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2015 (3) TMI 236 - AT - Income TaxDisallowance u/s 40(a)(ia) - non deduction of TDS on rent paid to Kolkata Port Trust - Held that:- CIT(A) has deleted the disallowance for the reason that the payments made to Kolkata Port Trust do not attract the TDS provision. For this, he observed that "I find that the Kolkata Port Trust is under the Ministry of Surface Transport, where in the Govt. of India has full beneficial interest. Therefore, any payment made to Kolkata Port Trust will be covered u/s. 196 of the I. T. Act, 1961 and as such assessee's appeal on this ground is allowed." We find that the findings of CIT(A) is totally perverse and against law for the reason that the TDS from rent payment to Kolkata Port Trust is liable to TDS u/s. 194-I of the Act. Kolkata Port Trust is assessable entity within the provisions of Income Tax Act and it is not Government itself. It is a Corporate entity assessable to tax. Once the payment of rent on account of warehouse by the assessee was made to Kolkata Port Trust and is claimed as expenditure, the same is liable for TDS u/s. 194-I of the Act, for which the assessee has not deducted any TDS. The disallowance made by invoking the provisions of section 40(a)(ia) of the Act by the AO is within the provisions of law. Hence, we restore the disallowance and the order of CIT(A) is reversed - Decided in favour of Revenue. Non deduction of TDS for payments were towards the settlement of legal disputes with Services & Supplies India for which, during the pendency of settlement M/s. Khaitan & Co. - Held that:- Payment of ₹ 769746/- for legal settlement with Services & Supplies India that these payments were towards the settlement of legal disputes with Services & Supplies India for which, during the pendency of settlement M/s. Khaitan & Co., a law firm acted as sole arbitrator and held the money in Escrow account with them. We find that on settlement of dispute the sum of ₹ 769746/- was paid out of the Escrow Account to M/s. Services & Supplies India as compensation. This payment is on account of compensation not to M/s. Khaitan & Co. but to M/s. Services & Supplies India and this is not a legal fee necessitating deduction of tax at source as prescribed u/s. 194J of the Act. Once the provisions of section 194J of the Act are not attracted, the disallowance cannot be made by invoking the provisions of section 40(a)(ia) of the Act. - Decided against Revenue.
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