2016 (2) TMI 1147 - AT - Income Tax

Tribunal rules in favor of assessee over conflicting High Court judgments on TDS disallowance

The Tribunal ruled in favor of the assessee, dismissing the appeal filed by the Assessing Officer and treating the cross objections as infructuous. ... Disallowance u/s.40(a)(ia) on account of short deduction of tax - Held that:- We are faced with two diagonally opposite views about applicability of the provisions of section 40 (a)(ia)of the Act, we are taking the view which is in favour of the assessee that expenses are not liable to be disallowed u/s.40(a)(ia)on account of short deduction of tax. We are following the judgment of Samir Tekriwal (2000 (2) TMI 40 - BOMBAY High Court)- Decided in favour of assessee. Issues involved:1. Disallowance of TDS under section 40(a)(ia) of the Income-tax Act.Analysis:1. The primary issue in this case revolves around the disallowance of TDS under section 40(a)(ia) of the Income-tax Act. The Assessing Officer (AO) made a disallowance of Rs. 47.38 crores due to short deduction of TDS by the assessee, who had deducted tax under section 194C instead of section 194J for services availed. The AO held that the services were technical and professional in nature, falling under section 194J, and not 194C. The First Appellate Authority (FAA) allowed the appeal filed by the assessee, citing previous Tribunal decisions in its favor for similar issues.2. The Departmental Representative (DR) argued that failure to deduct tax under section 194J would lead to disallowance under section 40(a)(ia) of the Act. The Authorized Representative (AR) for the assessee relied on Tribunal decisions and contended that expenses should not be disallowed under section 40(a)(ia) due to short deduction of tax. The Tribunal noted conflicting views from different High Courts on the applicability of section 40(a)(ia) and referred to the principle of following decisions in favor of the assessee when faced with conflicting judgments.3. Citing the judgment of the Hon'ble Bombay High Court in the case of Ashok Kumar Parekh, the Tribunal emphasized the importance of following binding precedents of High Court judgments. Considering the conflicting views and principles laid down by different High Courts, the Tribunal decided in favor of the assessee, following the judgment of the Hon'ble Kolkata High Court and previous Mumbai Tribunal decisions. Consequently, the effective ground of appeal was decided against the AO, leading to the dismissal of the appeal filed by the AO and the cross objections filed by the assessee.4. In conclusion, the Tribunal ruled in favor of the assessee, dismissing the appeal filed by the AO and treating the cross objections filed by the assessee as infructuous. The judgment highlighted the significance of adhering to binding precedents and decisions that favor the assessee when faced with conflicting interpretations of the law. The decision ultimately favored the assessee in the matter of disallowance of TDS under section 40(a)(ia) of the Income-tax Act.