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| The Tax Publishers2020 TaxPub(DT) 3820 (Mum-Trib) INCOME TAX ACT, 1961
Section 37(1)
Where assessee was engaged in selling home loans and financial products and AO made disallowance on account of alleged ad hoc provision made by assessee for unascertained liability, considering fact that provision was not for contingent expenditure as expenditure were already incurred and provision was made on certain basis for each head of expenses, and identity of recipient of the income and amount of payment could not be exactly quantified, disallowance made by AO was unjustified.
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Business expenditure - Allowability - Alleged provision made on ad hoc basis for unascertained liability -
Assessee-company was engaged in business of marketing and selling of home loans and other financial products. AO made disallowance on account of alleged ad hoc provision made by assessee for unascertained liability. AO further alleged that assessee did not comply with requirement of tax deduction at source on said expenses in terms of section 40(a)(ia). Held: CIT(A) granted relief to assessee by taking view that assessee was regularly following the practice of making provision for various expenses for month of March, which is reversed on 1st April of next year and that expenses were considered on the basis of actual payment in the subsequent year. CIT(A ) also concluded that these provision could not be held to be contingent expenditure as the expenditure were already incurred and the provision was made on certain basis for each head of expenses so that the accounts adopted by assessee represent a true and fair affairs of business and was with consistent of accounting standard. On issue of non-deduction of tax at source, CIT(A) agreed with submission of assessee that no disallowance can be made under section 40(a)(ia) as the scheme of TDS proceed on the assumption that the person whose liability is to pay income knows the identity of beneficiary or recipient of the income and that amount of payment should be exactly quantified. Order of CIT(A) was affirmed.
Distinguished:Abad Builders (P) Ltd. v. Asstt. CIT (2014) 43 Taxmann.com 128 (Coch-Trib.), Hardik Jigishbhai Desai v. Dy. CIT 2016 (11) TMI 668 (Ahd-Trib) 2016 TaxPub(DT) 4966 (Ahd-Trib), CIT v. Excel Industries Ltd. (2013) 358 ITR 295 (SC) : 2013 TaxPub(DT) 2414 (SC), Rotork Controls India (P) Ltd. v. CIT (2009) 314 ITR 62 (SC) : 2009 TaxPub(DT) 1730 (SC), Bharat Earth Movers v. CIT (2000) 245 ITR 428 (SC) : 2000 TaxPub(DT) 1505 (SC) CIT v. Triveni Engineering & Industries Ltd. (2011) 196 Taxman 94 (Delhi-HC) : 2011 TaxPub(DT) 667 (Del-HC), CIT v. Hinditron Services (P) Ltd. (2010) 321 ITR 263 (SC) : 2010 TaxPub(DT) 0168 (Bom-HC) and Aditya Birla Nuvo Ltd. v. Dy. CIT[(ITA No. 8427/Mum/2010, dated 17-9-2014] : 2015 TaxPub(DT) 3070 (Mum-Trib).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2015-16
IN THE ITAT, MUMBAI BENCH
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