TaxTMI 
TaxTMI 
2014 (1) TMI 1298
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....51,81,117/- and grant relief to the assessee on which tax has not been deducted at source. 2. The Commissioner of Income Tax (Appeals) failed to appreciate the fact that as per section 40(a)(ia) of the IT Act, the tax has to be deducted by the assessee on the payments made irrespective of whether paid or payable and that non-deduction of tax warrants action under section 40(a)(ia) of the Act. It is submitted that the Act does not distinguish between expenses made under section 28 and section 30 to 38 for the purpose of tax deduction at source and non-deduction warrants disallowance of expense under section 40(a)(ia) of the Act." 2. The assessee filed cross objection contending that hiring charges paid by t....
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....assessee are direct expenses allowable under section 28 of the Act and not under the provisions of section 30 to 38 for which the disallowance under section 40(a)(ia) attracts. According to the Commissioner of Income Tax (Appeals), the expenses allowable under section 30 to 38 only are liable for disallowance under section 40(a)(ia) of the Act but not the expenses allowable under section 28 of the Act. The Commissioner of Income Tax (Appeals) held that since the hire charges incurred by the assessee are direct expenses allowable under section 28 of the Act, the provisions of section 40(a)(ia) have no application. The Revenue is in appeal before us contending that the Income Tax Act does not distinguish between expenses made under section 28....
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....e case law relied on by both the parties. The Assessing Officer disallowed the hire charges paid by the assessee for non-deduction of TDS applying the provisions of section 40(a)(ia) of the Act. The Commissioner of Income Tax (Appeals) held that these hire charges incurred by the assessee are direct expenses and therefore allowable under section 28(1) of the Act to which the provisions of section 40(a)(ia) have no application. The Commissioner of Income Tax (Appeals) held that the provisions of section 40(a)(ia) apply only to the expenses which are allowable under section 30 to 38 of the Act. This logic and reasoning of the Commissioner of Income Tax (Appeals) was not accepted by the co-ordinate Bench of this Tribunal in the case of DCIT Vs....
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....made based on best of judgment. On such a factual situation, it was observed by the Bench that Section 40(a)(ia) covered only those items falling within Sections 30 to 38 of the Act. Here, on the other hand, books were not rejected by the Assessing Officer at all. Hence, in our opinion, the said decision will not help the assessee's case." 7. Similarly, the co-ordinate Bench of this Tribunal in the case of ITO Vs. Sarvodaya Mutual Benefit Trust (supra) did not accept the reasoning of the Commissioner of Income Tax (Appeals) that the provisions of section 40(a)(ia) have no application for the direct expenses allowable under section 28 holding as under:- "19. Next is the question of TDS and application of section 40(a)(ia) ....
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....to 43D. Section 36 specifically provides for other deductions allowable to an assessee. Section 36(1)(iii) provides for deduction of interest paid by an assessee. Section 37 provides a residuary provision for deducting other expenditure incurred in carrying on of the business, but not specified elsewhere. All these things show that law has provided a comprehensive system for deciding what are profits and gains of business or profession and how profits and gains of business or profession will be computed. When such an exhaustive provision is made in the Act, it is not possible to hold that section 28 itself provides for expenditure and, therefore, the assessee can claim the expenditure of interest payment as an expenditure deductible at sour....