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| The Tax Publishers2020 TaxPub(DT) 5023 (Mum-Trib) : (2021) 187 ITD 0463 : (2020) 208 TTJ 0945 INCOME TAX ACT, 1961
Section 40(a)(i)
Where assessee had made certain payments to Facebook Ireland Limited towards the cost of advertisements, carried by Facebook, for its clients, then unless a claim for deduction in respect of payments made to Facebook was made in the computation of business income, there could not be any occasion for invoking section 40(a)(i) for its disallowance in computation of business income.
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Business disallowance under section 40(a)(i) - Invocation of section 40(a)(i) - Claim of payments not mentioned in computation of income -
Assessee challenged order of CIT(A) upholding the disallowance made by AO under section 40(a)(i) of the IT Act, 1961 for non-deduction of tax at source from payment made to Facebook. Assessee had made certain payments to Facebook Ireland Limited towards the cost of advertisements, carried by facebook, for its clients. It was contended that assessee had not claimed any deduction in respect of expenditure incurred on payments made to Facebook Ireland Limited, and, therefore, disallowance of payment made to Facebook was wholly devoid of any legally sustainable merits. Held: Unless a claim for deduction in respect of payments made to Facebook was made in the computation of business income, there could not be any occasion for invoking section 40(a)(i) for its disallowance in computation of business income. Section 40(a)(i) acts as a restriction on the deductibility of expenses under sections 30 to 38, and, as a corollary to this legal position, when the related expenditure is not claimed as deduction under sections 30 to 38, this disallowance cannot be pressed into service at all.
REFERRED :
FAVOUR : Matter remanded.
A.Y. : 2015-16
IN THE ITAT, MUMBAI 'I' BENCH
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