2012 (8) TMI 1000 - AT - Income Tax

Tribunal overturns disallowance for short TDS deduction, citing correct section

The Tribunal allowed the appeal, deleting the disallowance under section 40(a)(ia) of the Act for short deduction of TDS on equipment hiring charges. The ... - Issues involved: Disallowance u/s.40(a)(ia) of the Act for short deduction of TDS on equipment hiring charges; Disallowance of expenses wrongly capitalized as revenue in nature.Dispute on disallowance u/s.40(a)(ia) of the Act: The appellant disputed the order confirming the action of the Assessing Officer (AO) to disallow Rs. 23,42,011 u/s.40(a)(ia) of the Act. The AO disallowed the expenditure due to short deduction of TDS on equipment hiring charges covered under section 194-I of the Act, stating a shortfall of Rs. 23,42,011. The appellant contended that the provisions of section 194-C were applicable, not section 194-I. The Commissioner of Income Tax (Appeals) upheld the AO's decision, leading to the appeal before the Tribunal.Arguments and Precedents: The appellant argued that the disallowance was unjustified as the TDS was deducted under section 194-C, not 194-I, and thus, the provisions of section 40(a)(ia) could not be invoked. The appellant cited precedents from ITAT Mumbai and Kolkata benches where similar issues were considered, emphasizing that the disallowance cannot be made for a shortfall in TDS deduction due to differences in interpretation of TDS provisions.Tribunal's Decision: The Tribunal, after considering the submissions and precedents, held that the disallowance u/s.40(a)(ia) was not justified. It noted that the appellant could be declared an assessee in default under section 201, but the disallowance under section 40(a)(ia) was unwarranted. The Tribunal allowed the appeal by deleting the disallowance made u/s.40(a)(ia) of the Act, in line with the decisions of co-ordinate benches.Other Grounds: Ground Nos. 5 & 6 regarding the capitalization of computer expenses and applicability of CBDT circulars were not pressed during the hearing and were dismissed as such.In conclusion, the appeal filed by the assessee was allowed in part, with the disallowance u/s.40(a)(ia) being deleted, and the decision was pronounced on 10th August 2012.