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Court has held that amendment made in section 40(a)(ia) by Finance Act, 2010 is retrospective in nature and would apply from 01.04.2005. The said amendment provides that no disallowance under section 40(a)(ia) could be made where the TDS has been paid before the due date of filing of return of income. This is first ruling of any High Court on this issue.
ITO, Bharuch Vs The Ankleshwar Taluka ONGC (ITAT Ahmedabad)- It is pertinent to note that in the assessment order, the AO disallowed the entire payment made to the farmers amounting to Rs.2,57,62,253/- by invoking the provisions of section 40(a)(i) of he IT Act. Apart from this, the AO disallowed Rs. 51,47,250/- under Section 40A(3) of the Act. Thus, the disallowance of Rs.51,47,250/- was made twice i.e. once under Section 40A(3) and then invoking section 40(a(ia).
Valibhai Khanbhai Mankad vs DCIT (ITAT Ahmedabad) -Whether CIT(A) has erred in confirming the dis-allowance of Rs. 7,93,34,193/- u/s 40(a)(ia) on the ground that the assessee has filed Form No. 15J with CIT on 26.02.2009 instead of on or before 30th June, 2006 in as much the there is no failure to deduct tax at source under section 194C since the assessee has received Form No.15-I from the sub-contractors before making payment to them. Held , No The decision on deductibility of tax on payment made to sub-contractor is to be taken at time when contractor is releasing payments to sub-contractors and it is at that point of time second proviso to section 194C(3)(i) would come into play and when Form No. 15-I are submitted by sub-contractors to contractor, then contractor is not required to deduct tax from such payments, whereas compliance of third proviso can be deferred till 30th June of next financial year.
ITO Vs Millenium Writing Products Pvt Ltd. (ITAT Kolkata) Deduction u/s. 80IB of the Act is available to an assessee whose gross total income includes any profits and gains derived from eligible business as specified in the section. Here the assessee is claiming deduction on an item of disallowance made by the Assessing Officer on account of employees’ contribution to PF, which was not deposited within the due date. This is neither an item of profit or gain of eligible business nor an item of Profit & Loss Account or manufacturing account rather it is just an employees’ contribution to PF, which assessee has to collect from its employees and to deposit with the PF authorities within the due date prescribed.
Hemant Mangaldas Bhanushali Vs ITO (ITAT Mumbai)- The main ground on which the CIT exercised jurisdiction under section 263 of the Act, was the failure on the part of the Assessing Officer to make enquiries with regard to the applicability of the provisions of section 194C to the payments made by the assessee to other truck owners in the course of his business of transportation of cargo and the consequent dis-allowance that could be made under the provisions of section 40(a)(ia) of the Act. In para 3.1 of the impugned order of the CIT, the CIT has concluded that the order was erroneous and prejudicial to the interest of the revenue because of the lack of enquiry and application of mind by the Assessing Officer on the above aspect.
Bharati Shipyard Ltd. Vs DCIT (ITAT Mumbai Special Bench) – The Finance Act, 2010 has extended the time limit for depositing tax deducted at source by the due date u/s 139(1) of the Act from the earlier lesser time available for compliance.
DCIT, Chennai Vs M/s Aban Offshore Ltd (ITAT Chennai) – Whether disallowance u/s 40(a)(ia) is warranted for deduction of tax @ 1% on subcontract where the sub-contract is entered into to fulfill the conditions of the main contract and the same is not independent to the main contract ?
Delhi High Court in the case of DCIT v. Cargill Global Trading (I) (P) Limited on the issue of whether discounting charges paid to a non-resident on discounting of bills of exchange (BEs) can be characterized as ‘interest’, liable for withholding held that the discounting charges are not in the nature of ‘interest’ since they are not payable in respect of money borrowed or debt incurred by the Taxpayer.
Recently in the case of ACIT v. Indair Carriers Pvt. Ltd. [I.T.A. No. 1605 (Del) of 2010], the Delhi Income-tax Appellate Tribunal, held that payments made to non-resident freight forwarders are not chargeable to tax under section 9(1)(vii) of the Income-tax Act, 1961 and hence the payer is not liable to withhold tax under section 195 of the Act. Consequently, there is no question of disallowance of the amounts paid to non-resident freight forwarders under section 40(a)(i) of the Act.
Vinod K Nevatia (2011-TIOL-65-ITAT-MUM) CIT (A) has rightly deleted the addition applying the decision of Kotak Securities Private Limited and Angel Broking observing that transaction fees paid to the stock exchange could not be said to be fees paid in consideration of stock exchange rendering any technical services to the assessee. Therefore, provisions of section 9(1)(vii) and section 40(a)(ia) are not applicable.
