No disallowance u/s 40(a)(ia) for TDS deduction under Wrong Provision under a bonafide belief

We noted that in both the cases the assessee was of the opinion that tax had to be deducted under section 194C @2% but the Revenue was of the view that tax has to be deducted under section 194J @10%. Therefore, the AO applied provisions of Section 40(a)(ia) and made the disallowance in respect of both the expenditures. Before us the learned D.R. relied on the decision of the Hon’ble Kerala High Court in the case of CIT vs. PVS Memorial Hospital Ltd. 60 taxmann.com 69 copy of which was placed before us in which it was held that deduction under a wrong provisions of the law will not save an assessee from section 40(a)(ia), i.e. where the tax was deductible under section 194J but was actually deducted under section 194C, such a deduction would not meet the requirements of section 40(a)(ia). We noted that prior to this decision the Hon’ble Calcutta High Court in the case of CIT vs. S.K. Tekriwal 361 ITR 432 vide order dated 3^rd December, 2014 taken a view by which the Hon’ble High Court dismissed the appeal of the Revenue against the order of the Tribunal by holding that where tax was deducted by the assessee, though under a bona fide wrong impression under wrong provisions, the provisions of Section 40(a)(ia) could not be invoked and if there was any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various tax deduction at source provisions, the assessee could be declared to be an assessee in default under section 201 but no disallowance could be made invoking the provisions of Section 40(a)(ia).

Full Text of the ITAT Order is as follows:-

Out of these four appeals two appeals are filed by the assessee while the other two appeals are filed by the Revenue for against the orders of the CIT(A) – 4, Mumbai dated 13.02.2017 and 06.02.2017 for assessment years 2011-12 and 2012-13 respectively.

2. In both the appals filed by the assessee in both the years assessee has taken a common ground in respect of disallowance made under section 40(a)(ia) except the change in figures. Both the parties agreed that the appeals of the assessee may be decided on the basis of the facts relating to A.Y. 2011-12. During A.Y. 2011-12 the assessee has taken the following effective grounds of appeals: –

“1.   Commission of Rs. 33,86,68,406/-

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