GST Helpdesk Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
What's New Case Laws Highlights Articles News Forum Short Notes Statutory TMI SMS More ...
Extracts
Home List
← Previous Next →

2016 (8) TMI 600 - ITAT VISAKHAPATNAM

2016 (8) TMI 600 - ITAT VISAKHAPATNAM - TMI - Disallowance of advertisement and professional charges u/s 40(a)(ia) - non dection of tds - Held that:- As relying on Merlyn Shipping & Transporters vs. ACIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ] no disallowance can be made under the provisions of sec. 40(a)(ia) of the Act, for non compliance of TDS provisions, if expenditure incurred is paid within the financial year. In the present case on hand, the assessee claims that out of the total disallow .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ricted to amounts remain payable at the end of the financial year. - Disallowance of interest paid on unsecured loan under sec. 40(a)(ia) - Held that:- The present case on hand, the assessee claims that the recipient had included the interest income in their books of accounts and discharged the tax liability on such interest. The assessee further claims that the assessee was not held as an assessee in default under the provisions of sec. 40(a)(ia) of the Act. Though, assessee filed relevant .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g return of income, then the A.O. is directed to delete the additions made towards interest paid on unsecured loans u/s 40(a)(ia) of the Act. - I.T.A.No.161/Vizag/2012, I.T.A.No.236/Vizag/2013, I.T.A.No.654/Vizag/2014 - Dated:- 17-6-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri C. Subrahmanyam,AR For The Respondent : Shri K. Ravi, DR ORDER PER G. MANJUNATHA, Accountant Member: These are two appeals filed by the assessee and one appea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing College, Post Graduate College and Polytechnic etc. The assessee neither registered u/s 12A nor registered u/s 10(23C)(vi) of the Income Tax Act, 1961. The assessee has filed return of income declaring income from other sources. The case has been selected for scrutiny and accordingly, notice u/s 143(2) was issued. In response to notice, the authorized representative appeared and submitted books of accounts and other information. During the course of assessment proceedings, the A.O. noticed t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ose of profit, therefore the income should be assessed under the head income from other sources. The assessee further submitted that the memorandum of Association or By -laws of any organization convey the objects and nature of activities that are to be carried out by the organization. The Society main objects are imparting education and it is pursuing its objects by running educational institutions. The Society has no business activity and hence, any surplus amount shall be assessed under the h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

service which comes under the head income from business or profession. The income from other sources is a residuary head of income, where income of every kind which is not to be excluded from the total income under this act, shall be chargeable to income tax under the head income from other sources, if it is not chargeable to income tax under any of the heads specified in section 14, items A to E of the Income Tax Act, 1961. The activities of the assessee are in the nature of business or trade, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ncome Tax Act, 1961 shall apply in addition to the other provisions of the Act. With these observations, the A.O. assessed the income under the head income from profits and gains of business or profession and made following additions. (i) Disallowance of personal expenditure ₹ 7,64,640/-. (ii) Disallowance of unpaid liability u/s 43B ₹ 2,01,199/-. (iii) Disallowance of expenditures u/s 40(a)(ia) ₹ 25,12,651/-. (iv) Excess Claim of Depreciation ₹ 2,41,547/-. (v) Disallowan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tted that the A.O. was not justified in invoking the provisions of sec. 28 to 44 of the Income Tax Act, 1961 as none of the provisions are applicable to the income of a charitable organization covered under sec. 2(15) of the Income Tax Act. It was further contended that it has solely existing for imparting education and it is continued to do the activities in accordance with the objects, therefore, the A.O. was not correct in concluding that the activities are in the nature of business and as a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tives, but the objectives in the trust deed/MOA is not material as for as Income Tax is concerned. Though there is claim of non-profit motive, it is undisputed that there is surplus created out of the same, year after year on continuous basis. Under the provisions of Income Tax Act, income of a person is to be computed under normal commercial principles and the income is to be determined under appropriate head of income as specified under sec. 14, items A to E based on the nature of activity. If .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nds for both the year s. From these grounds of appeal, the assessee has agitated three issues.i.e.(i) Head of income under which the income of the assessee is assessable, whether income from profits and gains of business or profession or income from other sources . (2) Disallowance of expenditures u/s 40(a)(ia) and (3) Disallowance of certain expenditures and unpaid liability u/s 43B. Similarly, the revenue in its appeal for the A.Y. 2010-11, has agitated the issue of deletion of addition made b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

grounds remains for our adjudication is disallowance of advertisement expenditure and other charges and interest on unsecured loans u/s 40(a)(ia) of the Act for non compliance with TDS provisions. 7. The first issue that came up for our consideration is disallowance of advertisement and professional charges u/s 40(a)(ia) of the Act. During the course of assessment proceedings, the A.O. noticed that the assessee has incurred advertisement expenses and professional charges without deduction of ta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/- a sum of ₹ 22,56,980/- and ₹ 9,27,393/- has been paid during the financial year before 31st March, therefore, in view of ITAT, Visakhapatnam Special Bench Decision, in the case of Merlyn Shipping & Transporters vs. ACIT, (2012)136 ITD 23, no disallowance can be made for the amounts which are paid during the same financial year. The assessee also relied upon the decision of Hon ble Allahabad High Court, in the case of Vector Shipping Services Pvt Ltd. Vs. CIT, 38 Taxmann.com 77 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ition made by the A.O. should be upheld. 8. We have heard both the parties and perused the materials available on record. The A.O. disallowed expenditures under the provisions of sec. 40(a)(ia) of the Act, for non deduction of TDS under Chapter XVII-B of the Act. The A.O. was of the opinion that any expenditure on which TDS provisions are not complied with respective TDS provisions, then deduction cannot be allowed towards such expenditure in view of clear provisions of sec. 40(a)(ia) of the Act .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

