TaxTMI 
TaxTMI 
2016 (2) TMI 239
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....he Income Tax Act, 1961 were issued. In response to the notices, the assessee's Authorized Representative appeared from time to time and furnished books of accounts, bills and vouchers. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has incurred hire charges of Rs. 1,20,40,586/-, on which TDS @ 1.33% under sec. 194C of the Act was deducted. On examination of the details furnished by the assessee, the Assessing Officer noticed that the payments made by the assessee are in the nature of rent for hiring of vehicles and the applicable rate of TDS for hire charges is 10% under sec. 194I of the Act. The A.O. further observed that the assessee has short deducted TDS, which attracts disallowance under sec. 40(a)(ia) of the Act. With these observations, the Assessing Officer disallowed a sum of Rs. 1,03,65,405/- under sec. 40(a)(ia) of the Act for short deduction of TDS under sec. 194I of the Act. Similarly, the Assessing Officer noticed that the assessee has paid an amount of Rs. 59,87,134/- to subcontractors without deducting tax at source and which was disallowed under sec. 40(a)(ia) of the Act. During the course of assessment proceedings, th....
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....ee has paid the amount to the sub-contractors during the same financial year and nothing is payable at the end of the financial year. Therefore, in view of the Special Bench decision of Visakhapatnam ITAT, the provisions of sec. 40(a)(ia) are not applicable to the amount has been already paid within the same financial year. Therefore, additions made by the Assessing Officer should be deleted. As far as disallowance of various expenditure are concerned, the assessee submitted that the expenditure disallowed by the Assessing Officer is on higher side therefore, the disallowance made by the Assessing Officer may kindly be scaled down. 6. The CIT(A), after considering the explanations offered by the assessee and also applying the ratio of the Hon'ble Calcutta High Court judgment in the case of S.K. Tekriwal (supra), deleted the additions of Rs. 1,03,65,405/- towards hire charges. While doing so, the CIT(A) observed that the provisions of sec. 40(a)(ia) are not applicable, where the assessee has already deducted TDS and remitted the same to the government account. In case, the assessee has made short deduction of TDS, separate provisions are provided under sec. 201 & 201(A) of the ....
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....rala High Court has examined the issue in the case of CIT vs. M/s. P.V.S. Memorial Hospital Ltd. in ITA No. 16/2014, wherein the Hon'ble Kerala High Court upheld the action of the Assessing Officer, disallowing the expenditure under sec. 40(a)(ia) of the Act for short deduction of tax. Therefore, requested to uphold the order of the Assessing Officer. 9. We have heard both the parties and perused the materials available on record. The Assessing Officer disallowed hire charges under sec. 40(a)(ia) of the Act, on the ground that the assessee has not complied with the appropriate TDS provisions. The Assessing Officer was of the opinion that the disallowance under sec. 40(a)(ia) is applicable even the assessee deducted TDS, but fails to deduct TDS under the appropriate provisions of the Act. The CIT(A) deleted the additions made by the Assessing Officer by relying upon the judgment of Hon'ble Calcutta High Court in the case of S.K. Tekriwal (supra). During the course of hearing, the Authorized Representative of the assessee argued that the issue involved in this appeal is squarely covered by the decision of Hon'ble Calcutta High Court in the case of S.K. Tekriwal (supra). ....
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....a)(ia) of the Act has two limbs one is where, inter alia, assessee has to deduct tax and the second where after deducting tax, inter alia, the assessee has to pay into Government Account. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is a shortfall in deduction. With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act, but the facts is that this expression, '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 sec. 139. This sec. 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default under sec. 201 of the Act and no disallowance can be made by invoking the provisions of sec. 40(a)(ia) of the Act." 10. The Departmental Representative relied upon the Hon'ble Kerala High Cou....
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....orized Representative of the assessee submitted that the issue involved in this appeal is squarely covered by the decision of Special Bench of Visakhapatnam ITAT, in the case of Merilyn Shipping and Transports (supra). On the other hand, Departmental Representative strongly supported the order of the CIT(A). 13. We have heard both the parties and perused the materials available on record. The Assessing Officer disallowed the amount under sec. 40(a)(ia) of the Act, for non-deduction of the tax at source on payment of sub-contractors. The Assessing Officer was of the opinion that the assessee has made payment without deducting tax at source, which attracts disallowance under sec. 40(a)(ia) of the Act. The CIT(A) confirming the additions made by the Assessing Officer, held that the operation of Special Bench decision was stayed by the Hon'ble Andhra Pradesh High Court, therefore, the additions made by the Assessing Officer should sustain. We have gone through the case-laws referred by the Authorized Representative of the assessee in the lights of the facts of the present case. The Visakhapatnam Bench of ITAT, in the case of Merilyn Shipping and Transports (supra), under similar c....