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2014 (3) TMI 1187 - AT - Income TaxRevision u/s 263 - AO failed to verify the applicability of section 194C as well as Section 40(a)(ia) - assessee has taken the contention that M/s. Motibagh Industries Pvt. Ltd is assessed to tax paid on due income but the Commissioner was of the view that M/s Motibagh Industries has paid the tax is not relevant for applicable of Section 40(a)(ia) - HELD THAT:- We find that Section 40 (a)(ia) of the Act is applicable for non deduction of TDS on the expenditure as per the specified under section 40(a)(ia) of the Act, determines the disallow-ability of any expenditure. Consequently, if the assessee can establish that payee has paid tax and filed the return of income before the due date, the expenditure by the assessee shall be allowed in spite of the fact that tax has not been deducted on the same. The memorandum explaining the Finance Act, 2012 also states, “In order to rationalize the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, it is proposed to amend section 40 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee.” Then there will be no disallowance under section 40(a)(ia) of the Act. Therefore, we are of the view that the payee has also paid the tax, therefore, we are of the view that there cannot be any disallowance U/s.40(a)(ia) of the Act - when the Commissioner has taken view that this amount has to be added as income U/s 40(a)(ia). As per documents filed by the assessee, it is verified and found that the payee to whom the payments is made i.e. M/s. Motibgh Industries has accounted this amount in his profit and loss account. M/s. Motibagh Industries is assessed to tax. M/s. Motibagh Industries has already accounted the amount of ₹ 3245797/- in its profit and loss account and paid the tax. We find that M/s. Motibagh Industires, the payee, is assessed to tax and paid the tax before due date of his return. As per section 201(1), if the assessee has not deducted the tax but if the payee has furnished his return of income u/s 139 and has taken the amount of sum for computing the income in such return of income and has paid the tax on his income declared by him in such return of income and furnished certificate to this effect from an accountant in such form as may be prescribed, then, assessee will not be regarded as in default. In the instant case the payee has already paid the tax, and the assessee has produced the evidence before us. Therefore, we are of the view that there cannot be disallowance U/s. 40(a)(ia). - Decided in favour of assessee.
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