2025 (8) TMI 623

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....Act, 1961 [in short, "the Act"] for A.Y. 2012-13, date of order 27/03/2025. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income tax- 5(1)(2), Mumbai, order passed under section 143(3) read with section 147 of the Act, date of order 12/12/2019. 2. During course of hearing Ld. AR stated that the tax effect involved in the appeal filed by the revenue is below the limit prescribed by the CBDT. In the assessment, the Ld.AO disallowed expenses amount to Rs. 42,18,986/- under section 40(a)(ia) of the Act, for non-deduction of TDS. The issue was carried before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal of the assessee. Being aggrieved the revenue preferred an appeal before the Bench. 3. The Ld. DR in ....

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.... account of non-deduction of tax at source. The Ld. AR has placed reliance on the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Income-tax v. V. M. Salgaonkar and Brothers (P.) Ltd., [2024] 169 taxmann.com 597 (Bombay), wherein the Hon'ble Court has adjudicated a similar issue in favour of the assessee. The relevant paragraphs of the said judgment are reproduced below for reference:- "12. In this view of the matter Ms Razaq submitted that the substantial questions of law on which both the present appeals were admitted clearly show that the dispute between the assessee and the Department relates to the nature of the transaction i.e. whether the payments made by the assessee towards sales and marketing s....

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.... was without reasonable cause. The amount of tax that could have been recovered from the payer would be equivalent to the amount that he would have had to deduct. Another collateral consequence that would flow is that the payer would suffer a disallowance of the expenditure that he had claimed as a deduction having regard to the provisions of section 40(a)(i) or section 40(a)(ia). In such circumstances for the assessment years that one is concerned with in the present appeals, the consequence would be that the expense that was claimed as a deduction on which tax was not deducted would be disallowed. 32. The present appeals raise one of the question as to whether the respondent is entitled to a deduction of the expenses incurred by ....

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..... 6/- would be determined to be the tax effect. On the other hand, in the case of a litigation pertaining to TDS, suppose on the aforesaid payment of Rs. 20/- tax at the rate of 15% would have to be deducted, then, in terms of clause 5.4 of the 15.03.2024 circular the tax effect would be calculated at Rs. 3/-. We find force in the submissions of the learned Senior Advocate that this is indicative of the fact that what is covered by para 3.1.l are cases springing out of a litigation from orders passed under section 201, 201(1A) etc. In the present appeals, the original order which was passed arises from an assessment framed under section 143(3) and, therefore, the exclusion contemplated in para 3.1. l would not apply and, accordingly, the ap....