75th Founding Day Lecture Meeting on “India@2030” Know More

September 2013

Business expenditure: Disallowance u/s. 40(a) (ia) : Deduction of tax at a lesser rate due to difference of opinion: Disallowance u/s. 40(a)(ia) not justified:

By K. B. Bhujle, Advocate
Reading Time 1 mins
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CIT vs. S. K. Tekriwal; 260 CTR 73 (Cal):

The assessee deducted tax @ 1% u/s. 194C(2) from the payments made to sub-contractors. The Assessing Officer held that the payments are in the nature of machinery hire charges falling under the head ‘Rent’ and the provisions of section 194-I are applicable as per which tax was deductible @ 10%. The assessing Officer, therefore, disallowed the payment proportionately by invoking the provisions of section 40(a)(ia). The Tribunal deleted the disallowance holding that no disallowance can be made by invoking the provisions of section 40(a)(ia), if there is any shortfall in deduction of tax at source due to any difference of opinion as to the taxability of any item or the nature of payment falling under various TDS provisions.

On appeal by the Revenue, the Calcutta High Court upheld the decision of the Tribunal and held as under:

“We find no substantial question of law involved in this case and therefore, we refuse to admit the appeal. Accordingly, the appeal is dismissed.”

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