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2017 (6) TMI 1114 - AT - Income TaxTDS u/s 194J - disallowance u/s. 40(a)(ia) - non-deduction of tax on MICR charges paid to Clearing House, i.e., expenses paid by various branches of the assessee, J & K Bank Ltd. - Held that:- CIT(A), while deleting the disallowance, has observed that MICR charges representing “Magnetic Ink Charter Recognition”, are cheque clearing charges. It is an undisputed fact that the machine involves recognized numeric data printed with magnetic charged ink. This is done with the help of ultraviolet rays, which scans the genuineness of the cheques. Apparently, human intervention is not required in MICR clearing of cheques, which involves examining technical data, analyzing them and making them useful for subsequent use. MICR clearance of cheques is possible only by a mechanized system, considering that the processing is of cheques in bulk. A similar situation had presented before the Hon’ble Supreme Court in the case of ‘CIT vs. Bharti Cellular Ltd. (2010 (8) TMI 332 - Supreme Court of India) following which it was, that the ld. CIT(A) held the provisions of section 40(a)(ia) of the Act not to be attracted. The ld. CIT(A) followed his own order in the assessee’s case for A.Ys. 2007-08 and 2009-10 in deleting the disallowance.- Decided against revenue Addition in respect of disallowance of depreciation on wooden partitions - Held that:- Assessee to be entitled to 100% depreciation, observing that the structure in the form of wooden partition was purely a temporary wooden structure on a rented premises, giving no advantage of enduring nature; and that similar disallowances have been deleted in the assessee’s own cases for A.Ys. 2005-06 to 2009-10. Addition u/s.40(a)(ia) on account of short TDS as reported in Annexure “J” of the Tax Audit Report of the assessee bank - Held that:- Section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s. 201 of the Act and no disallowance can be made by invoking the provisions of section 40{a)(ia) of the Act. Accordingly, we confirm the order of CIT (A) allowing the claim of assessee and this issue of revenue's appeal is dismissed. Non-deduction of tax on interest paid to Jammu Development Authority - Held that:- It has not been disputed that Jammu Development Authority stands incorporated by the J & K Development Act, 1970. C.B.D.T. Notification no.3439, dated 27.10.1970, issued, in pursuance of the provisions of section 194A(3)(f) of the Act, provides that no tax was required to be deducted on interest on deposit paid to a Corporation incorporated under a State Act. The position is not any different so far as regards J.D.A. incorporated under the said State Act, too. Therefore, the provisions of section 194A of the Act are not applicable, due to which, the provisions of section 40(a)(ia) are also not attracted. Disallowance u/s. 14A - Held that:- Before invoking Rule 8D of the IT Rules and making additional disallowance, the AO was required to record his satisfaction as to the incorrectness of the claim of the assessee; that in the year under consideration, the bank had shown that the investments, from which income had been earned, stood treated as stock in trade rather than investment; that the assessee had not claimed exemption on this income; that as such, the assessee had offered its income and had not considered the income to be part of its total income; that therefore, section 14A of the Act was not applicable and it could not have been invoked; that had the assessee claimed this income exempt, it was exactly the same as in the earlier years, in which years, it was held that in view of the assessee’s own funds, no disallowance of interest cost could have been made and that in view of the fact that management cost is fixed, whether or not this is exempt income as earned, there cannot be any management cost relating to this exempt income earned; and that a similar disallowance has been deleted by him [the ld. CIT(A)] in the assessee’s case for A.Y 2009-10. Disallowance on account of prior period expenditure - TDS laiability - Held that:- merely passing a debit entry of these expenses in the books of account, would not be sufficient for claiming the deduction in the present account in the concerned year and then also, the deduction would not be admissible, unless tax has been paid on such amount; and that the proviso to section 40(a)(ia) makes it clear that if tax has been deducted in the subsequent year and paid, then deduction would be allowed in that year. It may be important for accounting purposes, passing of a debit entry in the books of account, concerning the expenses in the year in which the expenses were incurred, for the purposes of section 40(a)(ia) of the IT Act, it is not determinative of the deductibility – particularly the year thereof. In view of the above, the grievance raised by the assessee is quite justified and it is accepted as such. The CIT(A)’s order is reversed. The addition is deleted.
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