For Full Access To All Latest Judgments on Income Tax
Click Here To Subscribe Now
Take a tour of our Income-Tax Library

There is mandatory requirement under Chapter XVII-Bto deduct TDS under certain eventualities and in case of failure to do so, consequences have also been mentioned under Section 201 and With the insertion of second proviso to Section 40(a)(ia) and first proviso to Section 201(1), exception has been carved that subject to the fulfilment of condition as stipulated in first proviso to Section 201, the assessee shall not be treated as assessee in default and the expenses so claimed will be allowed.
Facts: For the assessment year 2011-12, the assessee filed income tax return declaring income of Rs. 9,30,492/-. The case was taken up in scrutiny. The assessing authority issued a notice to the assessee to show cause as to why expenses claimed of interest paid to M/s Bajaj Finance Ltd. and M/s Sabsons Agency Pvt. Ltd., without the deduction of tax at source (TDS) be not disallowed. The assessee filed reply to the notice. The Assessing Officer being dissatisfied disallowed under section 40(a)(ia) the expenses claimed of interest paid of Rs. 13,78,291/- to M/s Bajaj Finance Ltd. and Rs. 3,09,872/- paid to M/s Sabsons Agency Pvt. Ltd. Being aggrieved of the order, an appeal was filed before Commissioner of Income Tax (Appeals) [CIT(A)]. In appeal, the challenge was made against the disallowance of the expenses and also to the action of Assessing Officer making addition of Rs. 15,000/- holding the portion of expenses as personal expenses. CIT(A) partly allowed the appeal. Disallowance of expenses was upheld but the addition made of Rs. 15,000/- was set aside. Further, appeal was filed before the Tribunal. Appeal was fixed for hearing on 17.06.2016. A request was made on behalf of the appellant for adjournment to enable it to produce certificates under Section 201(1). Instead of granting adjournment, the Tribunal reserved the order and vide order dated 21.06.2016 dismissed the appeal. Hence, the present appeal.
Held, that first proviso to Section 201 stipulates that a person who has failed to deduct tax in accordance with provisions of Section XVII-B shall not be deemed to be an assessee in default, if a certificate is furnished from an accountant in a prescribed form to the effect that resident has furnished return of Income Tax under Section 139 ; has taken into account the sum received for computing income in the return of income tax and has paid tax due on the income declared by him in such return. There is mandatory requirement under Chapter XVII-B to deduct TDS under certain eventualities and in case of failure to do so, consequences have also been mentioned under Section 201. With the insertion of second proviso to Section 40(a)(ia) and first proviso to Section 201(1), exception has been carved that subject to the fulfilment of condition as stipulated in first proviso to Section 201, the assessee shall not be treated as assessee in default and the expenses so claimed will be allowed. In the facts of the present case and in view of the additional evidence adduced in this Court without expressing any opinion on the merits of the case, the matter is remanded back to the Assessing Officer to decide the issue of disallowance of expenses under Section 40(a)(ia) afresh after hearing the assessee and after considering the evidence produced by the assessee.

Shanti Prime Publication Pvt. Ltd.

Section 40(a)(ia) of the Income Tax Act, 1961 — Business Disallowance — There is mandatory requirement under Chapter XVII-Bto deduct TDS under certain eventualities and in case of failure to do so, consequences have also been mentioned under Section 201 and With the insertion of second proviso to Section 40(a)(ia) and first proviso to Section 201(1), exception has been carved that subject to the fulfilment of condition as stipulated in first proviso to Section 201, the assessee shall not be treated as assessee in default and the expenses so claimed will be allowed.
Facts: For the assessment year 2011-12, the assessee filed income tax return declaring income of Rs. 9,30,492/-. The case was taken up in scrutiny. The assessing authority issued a notice to the assessee to show cause as to why expenses claimed of interest paid to M/s Bajaj Finance Ltd. and M/s Sabsons Agency Pvt. Ltd., without the deduction of tax at source (TDS) be not disallowed. The assessee filed reply to the notice. The Assessing Officer being dissatisfied disallowed under section 40(a)(ia) the expenses claimed of interest paid of Rs. 13,78,291/- to M/s Bajaj Finance Ltd. and Rs. 3,09,872/- paid to M/s Sabsons Agency Pvt. Ltd. Being aggrieved of the order, an appeal was filed before Commissioner of Income Tax (Appeals) [CIT(A)]. In appeal, the challenge was made against the disallowance of the expenses and also to the action of Assessing Officer making addition of Rs. 15,000/- holding the portion of expenses as personal expenses. CIT(A) partly allowed the appeal. Disallowance of expenses was upheld but the addition made of Rs. 15,000/- was set aside. Further, appeal was filed before the Tribunal. Appeal was fixed for hearing on 17.06.2016. A request was made on behalf of the appellant for adjournment to enable it to produce certificates under Section 201(1). Instead of granting adjournment, the Tribunal reserved the order and vide order dated 21.06.2016 dismissed the appeal. Hence, the present appeal.
Held, that first proviso to Section 201 stipulates that a person who has failed to deduct tax in accordance with provisions of Section XVII-B shall not be deemed to be an assessee in default, if a certificate is furnished from an accountant in a prescribed form to the effect that resident has furnished return of Income Tax under Section 139 ; has taken into account the sum received for computing income in the return of income tax and has paid tax due on the income declared by him in such return. There is mandatory requirement under Chapter XVII-B to deduct TDS under certain eventualities and in case of failure to do so, consequences have also been mentioned under Section 201. With the insertion of second proviso to Section 40(a)(ia) and first proviso to Section 201(1), exception has been carved that subject to the fulfilment of condition as stipulated in first proviso to Section 201, the assessee shall not be treated as assessee in default and the expenses so claimed will be allowed. In the facts of the present case and in view of the additional evidence adduced in this Court without expressing any opinion on the merits of the case, the matter is remanded back to the Assessing Officer to decide the issue of disallowance of expenses under Section 40(a)(ia) afresh after hearing the assessee and after considering the evidence produced by the assessee.[2018] 48 ITCD 64 (P&H)