Tribunal decision on income tax disallowance & TDS appeal: Payments to BMC not under Section 43B.

The Tribunal allowed the assessee's appeal regarding the disallowance under section 43B of the Income-tax Act, 1961, stating that the payment to BMC did not fall under the section. The revenue's appeal on the disallowance of expenses due to non-deduction of TDS was partly allowed, with the matter remanded for verification. Additionally, the Tribunal restored the addition of income based on TDS certificate and accounting method. The decision was pronounced on 11/04/2017.

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Issues Involved:
1. Disallowance under section 43B of the Income-tax Act, 1961 regarding provision for BMC charges.
2. Disallowance of expenses under section 40(a)(ia) due to non-deduction of TDS.
3. Addition of income based on TDS certificate and accounting method.

Issue-wise Detailed Analysis:

1. Disallowance under section 43B of the Income-tax Act, 1961 regarding provision for BMC charges:

The assessee contested the disallowance of Rs. 27,04,976/- under section 43B, arguing that the amount payable to BMC was a premium and not a tax, duty, cess, or fee. The AO disallowed this amount as it was unpaid before the due date of filing the return. The CIT(A) upheld the AO's decision, stating that the payment was for services rendered by BMC, thus falling under section 43B.

The Tribunal examined the nature of the payment and concluded that the FSI premium paid to BMC did not qualify as a tax, duty, cess, or fee under section 43B(a). Citing precedents like CIT vs. C.J. International Hotels Ltd. and Garo Devi vs. ITO, the Tribunal noted that such payments are contractual obligations and not statutory levies. Consequently, the Tribunal set aside the CIT(A)'s order and deleted the disallowance of Rs. 27,04,976/-.

2. Disallowance of expenses under section 40(a)(ia) due to non-deduction of TDS:

The revenue's appeal focused on the disallowance of Rs. 43,63,515/- for non-deduction of TDS on contractual expenses. The AO had disallowed these expenses as the TDS was paid after the due date. The CIT(A) deleted the disallowance, stating that the provision was made on an ad-hoc basis without identifying the payees or the exact amount payable.

The Tribunal referred to the case of Apollo Tyres Ltd. vs. DCIT and similar cases, emphasizing that TDS provisions apply only when the payee is identifiable and the amount payable is ascertainable. The Tribunal restored the matter to the AO to verify these conditions and decide accordingly, allowing the revenue's appeal for statistical purposes.

3. Addition of income based on TDS certificate and accounting method:

The AO added Rs. 4,40,000/- to the assessee's income based on Form 26AS, as the amount was paid on 31.03.2011 with TDS deducted. The assessee argued that this income should be recognized in the next year, as he followed the cash system for liaison services. The CIT(A) accepted this argument and deleted the addition.

The Tribunal, however, cited cases like CIT vs. Tanjore Permanent Bank Ltd. and others, which establish that income should be assessed in the year it is paid and TDS is deducted. The Tribunal restored the AO's addition of Rs. 4,40,000/-, setting aside the CIT(A)'s order.

Conclusion:

The assessee's appeal was allowed concerning the disallowance under section 43B, while the revenue's appeal was partly allowed, with the issue of TDS disallowance remanded for further verification and the addition of Rs. 4,40,000/- restored. The Tribunal's decision was pronounced on 11/04/2017.

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