Case Law Details
Shri A. Naga Srinivas Vs DCIT ( ITAT Hyderabad)
Assessee, an individual, deriving income from the activity of direction of cine films, has filed his return of income for the A.Y 2009-10 originally on 18.02.2010 admitting total income of Rs.45,25,330. The assessment order u/s 143(3) of the Act was passed on 14.12.2011 determining the taxable income at Rs.46,89,333 after making disallowance of 20% of the salary claimed i.e. Rs.1,64,000 only. Thereafter, the AO, on perusal of assessment records, observed that the assessee has debited an amount of Rs.20.00 lakhs in the P&L A/c for the A.Y 2009-10 as payment to M/s. Sumanth Art Production and that though the TDS needs to be made, the assessee has not deducted the TDS. He observed that in view of the above facts and as per section 40(a)(ia) of the Act, the entire expenditure has to be disallowed and brought to tax. Therefore, a show cause notice u/s 148 of the Act was issued to the assessee. The assessee requested for reasons for the reopening and the same was furnished to the assessee on 1.8.2013.
Thereafter, the assessee filed a letter explaining that he has received the sum of Rs.20.00 lakhs as advance for an upcoming project during the financial year 2006-07 relevant to the A.Y 2007-08 and that the TDS certificate was erroneously issued as payment of interest instead of professional fees. The confirmation from M/s Sumant Art Production was filed in support of the said contention. It was further submitted that the said production did not materialize and the advance was returned to the said party in the financial year 2008-09 relevant to the A.Y 2009-10 and by following the cash system of accounting it was debited to the P&L A/c. It was submitted that this transaction is not covered by the TDS provisions. The AO however, was not convinced with the assessee’s contentions and held that the return of money was subject to TDS and since no TDS was made, it is to be disallowed u/s 40(a)(ia) of the Act. Accordingly, he brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A), who confirmed the order of the AO and the assessee is in second appeal before us.
On Appeal ITAT held that advance received by the assessee towards his professional fee, when it is returned, is not covered by any of the provisions of Chapter XVIIB requiring TDS.
FULL TEXT OF THE ITAT JUDGMENT
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