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| The Tax Publishers2020 TaxPub(DT) 0175 (Ind-Trib) INCOME TAX ACT, 1961
Section 40(a)(ia)
Where commission paid by assessee was duly disclosed by deductee in his return of income, no disallowance under section 40(a)(ia) would be called for non-deduction of tax at source on such commission paid by the assessee.
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Business disallowance under section 40(a)(ia) - Non-deduction of tax at source - Commission payment made by assessee - Deductee duly disclosed commission in return of income
AO made disallowance under section 40(a)(ia) for non-deduction of tax at source on commission paid by assessee. Assessee contended that the deductee had duly disclosed the commission amount in his return of income thus, no disallowance was called for under section 40(a)(ia). Held: Section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non deduction of tax at source from payments for expenditure particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the law. Further, CBDT Circular No. 275/201/95-IT(B), dt. 29-1-1997 clarifies that “no demand visualized under section 201(1) should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee.” Therefore, the disallowance made under section 40(a)(ia) was deleted.
REFERRED : Hindustan Coca Cola Beverage (P.) Ltd v. CIT (2007) 293 ITR 226 (SC): 2007 TaxPub(DT) 1452 (SC) Rajeev Kumar Agarwal v. Additional CIT (2014) 45 Taxmann.com 555 (Agra): 2014 TaxPub(DT) 2460 (Agra-Trib)
FAVOUR : In assessee's favour
A.Y. :
INCOME TAX ACT, 1961
Section 37(1)
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