Malhotra Cables Pvt. Ltd., New Delhi vs Assessee

Appellant by : Shri Nagesh Kumar Behl and Shri Amit Khurana, CAs. Respondent by : Shri P. Dam Kanunjha, Sr.DR..

Date of hearing : 24.03.2015 Date of pronouncement : 01.04.2015

ORDER

PER G.C. GUPTA, GUPTA, VP :

This appeal by the assessee for the assessment year 2009-10 is directed against the order of learned CIT(A)-IX, New Delhi dated 7th June, 2013.

2. The only ground of appeal of the assessee is as under:-

"CIT(A) erred in disallowing expenditure u/s 40(a)(ia) of the Act in respect of expenditure already "Paid" during the year as Section 40(a)(ia) disallowance applies only to amounts "payable" as of 31st March and not to amounts already "paid" during the year."

2 ITA-4712/Del/2013

3. The assessee has also filed the revised additional grounds of appeal, which are as under:-

"1. That learned AO erred in disallowing expenditure u/s 40(a)(ia) of the Act in respect of expenditure of Rs.5,61,264 already "Paid" during the year as Section 40(a)(ia) disallowance applies only to amounts "payable" as of 31st March and not to amounts already "paid" during the year.

2. That learned CIT(A) erred in disallowing expenditure u/s 40(a)(ia) of the Act in respect of expenditure of Rs.4,06,950 incurred on which no TDS was required to be deducted at source.

3. That learned CIT(A) erred in disallowing expenditure u/s 40(a)(ia) of the Act in respect of expenditure of Rs.59,438 on which TDS was already deducted at source.

4. That without prejudice to above grounds, learned AO erred in making disallowing of Rs.13,72,543 u/s 40(a)(ia) of the Act without holding assessee as "assessee in default" u/s 201 of the Act, in other words, AO erred in pronouncing sentence to the assessee without going through the process of "trial" specified u/s 201."

4. The learned counsel for the assessee submitted that the issue in the ground of appeal of the assessee would be covered with the revised additional grounds raised by the assessee.

5. The revised additional ground of appeal No.1 is as under:-

"That learned AO erred in disallowing expenditure u/s 40(a)(ia) of the Act in respect of expenditure of Rs.5,61,264 already "Paid" during the year as Section 40(a)(ia) disallowance applies only to amounts 3 ITA-4712/Del/2013

"payable" as of 31st March and not to amounts already "paid" during the year."

6. Learned counsel for the assessee submitted that the amount of `5,61,264/- of expenditure was already paid during the accounting period and, therefore, the provision of Section 40(a)(ia) of the Act does not apply to the same as it applies only to the amount "payable" as on the last day of the relevant accounting period.

7. Learned DR has opposed the submissions of the learned counsel for the assessee. He referred to the relevant portion of the assessment order in support of the case of the Revenue.

8. We have considered the rival submissions and have perused the order of the Assessing Officer and the learned CIT(A). We find that the issue is now settled that the provision of Section 40(a)(ia) of the Act shall apply only to the amount "payable" as on the last day of the relevant accounting year. Accordingly, the Assessing Officer is directed to verify the amount in question and, if the amount was already paid during the year and no expenditure remained "payable" as on the last day of the relevant accounting period, the provision of Section 40(a)(ia) of the Act shall not apply. We direct accordingly.

9. The revised additional ground of appeal No.2 of the assessee is as under:-

"That learned CIT(A) erred in disallowing expenditure u/s 40(a)(ia) of the Act in respect of expenditure of Rs.4,06,950 incurred on which no TDS was required to be deducted at source."

4 ITA-4712/Del/2013

10. The learned counsel for the assessee submitted that the expenditure of `4,06,950/- does not attract the TDS provisions and, therefore, there could not be any disallowance on this amount. Learned DR has opposed the submissions of the learned counsel for the assessee.

11. We have considered the rival submissions and have perused the order of the Assessing Officer and the learned CIT(A). In the facts of the case, we restore this issue to the file of the Assessing Officer with the direction to decide the issue de novo after verification that whether the TDS provisions were applicable on the expenditure of `4,06,950/- after allowing reasonable opportunity of hearing to the assessee. We direct accordingly.

12. The revised additional ground of appeal No.3 is as under:-

"That learned CIT(A) erred in disallowing expenditure u/s 40(a)(ia) of the Act in respect of expenditure of Rs.59,438 on which TDS was already deducted at source."

13. The learned counsel for the assessee submitted that TDS was already deducted on the amount of expenditure of `59,438/- and, therefore, there was no question of applicability of provisions of Section 40(a)(ia) of the Act. He submitted that the evidence of TDS having been made on this amount of `59,438/- is filed in the form of Form No.16A, copy filed at page 42 of the compilation filed before the Tribunal. Learned DR has relied on the order of the Assessing Officer.

14. We have considered the rival submissions. In view of the evidence filed by the assessee in the compilation before us to prove 5 ITA-4712/Del/2013

that the assessee has made the TDS on the expenditure of `59,438/-, we decide the issue in favour of the assessee and direct that no disallowance of `59,438/- be made under Section 40(a)(ia) of the Act. Accordingly, the revised additional ground No.3 of the assessee is allowed.

15. The revised additional ground of appeal No.4 of the assessee is as under:-

"That without prejudice to above grounds, learned AO erred in making disallowing of Rs.13,72,543 u/s 40(a)(ia) of the Act without holding assessee as "assessee in default" u/s 201 of the Act, in other words, AO erred in pronouncing sentence to the assessee without going through the process of "trial" specified u/s 201."

16. The learned counsel for the assessee submitted that the total disallowance under Section 40(a)(ia) of the Act was `13,72,543/- and, after considering the three amounts covered by the revised additional grounds of appeal No.1, 2 & 3, there remains the disallowance of `3,44,891/- under Section 40(a)(ia) of the Act. He submitted that the assessee was never held as "assessee in default" under Section 201 of the Act and, therefore, the provision of Section 40(a)(ia) of the Act was wrongly invoked on this amount. Learned DR has relied on the order of the Assessing Officer.

17. We have considered the rival submissions and have perused the order of the Assessing Officer and the learned CIT(A). We find that there is no force in the arguments of the learned counsel for the assessee on this issue and, since the amount of expenditure in question was not paid during the year and was "payable" as on the last 6 ITA-4712/Del/2013

day of the accounting year, the disallowance of `3,44,891/- was rightly made by the Assessing Officer and confirmed by the CIT(A) under Section 40(a)(ia) of the Act. Accordingly, the revised additional ground of appeal No.4 of the assessee is dismissed.

18. In the result, the appeal of the assessee is partly allowed.

Decision pronounced in the open Court on 1st April, 2015.

Sd/- Sd/- (N.K. SAINI) SAINI) (G.C. (G.C. GUPTA) GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT

VK.

Copy forwarded to: -

1. Appellant : M/s Malhotra Cables Pvt.Ltd.,

C/o Nagesh Behl & Co., Chartered Accountant, 21/25, Moti Nagar, New Delhi - 110 015.

2. Respondent : Income Tax Officer, Ward-

Ward-6(3), New Delhi.

3. CIT

4. CIT(A)

5. DR, ITAT

Assistant Registrar