2020 (11) TMI 406 - AT - Income Tax

Tribunal partially allows appeal, remands issues for further verification. Dismisses other grounds based on SC decision.

M/s Balasore Cooperative Bank Limited Versus ACIT, Balasore Circle, Balasore

M/s Balasore Cooperative Bank Limited Versus ACIT, Balasore Circle, Balasore - TMI Issues Involved:1. Legality of the CIT(A)'s order confirming additions and disallowances made by the AO.2. Disallowance under Section 40(a)(ia) of the IT Act, 1961.3. Applicability of the amendment to the second proviso to Section 40(a)(ia) with retrospective effect.4. Disallowance under Section 43B for EPF.5. Disallowance of gratuity payment to staff.Issue-wise Detailed Analysis:1. Legality of the CIT(A)'s Order Confirming Additions and Disallowances:The assessee challenged the CIT(A)'s order confirming the additions and disallowances made by the AO as illegal, arbitrary, and not in accordance with law. The Tribunal noted that ground No.1 is general in nature and did not require separate adjudication.2. Disallowance under Section 40(a)(ia) of the IT Act, 1961:The Tribunal examined the disallowance of Rs. 36,30,998/- under Section 40(a)(ia) for non-deduction of TDS on payments made towards commission, legal expenses, and audit fees. The assessee argued that the payments were genuine and that non-deduction of TDS is a separate issue. The Tribunal referred to the Supreme Court's decision in Shree Choudhary Transport Company Vs. ITO, which clarified that the amendment to Section 40(a)(ia) is applicable from AY 2013-2014 onwards and not retrospectively. The Tribunal upheld the disallowance, stating that the assessee failed to deduct TDS as required by law.3. Applicability of the Amendment to the Second Proviso to Section 40(a)(ia):The assessee contended that the amendment to the second proviso to Section 40(a)(ia) should be applied retrospectively, citing the Supreme Court's decision in CIT Vs. Doraisamy Chetty. However, the Tribunal, relying on the Supreme Court's decision in Shree Choudhary Transport Company, held that the amendment is applicable prospectively from AY 2013-2014. Therefore, the Tribunal dismissed this ground of appeal.4. Disallowance under Section 43B for EPF:The AO disallowed Rs. 1,15,570/- under Section 43B for EPF payments, as the assessee could not produce challan copies for the amount, which was in arrears from 2007-2008. The Tribunal sent the matter back to the AO for a year-wise breakup and verification of payments, allowing this ground of appeal for statistical purposes.5. Disallowance of Gratuity Payment to Staff:The AO disallowed Rs. 2,70,000/- for gratuity payments under Section 36(1)(v), and the CIT(A) confirmed this disallowance. The assessee argued that the payments were made as per RBI guidelines but failed to produce documentary evidence. The Tribunal remanded the matter to the AO for verification of whether the payments were made to an approved gratuity fund or any other prescribed fund, allowing this ground of appeal for statistical purposes.Conclusion:The Tribunal partly allowed the appeal for statistical purposes, remanding the issues of disallowance under Section 43B and gratuity payment to the AO for further verification. The other grounds of appeal were dismissed based on the Supreme Court's decision in Shree Choudhary Transport Company, which clarified the applicability of amendments to Section 40(a)(ia).