2017 (1) TMI 1368 - HC - Income Tax

TDS u/s 194J OR 194C - whether incorrect deduction of tax has led to disallowance of expenditure under Section 40(a)(ia)? - Held that - The grievance raised herein could be raised by the petitioner s before the Income Tax Appellate Tribunal and appropriate interim reliefs should be sought from the Tribunal if so entitled. Mr. Suresh Kumar on instructions to allay the fears of the petitioner states that the respondent Revenue will not act upon the final assessment order passed by the Assessing Officer consequent to the direction of the DRP for a period of 4 weeks from the date of its communication to the petitioner on the above account. Mr. Suresh Kumar further states that there shall be no recovery and / or adjustment of the amounts refundable against the amounts payable by the petitioner on the disallowance of expenses under Section 40(a)(ia) of the Act on account of channel placement fees paid to the cable operators for a period of 4 weeks from the date of communication of the final assessment order of the Assessing Officer to the petitioner. In view of the above statement made on behalf of the Revenue Mr. Kaka learned Senior Counsel appearing for the petitioner seeks to withdraw the present petition.The Petition is disposed of as withdrawn.

Summary

Issues:
Challenge to order of Dispute Resolution Panel under Section 144C of the Income Tax Act, 1961 regarding incorrect deduction of tax under Section 194J instead of Section 194C leading to disallowance of expenditure under Section 40(a)(ia) of the Act.

Analysis:
The petition filed under Article 226 of the Constitution challenges the order passed by the Dispute Resolution Panel (DRP) under Section 144C of the Income Tax Act, 1961. The impugned order confirmed the draft assessment order by the Assessing Officer, which held that the petitioner should have deducted tax under Section 194J instead of Section 194C, resulting in disallowance of expenditure under Section 40(a)(ia) of the Act. The petitioner contended that the DRP ignored binding decisions of the Tribunal in their case, which held that tax deductions should be under Section 194C. Despite this, the DRP upheld the Assessing Officer's view, stating it was necessary to protect the Revenue's interest. The petitioner argued that the Assessing Officer was obligated under Section 144C(13) to implement the DRP's order promptly, leading to potential tax recovery and adjustment of refunds.

The respondent, representing the Revenue, pointed out that the petitioner had the option to appeal the Assessing Officer's order following the DRP's direction. The Revenue assured that they would not act on the final assessment order for four weeks from its communication to the petitioner. Additionally, there would be no recovery or adjustment of amounts refundable against amounts payable due to the disallowed expenses under Section 40(a)(ia) for the same period. In light of this assurance, the petitioner's Senior Counsel sought to withdraw the petition, leading to its disposal.

Therefore, the High Court disposed of the petition as withdrawn based on the assurance provided by the Revenue regarding the final assessment order and the period of non-action on recovery or adjustment of amounts payable by the petitioner.