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2024 (2) TMI 835 - AT - Income TaxIssues involved: The appeal pertains to the disallowance of expenses under section 40(a)(ia) of the Income-tax Act, 1961 for the assessment year 2015-16. Summary: The appellant contested the disallowance of Rs. 1,08,59,584 under section 40(a)(ia) of the Act related to minimum guarantee expenses of Rs. 3,61,98,948. The Assessing Officer observed non-deduction of tax at source on these expenses and issued notices for explanation. The appellant argued that these payments were not governed by TDS provisions. However, the Assessing Officer disallowed the amount, stating non-compliance with TDS provisions. The CIT(A) upheld the disallowance under section 194C, despite the appellant's argument that the expenses were compensatory and not contractual. The Tribunal found that the appellant's business model involved compensating shortfalls in room occupancy, not carrying out work under section 194C. Therefore, the disallowance was deemed incorrect, and the Assessing Officer was directed to delete the addition. Judgment: The Tribunal allowed the appeal, concluding that the provisions of section 194C were not applicable in this case, as the appellant was compensating for shortfalls in room occupancy, not carrying out work under a contract. The disallowance under section 40(a)(ia) was deemed incorrect, and the Assessing Officer was directed to delete the addition.
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