Case Law Details
Addl. CIT Vs Hiravati Marine Products Pvt. Ltd. (ITAT Rajkot)
Conclusion: Merely the payment of investigation charges to the chartered accountant firm was made by the bank on behalf of the assessee did not mean that the transaction was covered under the provisions of section 194A read with section 2(28A). As such the assessee was liable to deduct the TDS under section 194J and thus, assessee was not eligible for deduction for the expenses due to non-deduction of TDS.
Held: Assessee was under the obligation to make the payment of investigation charges carried out by the firm of chartered accountant appointed by the bank. But assessee failed to make the payment to the CA firm. Therefore, the banker had made the payment to the CA Firm on behalf of assessee which was recovered by bank from assessee by debiting its accounts in its books of accounts. AO held that there was non-deduction of TDS hence the expense was disallowed and added back to the total income of assessee. Now the issue arose whether the payment by assessee to the bank was not subject to TDS under section 194A read with section 2(28A) or 194C/194J. It was held that the primary liability of assessee was to make the payment to the chartered accountant firm. Thus merely the payment was made by the bank on behalf of the assessee did not mean that the transaction was covered under the provisions of section 194A read with section 2(28A). As such the assessee was liable to deduct the TDS under section 194J. Thus, assessee was not eligible for deduction for the expenses due to non-deduction of TDS under section 194J read with section 40a(ia). However, as per the 2nd proviso to the section 40a(ia), the expenses on account of non-deduction of TDS would not be disallowed if the recipient had included such receipts in its books of accounts and offered the same to tax. Therefore, in the interest of justice and fair play, the issue was set aside to the file of AO for fresh adjudication as per the provisions of law. AO will verify whether the recipient had included the receipt from the assessee in its books of accounts, if yes, then there would not be any disallowance on account of non-deduction of TDS under section 194J.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned Cross appeals have been filed at the instance of the Revenue and Assessee against the order of the Commissioner of Income Tax (Appeals) – Jamnagar [CIT(A) in short] dated 17/03/2010 and 24/01/2013 arising in the matter of assessment order passed under s.143(3) r.w.s. of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) dated 30/12/2010 relevant to Assessment Years (AYs) 2007-08 & 2008-09.
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