2017 (10) TMI 1631 - AT - Income Tax

Disallowance u/s 40(a)(ia) - Payment from the contract entered with the DTC for display of advertisement on DTC on their bus queue shelters and time keeper booths - HELD THAT:- AO after taking note of all documents has simply objected to admission of additional evidence, which in our opinion was not correct on the part of the AO.

When the mandate was given by the Ld. CIT(A) to verify the payment made to MCD which is flowing from the bank statement of the assessee placed before the AO during the course of assessment proceedings, then it was the duty of the AO to verify the same. CIT(A) has given a categorical finding that payment to MCD has been made through assessee’s bank account through cheque duly reflected in the bank account of DTC which is already part of the original record, which AO has not even bother to examine this issue at the time of assessment.

Complete failure on part of the AO himself while making such a disallowance u/s 40(a)(ia). Order of CIT (A) confirmed.

Since regular assessment of DTC, i.e., payee has been completed u/s 143(3) at a huge loss, wherein all the receipts of licence fee paid by the assessee has been reflected in its income, therefore, no disallowance is called for - We find that this fact that the payment made by the assessee is part of DTC’s receipts, has been duly noted by the Ld. CIT (A) - Once in the hands of the payee, receipts have been shown and income thereon has been assessed u/s 143(3), then no disallowance u/s 40(a)(ia) can be made in view of the second proviso to section 40(a)(ia) brought by the Finance Act 2012 w.e.f. 1.4.2013 which has held to be declaratory and curative in nature by cases including that of CIT vs. Ansal Land Mark Township (P) Ltd [2015 (9) TMI 79 - DELHI HIGH COURT] Thus the finding and observation of Ld. CIT (A) while deleting the said disallowance which has been reproduced above is affirmed and accordingly, ground raised by the revenue is dismissed.