce the

relevant evidence to show that the payments made by the assessee and

received by the HRTC have been duly accounted for by HRTC. The return for

the year was duly filed and tax paid thereupon. He, therefore, has submitted

that the matter be restored to the file of the Assessing officer so that the

assessee may be able to produce the relevant evidence before the Ld. CIT(A).

4.

The Ld. DR though has strongly supported the order of the Assessing

officer but has been fair enough to admit that the payee in this case is a

government undertaking which is supposed to account for the receipts received

in regular business.

5.

Considering the above submissions of the Ld. Counsel, and in the

interest of justice, the matter is restored to the file of the Assessing officer for

the purpose of giving opportunity to the assessee to furnish the relevant

evidences in this respect. If the assessee will be able show that the payee had

duly accounted for the receipts, filed the income tax return and paid due

3 ITA No.965-c-2016- M/s Vijay Chauhan & Co., Hamirpuri

taxes there upon, then as per the second proviso to section 40(a)(ia) of the

Act, which the Courts have held that the same is clarificatory in nature and

has to be applied retrospectively, the Assessing officer accordingly will not

disallow the expenditure u/s 40(a)(ia) of the Act.

6.

In the result, the appeal of the assessee is treated as partly allowed for

statistical purposes.

Order pronounced in the Open Court.

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 01.08. 2018 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR

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