TaxTMI 
TaxTMI 
2010 (9) TMI 1094
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.... date and also given a show cause to explain why this amount may not be disallowed u/s.40(a)(ia) of the I.T. Act. In response to this show cause notice the assessee has submitted its reply which is discussed at page 2 par 4 of the assessment order. After considering the reply of the assessee the Assessing Officer has held that the assessee company has deposited TDS late in the Government Account therefore the provisions of section 40(a)(ia) are applicable to this case, accordingly Rs. 29,52,389/- was disallowed. The assessee submitted that TDS payment is towards payment of commission of res.27,97,190/-, professional fee of Rs. 1,21,541/- and payment to director of Rs. 33,658/-. 4. Aggrieved by the order of the Assessing Officer the assessee preferred the appeal before CIT(A). 5. The AR of the assessee submitted before the CIT(A) as under: "Section 40(a)(ia) as amended with retrospective effect from Finance Act, 2008 and Explanatory notes to the Finance Bill, 2004 issued by the CBDT vide circular No.5/2005 dated July 15, 2005 are both brought in to existence after end of Financial Year 2004-05, which were not known to the assessee during the Financial Year 2004-05. Considering....
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.... to that subsection by the Finance Act, (No.1) 2004. The amendment to section 40(a)(ia) introduced in the Finance Act, (No.2) of 2004 Act which got the assent of the President on 10.09.2004. Therefore as per section 294 any payment accrued and credited in the books both prior to 10.09.2004 would not attract the provisions of section 40(a)(ia)." 8. Further, section 40(a)(ia) has been amended by the Finance Act, 2008 with retrospective effect from 01.04.2005 providing that tax deducted during the last month of the previous year but paid before due date for filing of the return u/s.130(1) was al allowable deduction. The CBDT vide their circular NO.1 of 2009 dated 27.03.2009 (310 ITR 42 Statues), at Para 12.2 has clarified that to mitigate any hardship caused by the above provisions of section 40(a)(ia), while maintaining TDS discipline, the Act has amended provisions of sub clause (ia) of clause (a) of section 40. The amendment allows additional time (till due date of filing of return of income) for deposit of TDS pertaining to deductions made for the month of March so that disallowance under sub clause (ia) of clause (a) of section 40 is not attracted in such cases. 9. This provisi....
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....ovisions of sec.40(a)(ia) will not be applicable and (ii) expenditure in respect of which TDS has been paid by the assessee before the due date of filling of the return. However, expenditure on which TDS has not been paid by the assessee requires to be disallowed u/s.40(a)(ia). 12. The next issue is regarding addition to commission income received from M/s. Mahindra Holidays and Resorts India P Ltd.(MHRIL). The assessee earns commission from marketing the membership of club Mahindra. The assessee is entitled to commission at the fixed basis in respect of membership introduced to MHRIL. During the year the assessee has offered the commission income earned from MHRIL at Rs. 1,69,29,206/-. But the TDS certificate issued by MHRIL showed the total commission on which TDS has been deducted and paid as Rs. 1,73,82,260/-. Therefore, the Assessing Officer added a sum of Rs. 4,63,054/- as commission that has accrued but not offered by the assessee. 13. On appeal before the CIT(A), the assessee submitted that they are offering the commission income in respect of members introduced at the time of joining of the members in club Mahindra and offering the same as income. However, the club Mahin....
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....pt of installment of membership fees. Hence, the time of accrual of commission expenditure by MHRIL differs. 16. We are of the opinion that Assessing Officer cannot merely take the income as per TDS statement and arrive at the undisclosed income without examining the method of accounting of the assessee. Section 199 provides that credit for TDS shall be given in the year in which corresponding income has been offered for taxation. As pointed out by the learned counsel Shri Anil Sathe, section itself contemplates timing difference in recognition of the income by the recipient and deduction of tax at source by the payer. Therefore without examining the method of accounting of recognition of income by way of commission and whether the assessee has accrued the entire commission income following the mercantile system of accounting, the Assessing Officer erred in adding this amount of Rs. 4,63,054/- purely on the basis of TDS Certificate. 17. In the circumstance we delete the addition made on the basis of TDS Certificate. 18. The next issue is regarding disallowance u/s.40(a)(2)(b) Directors Major Madhur Katragadda and Ms Sonal Ajmera were paid commission of Rs. 5,24,427/- and Rs. 2,0....
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....sessee company has a number of employees working as Telemarketing Agents. Sales Executive, Managers and Customer Relation Executives etc. who are procuring business for the company and commission at the rate of 0.10% to 1% is paid to these employees. The directors of the company are mainly engaged in the all over control of the administration of the company affairs. Both the directors have been paid commission at the rate of 1.5% and 0.75% which was excessive as compared to commission paid to other employees of the company. Both the directors have specified and covered u/s.40A(2)(b) of the I.T. Act. The Assessing Officer has given a show case notice to explain what extra services are rendered by these directors and why the commission payment made at the higher rate may not be disallowed. The assessee has submitted its reply before the Assessing Officer almost the same has been submitted before me. From the perusal of the reply it is noticed that the assessee has failed to submit a documentary evidence to prove the extra services rendered by the directors of the company for payment of the commission at the higher rates. Since the directors are engaged in controlling the over all bus....