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2015 (7) TMI 612 - AT - Income TaxRevision proceedings under section 263 by CIT(A) - assessee has not deducted TDS on management service fee and royalty, the debit to the profit and loss account, within the time frame prescribed u/s 40(a)(ia) of the Act, the expenses should have been disallowed - The assessee submits that as it had deducted and deposited TDS before the due date of filing of return, the provision of section 40(a)(ia) of the Act are not attracted - Held that:- We are not in agreement with the contentions raised by the assessee. The amendment made by the Finance Act 2010 extended the time of payment of tax deducted to the due date of filing of return u/s 139(1) of the Act. The tax had to be deducted only in the previous year only to avail the benefit of the amendment. Admittedly in the present case, tax had not been deducted by the assessee during the previous year and therefore disallowances ought to have been made for the payments made for management service fee as well as for royalty. The reasons stated by the assessee that the company was going through the process of demerger does not impress us at all. The provision of deduction on TDS are mandatory and strict in nature and cannot be given a go-by as done by the assessee. We are in agreement with the reasoning given in the impugned order of the ld. CIT that the assessee had failed to deduct TDS during the previous year on payments of management service fee and royalty debited to the profit and loss account. The order passed by the AO is therefore erroneous and prejudicial to the interest of the revenue. The twin conditions as laid down by the Hon’ble Supreme Court in the case of Malabar Industrial Co.Ltd vs CIT (2000 (2) TMI 10 - SUPREME Court) and the Hon’ble Delhi High Court in the case of CIT vs Vikash Polymers (2010 (8) TMI 745 - Delhi High Court ) are satisfied simultaneously in the present case. The Order passed by the AO suffers from non application of mind in as much as the mandatory statutory provision of section 40(a)(ia) of the Act were ignored. The ld. CIT was within its jurisdiction to invoke powers u/s 263 of the Act. The object of the provision is to correct the erroneous order which is prejudicial to the interest of the revenue, as the department has no right to file an appeal against the order of AO. Whether the ingradients of the section are satisfied will depend on the facts of each case. - Decided against assessee.
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