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of <h1>Tribunal clarifies disallowance rules for TDS deductions, affirming appellant's position</h1> <h3>M/s. Puneet Securities Pvt. Ltd. Versus Asst. CIT Cir. 4 (2)</h3> M/s. Puneet Securities Pvt. Ltd. Versus Asst. CIT Cir. 4 (2) - TMI Issues: Disallowance of Transaction Charges under Section 40(a)(ia) for TDS under wrong sectionAnalysis:1. The appellant challenged the order confirming the disallowance of transaction charges under Section 40(a)(ia) for not deducting TDS under the correct section, as per the Assessing Officer's decision.2. The Assessing Officer disallowed the claimed transaction charges of Rs. 12,72,440 for not deducting TDS under section 194J, considering it disallowable under section 40(a)(ia) despite TDS deduction under section 194C by the assessee.3. The CIT(A) upheld the disallowance citing the jurisdictional High Court's decision in Kotak Securities Ltd., which classified transaction charges as fees for technical services necessitating TDS deduction under section 194J.4. The appellant argued that the disallowance under section 40(a)(ia) applies only if no TDS is deducted or remains unpaid, contending that the assessee's belief in deducting TDS under section 194C was reasonable and that the clarification in Kotak Securities Ltd. came after the assessee's return filing.5. The appellant referenced various tribunal decisions supporting no disallowance under section 40(a)(ia) for short deduction or deduction under different sections, emphasizing the bona fide belief of the assessee.6. The Tribunal analyzed the provisions of section 40(a)(ia) and precedent, concluding that disallowance is warranted only if TDS is not deducted or remains unpaid, not for incorrect section deduction, citing the Kolkata High Court's decision in CIT Vs. S.K. Tekriwal.7. Consequently, the Tribunal allowed the appeal, emphasizing that disallowance under section 40(a)(ia) cannot be enforced solely due to TDS deduction under a different section, affirming the appellant's position.This judgment clarifies the scope of disallowance under section 40(a)(ia) concerning TDS deduction under the correct section, emphasizing the necessity of non-deduction or non-payment for disallowance rather than incorrect section deduction, supported by relevant legal precedents.
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