Provisions relating to TDS not applicable on expenses crystallized and paid after the end of the year which allowed as deduction in subsequent year

Last updated: 05 July 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
On the facts and in the circumstances of the case and in law the ld. CIT(A) failed to appreciate that expenses of Rs.4,13,52,970/- was not incurred by the assessee wholly and exclusively for the purpose of its own business. On the facts and in the circumstances of the case and in law the ld CIT(A) erred in deleting the addition of Rs.5,92,50,885/- being reimbursement of brokerage on which assessee failed to deduct tax and was disallowed under the provisions of sec. 40(a)(ia) of the I.T. Act.”

Citation :
D C I T - 2(3). Room No. 555, Aayakar Bhavan M.K. Road, Mumbai 400020 Appellant Vs. M /s. Tata Asset Management Ltd Fort House, Upper Ground Floor 221, Dr. DN Road, Mumbai 400001 PAN - AAACT 1458 L Respondent

IN THE INCOME TAX APPELLATE TRIBUNAL

"H" Bench, Mumbai

Before Shri D. Manmohan, Vice President

and Shri Rajendra Singh, Accountant Member

ITA No.5844/Mum/2010

(Assessment Year: 2006-07)

D C I T - 2(3).

Room No. 555, Aayakar Bhavan

M.K. Road, Mumbai 400020

Appellant

Vs.

M /s. Tata Asset Management Ltd

Fort House, Upper Ground Floor

221, Dr. DN Road, Mumbai 400001

PAN - AAACT 1458 L

Respondent

Appellant by: Shri Goli Sriniwas Rao

Respondent by: Shri Niraj Sheth

Date of Hearing: 05.06.2012

Date of Pronouncement: 20.06.2012

O R D E R

Per D. Manmohan, V.P.

This appeal by the Revenue is directed against the order dated 01.04.2010 passed by the CIT(A)-6, Mumbai and it pertains to A.Y. 2006-07.

2. The following grounds were urged by the Revenue:-

“1. The order of the CIT(A) is opposed to law and facts of the case.

2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in deleting the disallowance of expenses of Rs.4,13,52,970/- claimed under the head ‘scheme expenses’ which were unascertained and not crystallized during the previous year.

3. On the facts and in the circumstances of the case and in law the ld. CIT(A) failed to appreciate that expenses of Rs.4,13,52,970/- was not incurred by the assessee wholly and exclusively for the

purpose of its own business.

4. On the facts and in the circumstances of the case and in law the ld CIT(A) erred in deleting the addition of Rs.5,92,50,885/- being reimbursement of brokerage on which assessee failed to deduct tax and was disallowed under the provisions of sec. 40(a)(ia) of the I.T. Act.”

3. At the outset it may be noticed that the impugned order of the CIT(A) was communicated to the appellant on 10.05.2010 and hence limitation for filing the appeal before the Appellate Tribunal expired on 09.07.2010 whereas the appeal papers were filed in the Registry of the ITAT on 20.07.2010 resulting in delay of 11 days. The learned D.R. submitted that the records were misplaced in the office of the CIT-2, Mumbai and hence authorization could not be received on time which resulted in delay in filing the appeal. The learned counsel did not raise any objection with regard to the time taken for filing the appeal. Under these circumstances we condone the delay and proceed to dispose of the appeal on merits.

4. We have heard the learned D.R. as well as the learned counsel for the assessee and carefully perused the record. The learned D.R. merely relied upon the order passed by the AO. On the other hand, the case of the assessee, which found acceptance with the CIT(A), was that the AO mislead himself of facts while making the disallowances; with regard to the first issue the AO was under the wrong impression in treating the reimbursement of ‘scheme expenses’ as “provision for expenses” whereas the fact remains that the expenses were crystallized and it was paid immediately after the end of the financial year and similar expenses were allowed as eligible for deduction in the subsequent year. With regard to applicability of section 40(a)(ia) of the Act also, the learned CIT(A) gave cogent reasons in holding that provisions relating to TDS are not applicable and on similar issue the matter was decided in favour of the assessee in respect of A.Y. 2007-08.

5. Though the Revenue challenged the order of the CIT(A), no material, whatsoever, was produced before us to contradict the findings of the CIT(A). Having regard to the circumstances of the case we are of the view that the order passed by the learned CIT(A) does not suffer from any infirmity and accordingly the appeal filed by the Revenue is dismissed.

6. In the result, appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 20th June 2012.

Sd/- Sd/-

(Rajendra Singh) (D. Manmohan)

Accountant Member Vice President

Mumbai, Dated: 20th June 2012

Copy to:

1. The Appellant

2. The Respondent

3. The CIT(A) – 6, Mumbai

4. The CIT– 2, Mumbai City

5. The DR, “H“ Bench, ITAT, Mumbai