Directors' commission payments treated as salary with Section 192 TDS deduction avoid Section 40(a)(ia) disallowance

ITAT Delhi held that commission payments to directors treated as salary with TDS deducted under Section 192 instead of Section 194H would not attract disallowance under Section 40(a)(ia). The tribunal found the issue covered by precedent where commission was included in Form-16 as salary component. Since Section 192 requires TDS deduction only at payment time and quantum of expenses was undisputed by Revenue, CIT(A)'s deletion of addition was upheld. Appeal decided against Revenue.

---

---

Issues:
Appeal against deletion of addition under Section 40(a)(ia) of the Income Tax Act for Assessment Year 2021-22.

Analysis:
The appeal was filed by the Revenue against the deletion of an addition under Section 40(a)(ia) of the Income Tax Act for the Assessment Year 2021-22. The controversy arose from the disallowance of an amount under Section 40(a)(ia) by the Assessing Officer due to non-deduction of tax on commission payment to directors under Section 194H, while the appellant treated it as salary and deducted TDS under Section 192. The appellant argued that the issue was covered by their own case for Assessment Years 2014-15 to 2016-17, where the Tribunal ruled in their favor. The Tribunal noted that the commission payable to whole-time directors was considered "salary income" and subject to TDS under Section 192, not Section 194J. The Tribunal also referred to a similar case where the disallowance was deleted and upheld by the High Court. The Tribunal found no infirmity in the order of the Commissioner of Income Tax (Appeals) in deleting the addition, citing precedent from the Mumbai Bench and the High Court of Bombay.

The Tribunal emphasized that Section 192 requires tax deduction on salary only at the time of payment, not accrual. The Tribunal also highlighted the importance of consistency in tax treatment, as demonstrated by the Mumbai Bench and the High Court's decisions in favor of the assessee. The Tribunal dismissed the Revenue's appeal, finding it devoid of merit and upheld the order of the Commissioner of Income Tax (Appeals) in deleting the addition under Section 40(a)(ia) of the Act for the Assessment Year 2021-22. The judgment was pronounced in open court on 05/07/2024.

---