2013 (7) TMI 622

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.... "(a) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT has rightly confirmed the order of the CIT (A) and thereby deleting the disallowance of Rs.1,17,68,621/- made by the Assessing Officer under section 40 (a) (ia) of the I.T. Act, 1961 by ignoring the fact that the company M/s Mercator Lines Ltd. had performed ship management work on behalf of the assessee M/s Vector Shipping Services (P) Ltd. and there was a Memorandum of Understanding signed between both the companies and as per the definition of memorandum of understanding, it included contract also." In the present case the A.O. disallowed expenses on the ground that under Section 40 (a) (ia) expenses could not be allowed as no tax was deducted at source ....

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....rned counsel for the department states that the A.O. had recorded findings that on the services for which assessee was claiming allowance of the expenses, tax was not deducted at source and thus the expenses on salaries to the employees could not be claimed. He submits that expenses were clearly disallowable under Section 40 (a) (ia) of the Act. We find that CIT (A) has recorded finding that the allowance was claiming for salaries on which TDS was deducted by M/s Mercator Lines Ltd. for the assessee. The circumstances in which salaries were paid by M/s Mercator Lines Ltd. were sufficiently explained and the explanation was accepted by CIT (A). The CIT (A) held:- "In the light of the above facts and following the ratio decidende of the....