23, no disallowance can be made for the amounts which are paid during the same financial year. We find that the coordinate bench of this tribunal, in the case of Merlyn Shipping & Transporters vs. ACIT(Supra) held that no disallowance can be made on any expenditure which is paid during the same financial year. The relevant portion is reproduced as under: This appeal is preferred by the assessee against the order of the CIT(A) pertaining to the assessment year 2005-06. A reference u/s 255(3) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

constituted and the aforesaid question was answered in favour of the assessee. According to the majority view, it was held that section 40a(ia) of the Act is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which have already been paid during the year without deducting tax at source. 2. Issue involved in this appeal is with regard to the disallowance of payments of ₹ 38,75,000/- towards brokerage and ₹ 2,43,2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be invoked with respect to the aforesaid payments which were actually paid during the financial year but it can be invoked with respect to ₹ 1,78,025/- which remained payable as on 31.3.2005. Therefore, the disallowance is reduced to ₹ 1,78,025/- only. Accordingly, the order of the CIT(A) is modified. 9. Considering the facts and circumstances of the case and also respectfully following the coordinate bench decision(supra), we are of the view that no disallowance can be made under t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed purpose of verification of paid and payable. In case the expenditure is paid during the same financial year within 31st march, then no disallowance can be made. In other words disallowance u/s 40(a)(ia) should be restricted to amounts remain payable at the end of the financial year. 10. The next issue that came up for our consideration from assessee appeal in ITA.No.236/V/2013 and Revenue appeal in ITA.No.654/V/2014 is disallowance of interest paid on unsecured loan under sec. 40(a)(ia) of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ndinya Education Society has offered the interest income for taxation and filed the return of income. The assessee further submitted that the finance Act 2012, w.e.f. 1-4-2013 has inserted a second proviso, which states that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of chapter XVII-B on any such sum, but is not deemed to be an assessee in default under the first proviso to sub sec. (1) of sec. 201, then, for the purpose of this sub-claus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ia), if the recipient has included the such some in the return filed for the relevant assessment year. 11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. disallowed interest paid on unsecured loan under the provisions of sec. 40(a)(ia) of the Act, for the reason that the assessee has filed to deduct TDS on interest payments. The A.O. was of the opinion that any expenditure on which TDS provisions are not co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

whole or any part of the tax in accordance with the provisions of chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub sec. (1) of sec. 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such some on the date of furnishing of return of income by the resident payee referred to in the said proviso. 12. It is the claim of the assessee that the recipient Sri. Koundinya Education .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ya Education Society had accounted interest income of of ₹ 27,29,767/- in their books of accounts in two financial years, i.e. F.Y. 2007-08 ₹ 14,66,813/- and F.Y. 2008- 09 ₹ 12,62,954. Similarly, the assessee had paid interest of ₹ 50,13,728/- and the recipient had accounted interest income in the financial year 2009-10 and furnished a certificate from the Chartered Accountant under the provisions of sec. 201(1) of the Act, to the effect that the payee had discharged the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such some. 13. Having said that let us examine, whether second proviso inserted by the Finance Act, 2012, w.e.f. 1-4-2013 is prospective or retrospective in nature. The memorandum explaining the Finance Bill 2012 states that in order to rationalize the provisions of disallowance on account of non-deduction of tax at source from the payments made to resident payee, it is proposed to amend sec. 40( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Latest Notifications:

    Dated      Category

20-7-2017 Cus (NT)

18-7-2017 IT

18-7-2017 CE (NT)

18-7-2017 CE

18-7-2017 GST CESS Rate

15-7-2017 Kerala SGST

14-7-2017 Andhra Pradesh SGST

14-7-2017 Cus (NT)

14-7-2017 Cus

13-7-2017 Co. Law

13-7-2017 Co. Law

13-7-2017 ADD

13-7-2017 ADD

12-7-2017 Jammu & Kashmir SGST

12-7-2017 Gujarat SGST

12-7-2017 Gujarat SGST

12-7-2017 CGST Rate

12-7-2017 UTGST Rate

12-7-2017 UTGST Rate

12-7-2017 IGST Rate

More Notifications


Latest Circulars:

19-7-2017 Income Tax

18-7-2017 Customs

17-7-2017 Customs

14-7-2017 Income Tax

13-7-2017 Central Excise

13-7-2017 Customs

13-7-2017 Central Excise

13-7-2017 Customs

7-7-2017 Income Tax

7-7-2017 Goods and Services Tax

More Circulars



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version