2023 (2) TMI 910 - AT - Income Tax

Appeal partially allowed, AO to verify deductions, uphold disallowance under Section 40(a)(ia)

Saraf Exports Versus ACIT, Jhunjhunu.

The Tribunal partially allowed the appeal, directing the AO to verify and allow deductions in the year TDS was paid and to apply any future Supreme Court ... Disallowance made u/s. 40(a)(ia) - Exhibition Expense - Non deduction of TDS @0.01% - Assessee contented that for purpose of lower deduction of tax u/s. 197 receipient applied for deduction certificate and same was granted to him by his assessing officer - HELD THAT:- On this issue we have gone through the provision of section 40(ia). The law provide that if the assessee pays this tax then the same is allowable in the year when it is paid. Even the assessee on written submission sought relief that the AO be directed to allow the expenses in the year of payment of TDS. Looking to this provision and the specific relief sought by the assessee the ld. Assessing officer is directed to give the consequential relief in the year in which the tax has been paid by the assessee. In terms of these observation the ground are allowed for statistical purpose. Exemption of 80IB in respect of Duty Drawback - HELD THAT:- Assessee fairly admitted that the issue is pending before the supreme court which was decided by the ITAT against the assessee and has not been decided yet. Therefore, the assessee prayed that when the supreme court pass the order the consequential relief be implemented in the years also. The bench fairly admitted the plea of the assessee and the assessing officer is directed to give necessary appeal effect arising out of the order of the supreme court in the case of the assessee. As decided in assessee own case [2018 (2) TMI 1704 - ITAT JAIPUR] particular receipt which is found to be not income/profit derived from the business of the eligible undertaking has to be excluded for the purpose of computing the deduction u/s 80IB. Hence, we find that the case of the assessee does not fall in the category where the Assessing Officer has accepted the business of the assessee undertaking as eligible for deduction u/s 80IB in the initial year but has taken a difference stands in the subsequent years. Further, a year before us is not the first year in which the claim of the assessee u/s 80IB in respect of Vishesh Krishi Upaj Yojana and Drawback Duty has been denied but this was denied in the earlier years and for the Assessment Year 2008-09, the matter has been carried to the Hon’ble Jurisdictional High Court but the assessee could not succeed. Hence, we do not find any substance in the ground of the assessee’s appeal same is dismissed. Issues Involved:1. Disallowance under Section 40(a)(ia)2. Disallowance of Deduction under Section 80IB3. Charging of InterestDetailed Analysis:1. Disallowance under Section 40(a)(ia):The assessee claimed exhibition expenses of INR 1,74,509/- but failed to deduct TDS, leading to disallowance under Section 40(a)(ia). The assessee argued that no amount was payable at the end of the financial year, thus Section 40(a)(ia) should not apply. However, the CIT(A) and various High Court decisions (e.g., CIT vs. Crescent Export Syndicate, CIT vs. Sikandarkhan N Tunvar) held that the term 'payable' includes 'paid'. The assessee also failed to provide Form 26A as evidence. The Tribunal directed that if TDS was paid in subsequent years, the deduction should be allowed in the year of payment. The AO is instructed to verify and allow the deduction in the year TDS was paid.2. Disallowance of Deduction under Section 80IB:The AO disallowed the deduction of INR 18,52,184/- claimed under Section 80IB for Duty Drawback, citing the Supreme Court decision in Liberty India vs. CIT, which held that Duty Drawback does not form part of net profit for eligible industrial undertakings under Section 80IB. The CIT(A) upheld this view, supported by the Rajasthan High Court in CIT vs. Garment Crafts. The Tribunal acknowledged that the matter is pending before the Supreme Court and directed that any relief granted by the Supreme Court should be applied to the assessee's case.3. Charging of Interest:The charging of interest was deemed mandatory and consequential to the assessed income. The CIT(A) dismissed the ground, and the Tribunal upheld this decision.Conclusion:The Tribunal partially allowed the appeal, directing the AO to verify and allow deductions in the year TDS was paid and to apply any future Supreme Court decisions regarding Section 80IB deductions. The disallowance under Section 40(a)(ia) and the consequential interest charges were upheld.