Deliverhealth Services Private Limited Vs DCIT (ITAT Delhi)
Clerical Error Can’t Create Tax Liability: ITAT Deletes Duplicate TDS DisallowanceNo Double Disallowance Under Section 40(a)(ia): ITAT Deletes CPC/NFAC Addition Where Assessee Had Suo Motu Disallowed 30%
The Delhi Bench “E” of the ITAT, in DeliverHealth Services Pvt. Ltd. v. DCIT (AY 2021-22), allowed the assessee’s appeal and held that no further disallowance can be made under section 40(a)(ia) when the assessee has already suo motu disallowed the prescribed 30% of expenditure for non-deduction of TDS.
The assessee had created year-end provisions for professional and other expenses payable to resident parties, following a consistent accounting practice of deducting TDS at the time of actual payment. Since TDS had not been deducted by the year-end, the assessee voluntarily disallowed 30% of such expenses under section 40(a)(ia) while filing the return. However, due to a clerical error in the tax audit report, the disallowance was wrongly reflected under section 40(a)(i) instead of section 40(a)(ia). Relying on this, the CPC made an adjustment, which was partly confirmed by the JCIT(A).
The Tribunal noted that:
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All payees were Indian residents, hence section 40(a)(i) was clearly inapplicable;
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Section 40(a)(ia) permits disallowance only to the extent of 30%; and
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The assessee had already disallowed 30% suo motu, evidenced from the return and computation.
Holding that the action of CPC and the appellate authority resulted in double disallowance of the same expenditure, the ITAT deleted the entire addition. The appeal was accordingly allowed in full, reaffirming that once statutory disallowance is correctly made by the assessee, no further adjustment is permissible
FULL TEXT OF THE ORDER OF ITAT DELHI
