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Income Tax Appellate Tribunal, “ D ” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI CHALLA NAGENDRA PRASAD
आदेश / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER
This appeal by assessee is directed against the order of the Commissioner of Income Tax (Appeals)-I, Chennai, dated 27.10.2014 for the assessment year 2008-2009.
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The ld. Authorised Representative for assessee raised the
following grounds:-
‘’1. The learned Commissioner of Income Tax (Appeals) erred I confirming the order of the Assessing Officer which is contrary to law, facts and circumstances of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in confirming disallowance under section 40(a)(ia) of the Income- tax Act, 196 (the ACT) for non deduction of TDS on internet lease line charges amounting to ₹10,75,479/- on the rental advance adjusted against rent amounting to ₹2,15,000/-. 3. Without prejudice to ground No.2 above, the learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance u/s.40(a)(ia0 of the act without following the jurisdictional ITAT decision “Theekathir Press (ITA No.2076/Mds/2012)’’ that the disallowance u/s.40(a)(ia) of the Act applies to expenditure that are remaining ’payable’ as on the balance sheet date and does not apply to expenditure which is’ paid’.
The facts of the case are that the assessee was engaged in
transcription business. The issue adjudicated relates to disallowance
u/s.40(a)(ia) for non-deduction of TDS on internet lease line charges
to the tune of �10,75,479/-. The assessee incurred lease line
expenditure towards the use of internet to Reliance Communication
and Bharati Airtel Ltd. The Assessing Officer contended that the
assessee should have deducted tax at source, as is required under
section 194J, since it was a dedicated leased line provided to the
assessee exclusively for the use of the assessee catering to its specific
needs and it was not the same as a service provided to the public at
large. Further, the Assessing Officer held that even if the payment
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made by the assessee may not qualify to be for a technical service, it
has to be considered as royalty payments requiring TDS to be done in
the light of the decision of ITAT, Delhi, reported in 391 ITR 269.
Aggrieved, the assessee preferred an appeal before the Commissioner
of Income Tax (Appeals).
On appeal the Commissioner of Income Tax (Appeals) observed
that the decision relied upon by the assessee is not applicable to the
facts of the case and he decided the case against the assessee.
Against this, the assessee is in appeal before us.
We have heard both the parties and perused the material on
record. A similar issue is considered by the Special Bench of the
Tribunal (Vizag) in the case of Merilyn Shipping and Transports vs.
ACIT (2012) 136 ITD 23 (Visakhapatnam) wherein it was held that the
provisions of section 40(a)(ia) are applicable only to the expenses that
are “payable” and outstanding at the end of the close of the year
relevant to the assessment year and not to the amount already paid.
The same view was taken by the High Court of Allahabad in
the case of CIT vs. M/s. Vector Shipping Services (P) Ltd in ITA
No.122 of 2013 dated 09.7.2013 by holding that sec 40(a)(ia) is not
I.T.A.No.3114/Mds/2014. :- 4 -:
applicable when there is no outstanding balance at the end of the
close of the year relevant to the assessment year and SLP filed by the
Revenue in Supreme Court of India in CC No.8068/2014 dated
02.07.2014 is also dismissed. Being so, in our opinion an amount
outstanding at the end of the close of the assessment year is not to be
allowed u/s.40(a)(ia) of the Act. We direct the Assessing Officer to
disallow only that amount which is outstanding at the end of the close
of the assessment year. With these observations, we are remitting the
issue back to the file of the Assessing Officer for fresh consideration.
In the result, the appeal of the assessee in ITA
No.3114/Mds/2014 is partly allowed for statistical purposes.
Order pronounced on Friday, the 19th day of June, 2015, at Chennai.
Sd/- Sd/- (च�ला नागे�� �साद ) (चं� पूजार� ) (CHALLA NAGENDRA PRASAD) (CHANDRA POOJARI) �या�यक सद�य/ JUDICIAL MEMBER लेखा सद�य/ ACCOUNTANT MEMBER
चे�नई/Chennai. �दनांक/Dated:19.06.2015. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2.��यथ�/ Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.
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