TaxTMI 
TaxTMI 
2017 (10) TMI 419
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.... The CIT(A) has erred in law and on fact in deleting the addition of Rs. 42.66 lakhs made under section 40(a)(i) despite the fact that the assessee has not deducted tax at source as per the provisions of Section 195 of the Act. The CIT(A) has not appreciated the findings of the AO in the assessment order. [3] When this appeal was called out for hearing, learned counsel for the assessee raised a preliminary objection. She submitted that even if the plea of the Assessing Officer is to be accepted, since entire business income of the assessee is eligible for exemption under section 10A, it will be revenue neutral inasmuch as even if disallowance under section 40(a)(i) is upheld, the corresponding enhanced income eligible for sectio....
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....ribunal) 416 (Del)], in support of the position that by the virtue of non-discrimination clause in the respective tax treaty, a disallowance on account of non-deduction of tax from payment made to the nonresident cannot be more stringent than the provision for deduction of tax at source to resident. In any case, according to the learned counsel, disallowance under section 40(a)(i) will be on the same footing, as deduction under section 40(a)(ia), so far impact on taxable income is concerned. Learned Departmental Representative, on the other hand, submits that, as noted by the CBDT, the concession for not pursuing the appeal specifically refers to Section 40(a)(ia) and it cannot be extended to Section 40(a)(i). There is no need to bring in t....
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....(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been raised as to whether such higher profits would also result in claim for a higher profit-linked deduction under Chapter VI-A. 2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows: (i) If an expenditure incurred by as....
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....f the profits of the eligible business, and that deduction under Chapter VIA is admissible on the profits so enhanced by the disallowance. 4. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/Tribunals may be withdrawn/not pressed upon. The above may be brought to the notice of all concerned. [6] What has been accepted by the CBDT, as learned counsel rightly points out, is the principle that when a disallowance results in an enhancement of business profits but such an enhancement is revenue neutral inasmuch as related business profits, in totality, are eligible for deduction under chapter VI, such appeals need not be pursued. The reference to Sectio....
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....xt of the present proceedings, even as we take on record learned counsel's submission that, even on merits, the issue is now covered in favour of the assessee and that the assessee did not have any obligations to deduct tax at source at all. That aspect of the matter is wholly academic. In view of these discussions, and bearing in mind entirety of the case, we uphold the preliminary objection of the assessee and dismiss this ground of appeal as not maintainable. [7] Ground no. 1 is thus dismissed. [8] In ground no. 2 and 3, the Assessing Officer is aggrieved of the learned CIT(A)'s deleting the disallowance of Rs. 8.16 lakhs in respect of medical and life insurance premium, and of Rs. 12.89 lakhs in respect of late payment of employee....