2017 (9) TMI 1858 - AT - Income Tax

Tribunal upholds CIT(A) decision on disallowance under section 40(a)(ia) of the Act

The Tribunal upheld the decision of the Ld CIT(A) regarding the disallowance under section 40(a)(ia) of the Act, ruling that tax deduction was not ... Disallowance u/s 40(a)(ia) - payment by way of rent and repairs - HELD THAT:- CIT(A) has recorded a finding that M/s CKIL has duly complied with TDS provisions at the time of making payments to the concerned payees. Thus, it is noticed that the payment by way of rent and repairs have been duly subjected to deduction of tax at source. The assessee has reimbursed the amount to M/s CKIL on which tax has already been deducted at source. Since the impugned payments have been made M/s CKIL on behalf of the assessee and the tax has been deducted at source there from by M/s CKIL, it should be construed that M/s CKIL has deducted tax at source also on behalf of the assessee. The obligation of the assessee to deduct tax at source has been fulfilled by M/s CKIL and hence agree with the view taken by Ld CIT(A) that the provisions of sec. 40(a)(ia) would not get attracted in this factual matrix. Accordingly uphold the decision taken by Ld CIT(A) on the above said reasoning. Issues:1. Disallowance u/s 40(a)(ia) of the Act for non-deduction of tax at source on payments made to M/s Cox & Kings India Ltd (CKIL).Analysis:The appeal and cross objection before the Appellate Tribunal ITAT Mumbai involved a dispute regarding the disallowance made under section 40(a)(ia) of the Act for failing to deduct tax at source on payments to CKIL. The Revenue challenged the decision of the Ld CIT(A) in deleting the disallowance, while the assessee supported the Ld CIT(A)'s decision in the cross objection.Upon hearing the parties and examining the records, it was revealed that the assessee had made payments totaling Rs. 38.59 lakhs to CKIL for Rent and Repairs without deducting tax at source. The AO disallowed this amount under section 40(a)(ia) of the Act, contending that tax should have been deducted. However, the Ld CIT(A) reversed this decision, stating that tax deduction was not necessary for reimbursements. The Revenue, dissatisfied with this ruling, appealed.During the proceedings, the Ld D.R argued that tax should have been deducted by the assessee on payments to CKIL. In contrast, the Ld A.R cited a judgment of the Bombay High Court to support the contention that tax deduction was not required for reimbursed expenditures.The Tribunal noted that CKIL had already deducted tax at source when making payments for Rent and Repairs on behalf of the assessee. As the reimbursements made by the assessee to CKIL were already subjected to TDS, the Tribunal concluded that CKIL effectively deducted tax on behalf of the assessee. Consequently, the Tribunal upheld the Ld CIT(A)'s decision, ruling that section 40(a)(ia) did not apply in this scenario.The cross objection filed by the assessee merely supported the Ld CIT(A)'s order and did not require separate consideration. Ultimately, both the appeal of the Revenue and the cross objection of the assessee were dismissed by the Tribunal, affirming the decision of the Ld CIT(A) regarding the disallowance under section 40(a)(ia) of the Act.The judgment was pronounced on 11.9.2017 by the Appellate Tribunal ITAT Mumbai.