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The Tax Publishers BOC India Ltd. v. Addl. CIT [I.T.A. Nos. 806, 872/Kol/2011, dt. 17-2-2016] : 2016 TaxPub(DT) 1094 (Kol-Trib) Disallowance under section 40(a)(ia) conditions to be met? *Facts:* Assessee had paid sums to one Linde AG, Germany towards import purchase of capital goods disclosing the sums paid as advances and as capital work in progress. Assessing officer on scrutiny took a stand that the same be disallowed under section 40(a)(ia) for non-deduction of TDS under section 195. Assessee took plea that the sums were paid for delivery of capital goods at offshore foreign sea ports on FOB basis and since the deliveries were in progress were shown as capital work in progress/advances in line with normal method of accounting. Assessing officer refuting the same made addition of the said sums to the returned income under section 40(a)(ia) citing that assessee had disguised payments akin to technical fees under section 9(1)(vii) under the guise of composite contract. Assessee took stand that there was no TDS applicable on the said payments, no part of it was claimed as a business expenditure nor was any depreciation claimed on the same which was accepted by Commissioner (Appeals). On further appeal by the revenue -- Held in favour of the assessee The conditions for invoking section 40(a)(ia) are -- -- The sum paid should be chargeable under the act, i.e., it should have been debited to the P&L a/c and claimed as deduction. -- The payments ought to fall in the scope of income as per section 9(1) and its sub-sections. -- There must have been a TDS obligation rising out of such income with no TDS having been done. -- Such payments should have been made to a non-resident. If any of the above conditions are not met disallowance of section 40(a)(ia) cannot be triggered. The above were found missing in the case thus going in favour of the assessee.

The Tax Publishers

BOC India Ltd. v. Addl. CIT [I.T.A. Nos. 806, 872/Kol/2011, dt. 17-2-2016] : 2016 TaxPub(DT) 1094 (Kol-Trib)

Disallowance under section 40(a)(ia) conditions to be met?

Facts:

Assessee had paid sums to one Linde AG, Germany towards import purchase of capital goods disclosing the sums paid as advances and as capital work in progress. Assessing officer on scrutiny took a stand that the same be disallowed under section 40(a)(ia) for non-deduction of TDS under section 195. Assessee took plea that the sums were paid for delivery of capital goods at offshore foreign sea ports on FOB basis and since the deliveries were in progress were shown as capital work in progress/advances in line with normal method of accounting. Assessing officer refuting the same made addition of the said sums to the returned income under section 40(a)(ia) citing that assessee had disguised payments akin to technical fees under section 9(1)(vii) under the guise of composite contract. Assessee took stand that there was no TDS applicable on the said payments, no part of it was claimed as a business expenditure nor was any depreciation claimed on the same which was accepted by Commissioner (Appeals). On further appeal by the revenue --

Held in favour of the assessee

The conditions for invoking section 40(a)(ia) are --

-- The sum paid should be chargeable under the act, i.e., it should have been debited to the P&L a/c and claimed as deduction.

-- The payments ought to fall in the scope of income as per section 9(1) and its sub-sections.

-- There must have been a TDS obligation rising out of such income with no TDS having been done.

-- Such payments should have been made to a non-resident.

If any of the above conditions are not met disallowance of section 40(a)(ia) cannot be triggered. The above were found missing in the case thus going in favour of the assessee.