|The Tax Publishers2021 TaxPub(DT) 0740 (Bang-Trib)
INCOME TAX ACT, 1961
Provision of section 40(a)(ia) is applicable for computing the income chargeable under the head 'Profits and gains of business or profession' and not for computation of income under any other heads of income, including capital gains as the wording of said section confirms. Therefore, the disallowance made by AO under section 40(a)(ia) for not deducting TDS under section 194 on commission payment made in connection with sale of immovable property and confirmed by CIT(A) treating assessee as assessee-in-default under section 201 was not justified and hence, addition was deleted.
Business disallowance under section 40(a)(ia) - Applicability of provisions - AO made disallowance under section 40(a)(ia) of expenditure incurred in earning capital gains -
Assessee firm had capital gains on which commission was paid which was claimed as an expenditure in relation to such 'transfer' of immovable property. On this commission it was noticed that TDS was done under section 194H only on part of the amount. On the balance commission on which TDS was not deducted the AO invoked section 40(a)(ia) which was upheld by CIT(A) holding assessee-in-default under section 201. Held: Section 40 clearly stipulates that 'Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession'. Hence, it is evident that the provisions of section 40(a)(ia) is applicable while computing income chargeable under the head 'Profits and gains of business or profession' and it is not applicable to any other heads of income. In view of decision of Coordinate Bench in Shushila Mallick's case section 40(a)(ia) can be invoked only on income from business and it can in no way be invoked under the head capital gains.
Applied:Mrs. Sushila Mallick v. ITO (2012) 19 taxmann.com 233 (Luck) : 2012 TaxPub(DT) 0487 (Luck-Trib).
REFERRED : CIT-I v. Smt. Sushila Mallick, Prop. M/s. Cyber Soft India (2013) 36 taxmann.com 537 (All) : 2013 TaxPub(DT) 2660 (All-HC), and Mahatma Gandhi Seva Mandir v. Deputy Director of Income Tax (E) 1(2) (2012) 21 taxmann.com 321 (Mum)
FAVOUR : In assessee's favour.
IN THE ITAT, BANGALORE BENCH
N.V. VASUDEVAN, V.P.
R.K. Associates v. ITO
ITA No. 681/Bang/2020
11 February, 2021
Appellant by: B.R. Sudheendra, Advocate
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