Disallowance u/s 40(a)(i)/ 40(a)(ia) unsustainable as amount not claimed as revenue expenditure

PCIT Vs Linde India Limited (Calcutta High Court)

Held that disallowance by invoking provisions of section 40(a)(i)/ 40(a)(ia) unsustainable as the alleged amount is not debited to the profit and loss account and accordingly not claimed as deduction under profits and gains of business or profession

Facts- The assessee company is engaged in the business of manufacture and sale of various industrial and mechanical gases, cryogenic and non-cryogenic plants and vessels. A show cause notice was issued to the assessee alleging that tax was not deducted at source in terms of the provisions of Section 40(a)(ia) of the Act in respect of the advances lying on 31-03-2007 for import of capital goods.

AO made disallowances under Section 40(a)(ia) of the Act. The Assessing Officer also enhanced the long term capital gain on sale of Chennai land by invoking the provisions of Section 50C of the Act.

Tribunal hold that no disallowance could be made u/s. 40(a)(i)/ 40(a)(ia) of the Act. On the issue of capital gains Tribunal directed AO to rework the capital gains by adopting Rs. 861 per square feet being guideline value in the same manner in which the learned DVO had carried out the valuation. Being aggrieved, the Revenue preferred this appeal under Section 260A of the Act.

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