D.C.I.T CIR - 1,KOLKATA, KOLKATA vs. M/S ELDYNE ELECTRO SYSTEMS PVT LTD, KOLKATA

The assessee in the present case is a Company, which is engaged in the business of executing Railways contracts. The return of income for the year under consideration was filed by it on 27.09.2009 declaring total ./2013 Assessment year: 2009-2010 Page 2 of 4 income of Rs.5,00,33,483/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has paid commission of Rs.1,50,00,000/- to its Managing Director Mr. Santanu Basu without making deduction on account of tax at source as required by the provision of section 194H. He, therefore, invoked the provision of section 40(a)(ia) and disallowed the commission paid by the assessee- company to its Director.

The disallowance made by the Assessing Officer under section 40(a)(ia) on account of payment of commission made to its Director was challenged by the assessee-company in an appeal filed before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), it was submitted by the assessee that the commission of Rs.1.50 crores paid to the concerned Director was part of his salary and accordingly tax at source at a higher rate of 30% was deducted from the said payment as per the provision of section 192. Necessary documentary evidence to show such deduction of tax from the payment of salary was also filed by the assessee and keeping in view the same, the ld. CIT(Appeals) deleted the disallowance made by the Assessing Officer under section 40(a)(ia) for the following reasons given in paragraph no. 3.3 of his impugned order:- “3.3. I have carefully considered the observation of the Assessing Officer in the assessment order and also the submission of the Ld. A/R. During the course of the appellate proceedings, the Ld. A/ R has explained that the commission amounting to Rs.l,50,00,000/- was paid to an employee Director as a part of his salary and the tax was deducted at source at the time of disbursement of his salary. The Ld. A/R has explained that TDS u/s.192 instead of section 194H has been deducted from the commission payment of Rs.1,,50,00,000/- to the Director. The Ld. A/R has also explained that the TDS u/s.192 has been deducted at the rate of 30% from the above commission and paid to the credit of the Central Government whereas the prescribed rate for TDS u/ s.194H is only 5%. Considering the facts of the case, the A.O. is directed to delete the addition of Rs.1,,50,00,000/- u/s.40(a)(ia) as the TDS u/s. 192 has already been deducted from the aforesaid commission of Rs.1,50,00,000/- paid to the Director. This ground of appeal is allowed”. ./2013 Assessment year: 2009-2010 Page 3 of 4 Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.

4. At the time of hearing before us, none has appeared on behalf of the assesese. This appeal of the Revenue is, therefore, being disposed of ex- parte qua the respondent-assessee after hearing the arguments of the ld. D.R. and perusing the relevant material available on record. The ld. D.R. has not disputed in principle the decision of the ld. CIT(Appeals) that the assessee-company having deducted tax at source from the payment of commission made to its Director as per section 192 treating the same as part of salary, the disallowance made by the Assessing Officer on account of such commission by invoking the provisions of section 40(a)(ia) cannot be sustained. He, however, raised a limited contention that no opportunity was given by the ld. CIT(Appeals) to the Assessing Officer to verify this stand taken by the assessee for the first time before him. We find merit in the contention of the ld. D.R. Accordingly this issue is restored to the file of the Assessing Officer for the limited purpose of verifying the claim of the assessee of having deducted tax at source from the payment of commission made to the concerned Director as per the provision of section 192.