Mahaonline Ltd. Directorate of Information Technology Vs CIT (Appeals) (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai has partially allowed the appeal of Mahaonline Ltd., quashing a disallowance of ₹31.34 lakh made under Section 40(a)(ia) of the Income Tax Act, 1961. The dispute pertained to the Assessment Year 2017–18 and involved payments that the Assessing Officer (AO) claimed were subject to Tax Deducted at Source (TDS) provisions. The disallowance was originally upheld by the National Faceless Appeal Centre (NFAC), Delhi.
The core issue stemmed from payments amounting to ₹1.04 crore made by the assessee during the year, with 30% (₹31.34 lakh) disallowed for failure to deduct TDS. A significant portion of the disallowed amount included payments to government entities such as the Government of Maharashtra and related departments. Mahaonline Ltd. argued that these payments were not liable for TDS, citing a coordinate bench decision in the case of Tata Consultancy Services, where similar payments to the government were held outside the scope of TDS provisions.
The Tribunal accepted the assessee’s argument that payments of ₹43.2 lakh and ₹34.55 lakh to state government bodies were exempt from TDS. On the payment of ₹19.85 lakh to Village Level Entrepreneurs (VLEs), it was demonstrated that no payment or credit occurred during the year under consideration. The Tribunal noted that when payments were made in later years, the assessee complied with TDS requirements and submitted Form 16A certificates. Additionally, the provision created for ₹6.72 lakh towards outsourcing was shown to have been reversed subsequently, eliminating the requirement to deduct TDS.
