ITAT upholds disallowance under sec. 40(a)(ia) for payable and paid expenditures. The ITAT dismissed the appeal filed by the assessee against the CIT(A)'s order confirming the assessment order disallowing a sum under sec. 40(a)(ia) of ...
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ITAT upholds disallowance under sec. 40(a)(ia) for payable and paid expenditures.
The ITAT dismissed the appeal filed by the assessee against the CIT(A)'s order confirming the assessment order disallowing a sum under sec. 40(a)(ia) of the Act. The delay in filing the appeal was condoned, but the ITAT upheld the disallowance, stating that it applies to both payable and paid expenditures based on the jurisdictional High Court's precedent. The ITAT found no reason to interfere with the CIT(A)'s decision, ultimately affirming it on October 7, 2015.
Issues: Delay in filing the appeal, Justification of confirming the assessment order disallowing a sum under sec. 40(a)(ia) of the Act.
Analysis: The appeal was filed by the assessee against the CIT(A)'s order dated 30.9.2014, concerning the assessment year 2006-07. The delay in filing the appeal by 38 days was condoned as the assessee provided sufficient reasons. The main issue was whether the CIT(A) was right in confirming the assessment order disallowing a sum of Rs. 31 lakhs under sec. 40(a)(ia) of the Act. The assessee, engaged in film release and distribution, had declared a total income of Rs. 7,56,853/-, but the AO fixed the total income at Rs. 38,97,500/- by disallowing an expenditure of Rs. 31 lakhs for not deducting tax at source.
On appeal, the assessee argued that the disallowance should not apply as the amounts were already paid, relying on precedents. However, the CIT(A) upheld the disallowance citing legal precedents and held that the AO was correct in making the disallowance. The CIT(A) also referred to the amendment to sec. 40(a)(ia) by Finance Act 2012, stating it was only prospective. The assessee then appealed to the ITAT, acknowledging that a judgment of the Hon'ble jurisdictional High Court was against their contention.
The ITAT considered the arguments and legal precedents cited by both parties. The assessee contended that the Special Bench's decision in the case of M/s Merilyn Shipping & Transports restricted the disallowance to payable amounts only. However, the Hon'ble jurisdictional High Court's judgment in another case held that the disallowance also applies to paid expenditures. The ITAT, following the High Court's decision, upheld the CIT(A)'s order, stating that no interference was needed.
In conclusion, the ITAT dismissed the appeal, upholding the CIT(A)'s order. The judgment was pronounced on October 7, 2015.
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