Nidra Hospitality Gujarat Pvt. Ltd. Vs ACIT (ITAT Ahmedabad)
Form 15CB Filed, TDS Deposited & DTAA Followed – ITAT Deletes 201(1)/201(1A) Demand as No Default Exists
Assessee paid commission of Rs.23,52,460/- to non-residents during AY 2017-18. AO, during regular assessment u/s 143(3), disallowed 30% of the amount u/s 40(a)(i) alleging non-deduction of TDS. On that basis, AO separately passed order u/s 201(1)/201(1A) treating Assessee as “assessee-in-default” & raised demand of Rs.3,12,210/- (tax + interest). CIT(A) upheld the order without properly considering Assessee’s evidence.
Before Tribunal, Assessee demonstrated that TDS was duly deducted wherever applicable, Form 15CB was obtained for every non-resident payment, tax was deposited as per law, and Form 27Q (TDS return) was filed on time. Assessee also relied on DTAA provisions, explaining that certain payments to non-residents were not taxable in India and therefore TDS u/s 195 was not required. Further, Tax Audit Report (Form 3CD, Clause 34B) did not report any TDS default.
Tribunal noted that the Department failed to disprove any of the documentary evidence. It further observed that AO mechanically treated Assessee as defaulter simply because commission was paid to non-residents, without examining whether income was taxable in India under the Act or DTAA. Tribunal held that Section 195 requires TDS only when sum is chargeable to tax in India, and when Assessee has complied with DTAA & obtained Form 15CB, there is no failure under TDS provisions.
Since Assessee had either deducted TDS wherever applicable or was exempt under DTAA, there was no default u/s 201(1) & consequently no liability of interest u/s 201(1A). Tribunal held that both AO & CIT(A) were unjustified in treating Assessee as defaulter. Accordingly, Tribunal deleted the entire demand raised u/s 201(1)/201(1A) & allowed the appeal in full.
When Form 15CB is obtained, TDS is deducted/deposited wherever applicable & DTAA is followed, Assessee cannot be treated as “assessee in default”. Section 201(1)/201(1A) demand deleted. Appeal allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This is an appeal filed against the order dated 20-02-2025 passed by CIT(A)/Addl/JCIT(A)-2, Chandigarh for assessment year 2018-19.
2. The grounds of appeal are as under:-
“1. Your Appellant submits that CIT (Appeals) i.e. National Faceless Appeal Centre (NFAC) Chandigarh erred in passing order by confirming the order passed u/s 201(1)/201(1A) of the Act.
2. Your Appellant submits that the appellate order passed u/s 250 of the Act by the NFAC which is in haste and hurry and without giving reasonable opportunity of being heard to the appellant. The assessment was completed on presumption, guess work and the same be deleted.
3. Additions/disallowances under the following heads:
| Head of Additions disallowances | Additions Disallowance by the learned Assessing Officer and confirmed by the CIT (A) |
|---|---|
| 1) Failure to deduct TDS on Commission Expenses of Rs. 16,11,287/- as per provisions of Sec 195 of the Act.-Liable to pay the sum u/s 201(1) and-Interest Chargeable thereon u/s. 201(1A) of the IT Act. |
Rs. 1,61,129/-
Rs. 1,51,081/ |
| Total- | Rs. 3,12,210- |
4. Your appellant submits that as per Para 3 of the appeal order it is mentioned that appeal hearing notices were issued to the appellant on various dates and no compliances filed by the company in response to notices issued.
However, please note that appellant has not received any notices on the email id mentioned in the Form-35 i.e. bharat [email protected]. And because of that no response submitted to the notices issued.
5. The Assessing Officer has erred both in Law and in fact and invoking Sec. 201(1)/201(1A) of the Act and thereby making an unfounded addition of Rs 3,12,210/-.
6. During the course of regular assessment proceedings u/s 143(3) of the Act, the ld AO has erred in disallowing 30% of Commission Expenses of Rs. 23,52,460/- i.e. Rs 7,05,738 on the grounds that details & evidences for claim of the expenditure were not furnished. The ld. AO has erred in making a disallowance of the said expenditure without considering the fact and ignoring the all the relevant supporting details of expenditure, submitted during the e-assessment proceedings.
7. On the basis of disallowance u/s 143(3), the Ld. AO has initiated proceedings u/s 201 of the Act. And ignored the necessary supporting documents submitted during the assessment.
8. During the assessment proceedings u/s 201 of the Act, assessee has submitted all the relevant documents in support of claim that no TDS provisions applicable to the concerned clients.
Thus, not liable to pay the sum u/s 201(1A) of the Act and applicable interest thereon u/s 201(1A) of the IT Act, 1961.
It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly.
Your Appellant reserves right to add, alter, amend to withdraw any or all Ground of Appeal.”
3. The assessee filed return of income on 31-10-2017 thereby declaring loss at Rs. (-) 5,13,57,857/-. The assessment proceedings were completed u/s. 143(3) of the Act, 1961 on 27-12-2019 assessing total loss at Rs. (-) 5,03,31,550/- by making disallowances including disallowance u/s. 40a(i) r.w.s. 195 of the Income Tax act amounting to Rs. 7,05,738/- being 30% of Rs. 23,52,460/-. The Assessing Officer observed that as per schedule 26 of notes to accounts (profits and loss account), the assessee debited commission expenses at Rs. 24,00,460/- out of the commission payment of Rs. 23,52,460/- which included the non-residents without deducting TDS u/s. 195 of the Act. Since the assessee failed to deduct tax on commission paid to non-resident, the Assessing Officer treated the assessee as defaulter in making TDS on commission paid to non-residents and passed order u/s. 201(1) and 201(1A) of the Income Tax Act, 1961 vide order dated 30-07-2022.
4. Being aggrieved by the said order u/s. 201(1) and 201(1A) of the Act, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The A.R. submitted that the assessee has filed Form 35 before the CIT(A) with necessary supporting documents including the item-wise details of commission expenses amounting to Rs. 23,52,460/- related to financial year 2016-17 as per annexure -2 wherein it is clarified that TDS wherever applicable has been duly deducted by the assessee company in the relevant assessment year and duly filed its TDS return on time. Copies of acknowledgement of TDS return filed along with copies of Form 27Q for assessment year 2017-18 was also attached. The ld. A.R. submitted that the TDS was deducted in accordance with the provisions of the Income Tax Act and on the basis of Double Taxation Avoidance Agreement with countries of residents of the parties concerned. Form15CB was obtained for each transaction involving payment of non-resident taxation at source advised by the chartered accountant was duly deposited. On perusal of clause 24b of Form 3CD issued by the tax auditor, no none compliance on the part of the company with respect to deduction of tax at source was reported. Thus, the assessee is not to be considered as assessee in default as per provisions of section 201 of the Act.
6. The ld. D.R. relied upon the order u/s. 201(1) r.w.s. 201(1A) of the Act.
7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the payment was made to the non-resident and the assessee has submitted Form 15CB related to each transaction involving payment to non-resident and tax at source which was duly deposited by the assessee. The assessee at no point of time has defaulted as per TDS and the same was deducted in accordance with the provisions of the Income Tax Act as well as on the basis of DTAA with countries of residents of the parties concerned. Since the party was non-resident, the assessee has not deducted the tax at source and adhered to DTAA which is applicable in present case. Therefore, the Assessing Officer as well as CIT(A) was not right in treating the assessee as defaulter u/s. 201(1) r.w.s. 201(1A) of the Act. Thus, the appeal of the assessee is allowed.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 08-10-2025
