2014 (5) TMI 3 - AT - Income Tax

Appeal Decision on TDS Compliance and Additions under Income Tax Act

Shree Ram Engineering Company Versus ITO, Ward-2, Bharuch

The appeal involved confirmation of additions under section 40(a)(ia) of the Income Tax Act totaling Rs.24,71,176 due to delayed TDS payment by an ... Addition made u/s 40(a)(ia) of the Act – Held that:- The matter should go back to CIT(A) because one of the vital fact was not brought on record that whether the entire amount pertained to the period in which the assessee-firm came into existence, or part of the amount pertained to the period which was under the proprietorship of one Sri Dineshbhai Chunawala - the CIT(A) is required to first ascertain whether the entire expenditure was claimed by the firm in its books of account or part of the expenditure was claimed by the said proprietor - the provisions of Section 40(a)(ia) are to be applied only in a situation when an expenditure is claimed of the amount on which TDS was required to be deposited - CIT(A) is directed to apply the correct position of law as on date as per the interpretation of the amended provisions of IT Act in respect of Section 40(a)(ia) – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee. Non-deduction of TDS – Held that:- CIT(A) has not dealt with the explanation of the assessee - CIT(A) has only dealt with the legal aspect but remained silent on the factual aspect of the matter – thus, the matter is required to be remitted back to the CIT(A) for adjudication – Decided in favour of Assessee. Issues:1. Confirmation of additions made under section 40(a)(ia) of the Income Tax Act.2. Non-deduction of TDS in respect of specific parties.Issue 1: Confirmation of additions under section 40(a)(ia) of the Income Tax Act:The appeal arose from an order by the learned CIT(A)-VI, Baroda, confirming additions made under section 40(a)(ia) of the Income Tax Act totaling Rs.24,71,176. The Assessing Officer noted that the assessee-firm, engaged in civil construction and structural work, had not paid TDS on time for certain expenditures. The AO invoked section 40(a)(ia) due to delayed TDS payment, taxing the amount in the hands of the assessee. The assessee argued that if TDS is deposited before the return due date, it should be considered paid on time. However, the CIT(A) upheld the AO's decision, emphasizing that the law does not allow deductions in the year of payment if TDS was deposited in a subsequent year. The Tribunal directed the CIT(A) to reexamine the issue considering relevant legal interpretations and judgments.Issue 2: Non-deduction of TDS in respect of specific parties:The appeal also addressed the alleged non-deduction of TDS in relation to specific parties totaling Rs.4,69,269. The assessee explained that TAN was applied for but issued later, resulting in TDS deposit after the issuance. Despite the explanation, the AO taxed the amount. The CIT(A) did not address the factual aspects raised by the assessee, focusing only on legal aspects. Consequently, the Tribunal directed the CIT(A) to reconsider the issue comprehensively, taking into account both factual and legal aspects for a well-reasoned decision. As a result, the assessee's appeal was allowed for statistical purposes only.This detailed analysis covers the issues involved in the legal judgment, addressing the grounds of appeal, factual backgrounds, arguments presented by both parties, legal interpretations, and the directions provided by the Tribunal for further consideration by the CIT(A).