2017 (8) TMI 1056 - AT - Income Tax

Tribunal upholds decision to delete disallowance under Income Tax Act, corrects TDS application

DCIT-8 (3) (1), Mumbai Versus M/s. Times Global Broadcasting Co. Ltd.

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to delete the disallowance under section 40(a)(ia) of the Income Tax Act, ... TDS u/s 194C or 194J - payment made to the cable operators as Channel Subscription Fee - addition u/s 40(a)(ia) - Held that:- The Tribunal noted the earlier decision of the Tribunal in assessee’s own case for Assessment Years 2008-09 to 2011-12 [2014 (12) TMI 716 - ITAT MUMBAI] held that such payments were liable for deduction of tax at source u/s 194C of the Act and not u/s 194J of the Act, as canvassed by the Revenue. The aforesaid precedents continue to hold the field as the same have not been altered by any higher authority and, therefore, in this view of the matter, it has to be held that the Assessing Officer was wrong in concluding that there was a default on the part of the assessee in deducting tax at source on the impugned payment u/s 194C of the Act so as to trigger Sec. 40(a)(ia) of the Act. A mere shortfall in deduction of tax at source would not justify invoking of Sec. 40(a)(ia) of the Act in order to disallow the expenditure. The CIT(A) correctly accepted the aforesaid plea and accordingly directed the Assessing Officer to delete the disallowance made u/s 40(a)(ia) of the Act. - Decided in favour of assessee. Issues Involved:1. Disallowance under section 40(a)(ia) of the Income Tax Act for shortfall in TDS deduction.2. Interpretation of provisions of Section 194J and Section 194C of the Income Tax Act.3. Validity of the order passed by the CIT(A) in deleting the disallowance made by the Assessing Officer.Analysis:Issue 1: Disallowance under section 40(a)(ia) of the Income Tax Act for shortfall in TDS deduction:The Revenue appealed against the order of CIT(A) deleting the disallowance of &8377;35,31,11,238 under section 40(a)(ia) of the Income Tax Act. The Assessing Officer had disallowed the expenditure claimed by the assessee due to a shortfall in tax deduction at source. The Revenue contended that the CIT(A) erred in not appreciating the factual and legal aspects of the case. However, the Tribunal noted that the issue had been previously decided in favor of the assessee for earlier assessment years. The Tribunal held that the Assessing Officer's conclusion of default in TDS deduction was incorrect, and therefore, the disallowance under section 40(a)(ia) was unwarranted. The Tribunal upheld the CIT(A)'s decision to delete the addition, albeit on different grounds.Issue 2: Interpretation of provisions of Section 194J and Section 194C of the Income Tax Act:The Assessing Officer believed that the payments made by the assessee to cable operators for carriage fee should have been subject to TDS deduction at 10% under Section 194J of the Act, instead of the 2% deduction under Section 194C. However, the Tribunal, based on precedents, held that the payments were rightly covered under Section 194C and not Section 194J as argued by the Revenue. The Tribunal emphasized that the earlier decisions in the assessee's case remained valid and had not been overturned by any higher authority. Therefore, the Tribunal concluded that the Assessing Officer's application of Section 40(a)(ia) was incorrect.Issue 3: Validity of the order passed by the CIT(A) in deleting the disallowance made by the Assessing Officer:The CIT(A) accepted the assessee's argument that a mere shortfall in TDS deduction did not warrant the disallowance under Section 40(a)(ia) of the Act. The Tribunal concurred with this view and upheld the CIT(A)'s decision to delete the disallowance. The Tribunal found that the Assessing Officer's reliance on Section 194J for TDS deduction was misplaced, and the disallowance was not justified based on the facts of the case.In conclusion, the Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to delete the disallowance, emphasizing the correct interpretation of TDS provisions under the Income Tax Act.