2013 (8) TMI 380 - AT - Income Tax

Tribunal allows appeal on tax deduction liability, remands non-adjudicated grounds for reassessment

M/s Pee Cee Cosma Sope Limited Versus Dy. Commissioner of Income Tax

M/s Pee Cee Cosma Sope Limited Versus Dy. Commissioner of Income Tax - TMI Issues:1. Disallowance under section 40(a)(ia) of the Income Tax Act for non-deduction of tax at source on payments made.2. Interpretation of section 40(a)(ia) regarding the timing of payments and applicability on amounts payable on the last day of the previous year.3. Adjudication of grounds raised before the CIT(A) but not addressed.Analysis:Issue 1: Disallowance under section 40(a)(ia) for non-deduction of tax at sourceThe appellant contested the disallowance of Rs. 14,93,965 made by the Assessing Officer under section 40(a)(ia) of the Income Tax Act. The Assessing Officer found that the appellant had not deducted tax on payments made to consignees, considering it as reimbursement of expenses. However, it was concluded that these payments were fixed commissions unrelated to actual expenses. The CIT(A) upheld the disallowance, stating that the expenses reimbursed did not correlate with actual expenses incurred by consignee agents, and therefore, the appellant was liable to deduct tax at source. The appellant argued that the disallowance was unwarranted as the payments were made throughout the year and not payable on the last day of the previous year.Issue 2: Interpretation of section 40(a)(ia) regarding timing of paymentsThe appellant contended that section 40(a)(ia) is applicable only when the amount is payable on the last day of the previous year. Reference was made to a decision of the ITAT Special Bench Visakhapatnam, which clarified that disallowance under section 40(a)(ia) cannot be invoked for payments made during the financial year, except for amounts remaining payable at the year-end. The Tribunal agreed with the appellant's argument, emphasizing that there was no amount payable at the end of the previous year in this case. The issue was remanded to the Assessing Officer for factual verification in line with the ITAT decision.Issue 3: Adjudication of grounds not addressed by CIT(A)The appellant raised multiple grounds before the CIT(A), including the non-adjudication of a specific ground. The Tribunal noted that the ground raised before the CIT(A) was identical to one raised before them. It was observed that factual verification was necessary based on the ITAT decision cited, prompting the issue to be sent back to the Assessing Officer for reconsideration in accordance with the ITAT's ruling.In conclusion, the Tribunal allowed the appeal for statistical purposes, directing a reevaluation of the disallowance under section 40(a)(ia) in light of the legal interpretations provided.