TaxTMI 
TaxTMI 
2012 (4) TMI 495
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....missioner of Income Tax (Appeals) was not justified in confirming the addition of Rs 28,05,085 to total income made by the learned Assessing Officer in application of Section 40(a)(ia) and Section 194J of the said Act. 2. For that the learned Commissioner of Income Tax (Appeals) was wrong in holding that the appellant has raised composite bills for the entire works on its clients on presumptions and without taking into consideration the evidence adduced to him that there were separate bills issued by the appellant in respect of fees paid to the counsels and its own fees and tax was deducted at source from the payments made to the appellant in respect of such bills. 3. For that the learned Commissi....
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....ssessment proceedings were initiated on 29th June 2009. In the course of the resultant reassessment proceedings, the Assessing Officer noted that the assessee has made payments, aggregating to Rs. 30,30,140, to various lawyers for their professional services, but has not deducted tax at source under section 194 J from the same. The Assessing Officer was of the view that the assessee was under statutory obligation to deduct tax at source under section 194 J, and since the assessee has failed to perform this obligation, such payments are to be disallowed under section 40(a)(ia). After excluding some payments, which did not exceed the threshold limit for invoking tax deduction at source provisions, the Assessing Officer disallowed the balance ....
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.... books of accounts. As per accounting norms, the entire amount corresponding to the TDS certificates was to be shown as receipts and fees payable to the counsels should have been shown as expenditure. However, the appellant chose to reflect the net receipts in its profit and loss account, but claimed entire credit of TDS made by the its clients on the gross receipts, towards adjustment against its tax liability..................... 5.1 The contention of the AR that the fees paid or payable to the counsels were of the nature of reimbursements by clients is also not tenable. Had it been so, the clients would have deducted tax at source separately for the appellant and the lawyers/ counsels. It appears from the copy of TD....
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....rvices or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the prev....
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....t to be deducted under these sections. As a corollary to this position, unless a deduction is claimed in respect of the said amount, under sections 30 to 38, the disallowance under section 40(a)(ia) cannot come into play at all. 8. We have noted that it is assessee's contention that the amounts paid to the lawyers were reimbursed by assessee's clients, and, therefore, the amounts paid to the lawyers were never claimed as a deduction in the first place. It was then contended that when deduction is not claimed in respect of these amounts, there cannot be any occasion to invoke section 40(a)(ia). Learned CIT(A) has not disputed the legal contention embedded in this line of arguments, and rightly so, because the question of disallowance unde....
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....unsel and claimed reimbursements in respect of the same, these expenses cannot of such a nature as to seek deduction in respect of the same. When the expenses are being reimbursed by the clients, these expenses cease to be expenses of the assessee, and, therefore, there is no question of deduction in respect of the same. However, when assessee has raised composite bills for professional services, on gross basis and without giving details of payouts to outside lawyers on behalf of his clients, the payments to outside lawyers will be in the nature of deduction to be claimed by the assessee. Without there being any categorical finding to the effect that the payments to outside lawyers were claimed as deductions in computation of profits, the d....