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 warranted under Section 40(a)(i) as the second proviso, though inserted w.e.f. 1.4.2020, was curative and declaratory in nature requiring retrospective application. For FOM fees, the CIT(A)'s deletion was upheld since the chargeable sum resulted in loss, requiring no TDS withholding. The bank guarantee commission disallowance under Section 194H was also rejected, following the Tribunal's earlier decision that no TDS was required on such payments.

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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.

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