2023 (12) TMI 498 - AT - Income Tax

ITAT allows TDS disallowances under Section 40(a)(i) citing retrospective application of second proviso

The ITAT Delhi ruled in favor of the assessee on multiple TDS-related disallowances. Regarding fees paid to FOWC, the Tribunal held no disallowance was ... Addition u/s 40(a) - withholding of TDS - assessee submits that the ground of the Department for disallowance of the gross fee paid to FOWC already stands decided against the Department by the Tribunal in assessee’s own case - as regards the disallowance of fee paid to FOM it is rightly deleted by the Ld.CIT(A) for both the reasons: (i) there was no chargeable sum in the gross fee and (ii) FOM had filed their returns and had paid their tax dues. HELD THAT:- In so far as the fee paid to Formula One World Championship Ltd. to UK (FOWC), we find that the issue stands covered in favour of the assessee by the order of the Tribunal [2023 (3) TMI 609 - ITAT DELHI] for the assessment years 2012-13 to 2014-15 as held no part of the RPC fee paid by the assessee is liable to be disallowed under clause(i) of s.40(a) because the second proviso clause (i) of Section 40(a) has been inserted w.e.f. 1.4.2020. The said proviso essentially provides that where the relevant income has been declared by the payee and tax thereon has been paid by him then no disallowance shall be made in the hands of the payer. This proviso is similar to the second proviso to clause(ia) of s.40(a) which was inserted w.e.f. 1.4.2013. Both these provisos were inserted to remove an anomaly and were therefore curative and declaratory in nature. Hence they had to be given retrospective effect. Fee paid to Formula One Management Ltd. of UK (FOM) - On careful observation of Ld.CIT(A), we noticed that the disallowance was deleted on the ground that the assessment made in FOM it was found that the chargeable sum resulted in loss therefore no withholding was required by the assessee the disallowance was rightly deleted. Grounds of Revenue on this issue are rejected. TDS u/s 194H - Disallowance of bank guarantee Commission - As decided in own case [2017 (9) TMI 241 - ITAT DELHI] no tax is required to be deducted on bank guarantee Commission u/s 194H of the Act was accepted. Respectfully following the decision of the Tribunal, we reject the grounds raised by the Revenue on this issue. Issues involved:The judgment involves appeals filed by the Revenue against different orders of Ld. CIT(Appeals)-II, Noida for the assessment years 2012-2013, 2013-14, and 2014-15.Issue 1 - Grounds of ITA No.1563/Del/2020 - AY 2012-13:The Revenue challenged the Ld.CIT(A)'s order, specifically regarding the disallowance under section 40(a)(i) of the Income Tax Act, 1961 related to fees paid to Formula One World Championship (FOWC). The Ld.CIT(A) restricted the disallowance to the chargeable sum, considering CBDT clarification, and also deleted the disallowance of bank guarantee Commission paid by the assessee under section 40(a)(ia).Issue 2 - Grounds of ITA No.1558/Del/2020 - AY 2013-14:Similar to the first issue, the Revenue contested the Ld.CIT(A)'s order concerning the disallowance under section 40(a)(i) related to fees paid to Formula One World Championship (FOWC). The Ld.CIT(A) restricted the disallowance and also deleted the disallowance of bank guarantee Commission paid by the assessee under section 40(a)(ia).Issue 3 - Grounds of ITA No.1559/Del/2020 - AY 2014-15:The Revenue raised similar contentions as in the previous issues, challenging the Ld.CIT(A)'s order regarding the disallowance under section 40(a)(i) related to fees paid to Formula One World Championship (FOWC) and Formula One Management Ltd. (FOM). The Ld.CIT(A) restricted the disallowance and deleted the disallowance of payment made to FOM under section 40(a)(ia).In the judgment, the Tribunal considered the arguments made by the Ld. Counsel for the assessee, which highlighted that the disallowance of fees paid to FOWC and FOM was not justified as the relevant income had been declared by the payees and tax had been paid. The Tribunal referred to relevant provisions and circulars, ultimately quashing the disallowances made by the AO and upheld by the CIT(A).Regarding the disallowance of bank guarantee Commission, the Tribunal noted that the issue had been previously addressed in the assessee's own case and held that no tax was required to be deducted on bank guarantee Commission, following the decision of the Hon'ble Delhi High Court. Therefore, the Tribunal dismissed the Revenue's grounds on this issue.In conclusion, the Tribunal rejected the appeals of the Revenue, upholding the decisions made by the Ld.CIT(A) in favor of the assessee.