Violet Commercial (P) Ltd, Kolkata vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH: KOLKATA [Before Shri P. K. Bansal, AM & Shri Mahavir Singh, JM] I.T.A No. 1528/Kol/2013 Assessment Year: 2008-09 M/s. Violet Commercial (P) Ltd. Vs. Commissioner of Income-tax-1, Kol. (PAN: AACCV0278L) (Appellant) (Respondent) Date of hearing: 21.05.2015 Date of pronouncement: 21.05.2015 For the Appellant: Shri Subash Agarwal, Advocate For the Respondent: Shri Sanjay, Addl. CIT, Sr. DR ORDER Per Shri Mahavir Singh, JM:

This appeal by assessee is arising out of revision order passed by CIT, Kolkata-1, Kolkata vide No. Nil dated 26.03.2013. Assessment was framed by ITO, Ward-1(2), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2008-09 vide his order dated 31.12.2010.

2. The only issue in this appeal of revenue contested by the assessee is as regards to revision order of CIT, Kol-1 u/s. 263 of the Act directing AO to disallow the payments, where short deduction of TDS was made by AO u/s. 194C of the Act @1% instead of TDS to be deducted u/s. 194-I @10% on rent. Before us, Ld. Counsel for the assessee made following submissions:

"The assessee paid machinery hire charges on which it deducted TDS at 1 % u/s. 194C. The AO claimed that the amount was in the nature of "rent" and TDS at 10% ought to have deducted u/s 194-1. A proportionate disallowance us/. 40(a)(ia) was made on the ground that there was a "failure" to deduct TDS on the payment. The Tribunal (48 SOT

515) upheld the assessee's plea that s. 40(a)(ia) disallowance could not be made when there was a shortfall in TDS deduction. On appeal by the department to the High Court, HELD dismissing the appeal:

S. 40(a)(ia) can be invoked only when the two conditions, namely, that tax is deductible at source and such tax has not been deducted is satisfied. Where tax is deducted by the assessee under a wrong provisions of TDS and there is a shortfall, s.40(a)(ia) disallowance cannot be made."

3. We find that this issue is covered by the decision of Hon'ble Calcutta High Court in the case of CIT Vs. M/s. S. K. Tekriwal (2014) 361 ITR 432 (Cal), wherein it has been held as under:

"S. 40(a)(ia) can be invoked only when the two conditions, namely, that tax is deductible at source and such tax has not been deducted is satisfied. Where tax is deducted by the assessee under a wrong provisions of TDS and there is a shortfall, s.40(a)(ia) disallowance cannot be made."

2 ITA No.1528/K/2013 Violet Commercial (P) Ltd. AY 2008-09

As the assessee has not contested the other issues, we find that the AO will verify this payment and will allow in view of the decision of Hon'ble Calcutta High Court, cited supra in respect of short deduction of TDS. Hence, we confirm the revision order passed by CIT u/s. 263 of the Act but the AO is directed to verify the details of TDS after allowing reasonable opportunity of being heard to the assessee. Appeal of assessee is dismissed.

4. In the result, appeal of assessee is dismissed.

5. Order is pronounced in the open court.

Sd/- Sd/- (P. K. Bansal) (Mahavir Singh) Accountant Member Judicial Member Dated : 21st May, 2015 Jd.(Sr.P.S.) Copy of the order forwarded to:

1. APPELLANT - M/s. Violet Commercial (P) Ltd., 28, Paikpara, Raja Manindra Road, Kolkata-700037.

2 Respondent -CIT-1, Kolkata.

3. The CIT(A), Kolkata

4. ITO, Ward-1(2), Kolkata

5. DR, Kolkata Benches, Kolkata /True Copy, By order,

Asstt. Registrar.