Appellant's Appeal Partially Allowed: Restrictions on Disallowances & Salary Expenses Overturned

The Tribunal partially allowed the appellant's appeal, restricting disallowances under section 40(a)(ia) to 30% of expenses where TDS should have been deducted. Additionally, a 25% disallowance of salary expenses for specific employees was directed, overturning the CIT(A)'s decision based on assumptions and incomplete verifications.

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Issues:
1. Disallowance of expenses under section 40(a)(ia) of the Income-tax Act, 1961.
2. Disallowance of salary expenses under section 40(a)(ia) of the Act.

Issue 1: Disallowance of expenses under section 40(a)(ia) of the Income-tax Act, 1961:
The appellant challenged the disallowance of expenses under section 40(a)(ia) for non-deduction of TDS on consultation expenses. The appellant argued that the amendment made by the Finance Act, 2014 should restrict the disallowance to 30% of the expenses, citing it as curative and retrospective. The Tribunal noted that various Tribunal decisions, including Delhi Benches, held the amendment as curative. Relying on the precedent set by these decisions, the Tribunal directed the Assessing Officer to restrict the disallowance to 30% of the amount paid where TDS should have been deducted, partially allowing ground No. 1.

Issue 2: Disallowance of salary expenses under section 40(a)(ia) of the Act:
Regarding the disallowance of salary expenses under section 40(a)(ia), the Assessing Officer disallowed a significant amount for non-compliance with section 194H. The CIT(A) allowed a portion of the expense but questioned the legitimacy of 42 employees' salaries. The Tribunal observed that the CIT(A) based its decision on assumptions and incomplete verifications. Considering the circumstances, the Tribunal decided not to remand the matter to the Assessing Officer and instead directed a 25% disallowance of the salary expense for the 42 employees. Consequently, ground No. 2 was partially allowed.

In conclusion, the Tribunal partially allowed the appeal of the assessee, restricting the disallowances under section 40(a)(ia) to 30% of the expenses where TDS should have been deducted and directing a 25% disallowance of salary expenses for certain employees.

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