TMI Blog2011 (4) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst of assessee. Rent paid - under the provisions of section 40(a)(ia) - The claim of the assessee is that tax had been deducted and paid to the Central Government which was supported by the books of account and bank statement - The assessee could not produce the challan which was not traceable and which was the reason for disallowance - Hence, one more opportunity is required to be given to the assessee to trace the challan as it would not be proper to make addition if the tax had actually been deducted and paid to the Central Government - Accordingly restore the issue to the file of Assessing Officer for passing a fresh order after allowing opportunity of hearing to the assessee. - IT APPEAL NO. 5945 (MUM.) OF 2010 - - - Dated:- 20-4-2011 - D.K. AGARWAL, RAJENDRA SINGH, JJ. Bhupendra Shah for the Appellant. Sumeet Kumar for the Respondent. ORDER Rajendra Singh, Accountant Member. This appeal by the assessee is directed against the order dated 3-6-2010 of CIT(A) for the assessment year 2007-08. The assessee in this appeal has raised disputes on three different grounds. 2. The first dispute is regarding disallowance of expenditure of Rs. 42 lakhs inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer was however not satisfied by the explanation given. It was observed by him that the receiver was acting only as a representative of the firm and therefore he could have easily given the PAN of the erstwhile firm. He referred to the provisions of section 40(a)(ia) which provide that in case tax has not been deducted at source in respect of royalty payment or fees for technical services the amount paid could not be allowed as deduction while computing the total income. 2.2 The assessee disputed the decision of the Assessing Officer before CIT(A) and reiterated the submissions made before the Assessing Officer that the matter being in dispute and the receiver not having any PAN, the assessee did not deduct the tax at source. It was also submitted that payment by way of royalty was diversion of income by overriding title and therefore there was no income accruing to the assessee on account of royalty and there was no obligation of any TDS. CIT(A) was however not convinced by the arguments advanced. It was observed by him that the receiver had been appointed on behalf of the firm which had the license to operate the blood bank and therefore the royalty payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty. The assessee being the highest bidder, was to pay monthly royalty of Rs. 3-5 lakhs to the receiver. The total annual payment of Rs. 42 lakhs had been claimed by the assessee as deduction in the profit and loss account while computing the income of the business. The assessee had not deducted tax at source and therefore the Assessing Officer disallowed the claim under the provisions of section 40(a)(ia) which provides that in case of any payment on account of royalty etc. if the tax is not deduct at source, the claim has to be disallowed. The case of the assessee is that the arbitration proceedings between the two partners were still going on and it was not clear as to the name in which the income has to be assessed and therefore the tax was not deducted at source. It has also been submitted that the receiver did not have PAN which was necessary for payment of tax deducted at source. Another argument advanced by the assessee is that the payment of Rs. 42 lakhs was diversion of income at source in terms of the order of the High Court and therefore the income had not accrued to the assessee at all and thus there was no question of deducting tax at source. 2.6 We have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romoters had been permitted by the Executive committee for limited purpose of registering a cooperative society and not for carrying on any business. The promoters had collected large amounts from persons who were to be become members. Due to delay in formation of society, the money collected had been deposited in bank on which interest had been earned. The issue was whether the interest income could be assessed in the name of the promoter. It was held that the promoters were only acting as an agent of the principal who were the shareholders. The promoter did not have any title to the income which merely vested in the shareholder. Therefore there was no question of any overriding title of the shareholder because even initially the income vested in the shareholder and the promoters were merely acting as an agent. Income thus could not be taxed in the hands of the promoters either as AOP or Body of Individual. The case is obviously distinguishable and not applicable to the case of the assessee. The case would have been relevant if the issue was whether the royalty income should be taxed in the name of the firm on whose behalf it had been received or in the name of the receiver which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 3 lakhs being the rent paid by the assessee under the provisions of section 40(a)(ia). The Assessing Officer noted that the assessee had debited a sum of Rs. 3 lakhs on account of rent. The assessee submitted that it had deducted tax at source and paid to the Government and in support thereof filed ledger account of TDS. However the assessee could not file the TDS challan and TDS return. The Assessing Officer therefore did not accept the claim that tax had been deducted and accordingly disallowed the claim of Rs. 3 lakhs under section 40(a)(ia). In appeal CIT(A) confirmed the disallowance aggrieved by which the assessee has filed the present appeal. 3.1 Before us the Learned AR for the assessee submitted that the assessee had deducted tax and also paid to the Government which was supported by the books of account and the bank statement. The Assessing Officer had disallowed the claim on the ground that challan had not been produced. The assessee had not produced the challan as the same was not traceable. However, the assessee will produce the same before the Assessing Officer if opportunity was given. The Learned DR placed reliance on the orders of authorities below. 3.2 We h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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