TaxTMI 
TaxTMI 
2017 (9) TMI 740
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.... 2 and 4 read as under : "2. On the facts and circumstances of the case and in law the Hon'ble Commissioner of Income Tax (Appeals)30 has erred in upholding the action of the AO in disallowing reimbursement of salary and related expenses to the tune of Rs. 4,99,19,593/for non-deduction of TDS u/s 40(a)(ia). 4. On the facts and circumstances of the case and in law the Hon'ble Commissioner of Income Tax (Appeals)30 has erred in upholding the action of the AO in disallowing reimbursement of administrative expenses to the tune of Rs. 2,39,64,463/for nondeduction of TDS u/s 40(a)(ia)." 5. As far as ground no.2 is concerned, the Tribunal understood it to mean that it is relatable and referable to ground nos.3 and 4, in the sense the Tribunal found that it is only Section 40(a)(ia) of the Income Tax Act, 1961 (for short, "the IT Act") which is the applicable provision. However, on a perusal of the order of the Assessing Officer and that of the Commissioner, we find that Section 40(ba) of the IT Act was also invoked and applied. The relevant finding on that aspect of the matter can be found in the order of the Assessing officer. In paragraph no. 4.2 and while dealing with the is....
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....to deduct the TDS as per the provisions of the IT Act which was admitted by the assessee. That is how the Assessing Officer, on remand report, also found that he is justified in disallowing expenditure of Rs. 4,99,19,593/on account of salary and other related expenses for non deduction of TDS under Section 40(a) (ia) of the IT Act. Pertinently, the Assessing Officer also noted in the order that the said disallowance is also warranted by the provisions of Section 40(ba). That is because in the case of association of persons, any payment of interest, salary, bonus, commission or remuneration by whatever name called, made by such association to a member of such association shall not be allowed as deductible expenditure. Therefore, on this ground also, the salary and related expenses need to be disallowed. The First Appellate Authority agreed with the Assessing Officer and confirmed this finding. 9. The aggrieved assessee approached the Tribunal. The assessee pointed out that it is a Joint Venture. The Joint Venture is with two companies, namely, ITD Cementation India Limited, an Indian Company and Italian Thai Development Public Company Limited, a foreign enterprise. The Assessing Of....
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....t that there is no question of invoking Section 40(ba) of the IT Act and merely because the Assessing Officer has referred to it does not mean that the Tribunal was obliged to render any finding about its applicability. We do not agree with the counsel for the assessee for more than one reason. The finding with regard to the applicability of Section 40(ba) is rendered in paragraphs 20, 21 and 22 of the Tribunal's order. These paragraphs read as under: "20. Now we divert our attention to the provision of section 40(ba). 21. The provision is very specific, because it calls for disallowance of payment of any kind by the AOP to its member. We would have accepted the arguments of the DR/AO/CIT(A), had the member of the assessee were an individual, because, the provision has the enrichment of members through back door. But here is the case of a company, which is a separate juridical person, distinct from its shareholders/directors. In the instant case, the payment has been made on account of reimbursement of an expense made by the company. Here the question of enrichment of a member does not arise, as has been held earlier that there is no profit element. 22. In such a circ....
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....uja for the Revenue would submit that even question no.(a1) as proposed and substituted by the amendment is a substantial question of law. We are unable to agree with him. That relates to a disallowance of administrative expenses at The concurrent finding in that regard of the Assessing Officer and the Commissioner of Income Tax (Appeals) has been set aside. 21. The Tribunal discussed this issue from paragraph 40 of the order under challenge. 22. The Assessing Officer noticed that the assessee had not deducted the Tax at Source while making payment on account of administrative expenses. That was paid by the Joint Venture to their Indian company, namely ITD Cementation India Limited. The payment was hit, according to the Assessing Officer, by Section 40(a)(ia) and thus disallowable. The Assessing Officer also held that even under Section 40(ba) this expense shall not be allowed because in the case of Association Of Persons, any payment of salary or remuneration by whatever name called, is not allowable. 23. The assessee contended that there were fresh materials to support it's contentions. The Commissioner of Income Tax (Appeals) therefore directed the Assessing officer to co....