INCOME TAX ACT, 1961

Section 40(a)(ia)

Business disallowance under section 40(a)(ia) - Non-deduction of tax at source - Commission paid by assessee -

AO made disallowance under section 40(a)(ia) for non-deduction of tax at source on commission payment made by assessee-company. However, CIT(A) deleted the said disallowance observing that the commission amount was shown as paid in the balance sheet and therefore, no disallowance could have been made in respect of the same. Further, assessee submitted that in view of second proviso to section 40(a)(ia) read with first proviso to section 201, no disallowance could be made if the payee accounted for the commission income as its income and showed the payment received in the income-tax return and paid taxes thereon. Held:It is settled law that disallowance under section 40(a)(ia) is applicable not only on payable amount but also on paid amount and under both the circumstances, TDS should be deducted. Thus, the reasoning given by the CIT (A) was rejected. However, there was merit in the submission of the assessee that if the payee accounted for the commission as his income and showed it in his return of income and also paid tax thereon, then no disallowance could be made in terms of second proviso to section 40(a)(ia) read with first proviso to section 201. Accordingly, the issue was remanded to the AO only with respect to the verification of the fact as to whether the payee showed the commission amount as his income or not.

Relied:Palam Gas Services v. CIT (2017) 81 taxmann.com 43 (SC): (2017) 247 Taxman 379 (SC): (2017) 394 ITR 300 (SC): 2017 TaxPub(DT) 0914 (SC)

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 37(1)

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