Case Number: ITA 411/DEL/2019
Appellant: Associated Law Advisers, New Delhi
Respondent: ACIT, Circle-63(1), New Delhi
Assessment Year: 2015-16
Case Filed On: 2019-01-21
Order Type: Final Tribunal Order
Date of Order: 2020-10-28
Pronounced On: 2020-10-28
Associated Law Advisers, a prominent law firm based in New Delhi, filed an appeal against the order of CIT(A)-20, New Delhi, dated 16.01.2019, for the assessment year 2015-16. The appeal was filed to address the disallowance of TDS liability that was not paid before the end of the financial year.
The appeal was heard by the Delhi Bench ‘A’ of the Income Tax Appellate Tribunal (ITAT), comprising Shri R.K. Panda, Accountant Member, and Shri K. Narasimha Chary, Judicial Member. The appellant was represented by Sh. R.P. Mall, Advocate, while the respondent was represented by Sh. P.M. Baranwal, Senior Departmental Representative (DR).
During the assessment for the relevant years, the Assessing Officer observed that the appellant had shown statutory liability on account of TDS payable in their balance sheet but claimed it as an expenditure in the Profit & Loss Account. The Assessing Officer disallowed the same on the grounds that the TDS amount was not paid before the end of the financial year, thereby adding it back to the income of the appellant.
The appellant contended that they had been following the cash system of accounting and had paid the TDS amount to the Central Government within the time specified in Rule 30(2)(a) of the Income-tax Rules made u/s. 200 of the Income Tax Act. They argued that the authorities below were not justified in making the addition and confirming the same.
The appellant brought to the Tribunal’s notice that similar additions were made and confirmed for the assessment year 2013-14. The Tribunal, in its order dated 11.09.2019 in ITA No. 1122/Del/2017, deleted the addition by following the decision in the case of CIT v. Calcutta Export Company (2018) 404 ITR 654 (SC). The appellant requested the Tribunal to follow the same precedent for the current assessment years.
The respondent argued that the appellant had shown statutory liability on account of TDS payable in their balance sheet but claimed it as an expenditure in the Profit & Loss Account. They maintained that since the appellant had been following the cash system of accounting, only payments made during the year could be claimed as expenditure. The respondent further argued that the appellant only showed professional receipts that were actually received as income and did not account for accrued income, despite TDS being deducted by the concerned party.
Upon reviewing the record and considering the submissions from both sides, the Tribunal found that the issue at hand was identical to that in the assessment year 2013-14. The Tribunal noted that the appellant had made cash payments to various parties after deducting TDS, and the TDS amount was deemed to be the income received by the recipient of the payment, as per Section 198 of the Income Tax Act. Therefore, it was considered as a sum paid by the appellant on behalf of the recipient, and the cash system of accounting was deemed to include this amount as a deductible expenditure.
The Tribunal observed that the addition made by the Assessing Officer and confirmed by the CIT(A) was not justified, as the TDS amount was paid to the government within the prescribed time, following the decision in CIT v. Calcutta Export Company.
The Tribunal concluded that the facts of the case were similar to the assessment year 2013-14, and the decision of the co-ordinate Bench of the Tribunal for that year was squarely applicable. Respectfully following the same, the Tribunal answered the issue in favor of the appellant and allowed the appeal.
In the result, the appeal filed by Associated Law Advisers was allowed, setting aside the additions made by the Assessing Officer and confirmed by the CIT(A).
The decision was pronounced in the open court on 28/10/2020.
Members of the Tribunal:
R.K. Panda, Accountant Member
K. Narasimha Chary, Judicial Member
For more information on similar cases and legal precedents, visit the official website of the Income Tax Appellate Tribunal of India.
Associated Law Advisers vs ACIT: Disallowance of TDS Liability – ITA 411/DEL/2019
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