INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Expenditure on account of TDS on export commission - Assessee claimed that expenditure incurred as contractual obligation--No material to substantiate assessee's claim

Assessee-company was engaged in business of manufacturing piston rings, semi-finished castings, etc. It claimed expenditure on account of TDS on export commission. AO was of the view that TDS being in nature of income-tax would not be allowable as expenditure. CIT(A) also sustained the disallowance made by the AO. Assessee submitted that it paid TDS on export commission as per terms of agreement. Therefore, such expenditure being incurred as per contractual obligation would be allowable under section 37(1). Held: No material was brought on record to show that the assessee had to bear the TDS liability on account of the payees as per any contractual agreement. Therefore, in absence of any material evidence, no factual finding could be recorded to the effect that the assessee incurred such expenditure in terms of any contractual obligation. If the assessee through proper evidence could prove that the TDS liability was incurred by it in terms of any contractual obligation, the said expenditure would be allowable. However, existence of contractual obligation required factual verification by the AO. Therefore, the issue was remanded to the AO for factual verification and if it was found that the expenditure was incurred on account of contractual obligation, the same would be allowable.

REFERRED : Asstt. CIT v. Bobcards Ltd. (2013) 29 Taxmann.com 234 (Mum)(Mag) : 2013 TaxPub(DT) 1005 (Mum-Trib).

FAVOUR : Matter remanded.

A.Y. : 2012-13

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