No disallowance u/s 40(a)(ia) when TDS deposited within extended time for return filing – ITAT

No disallowance u/s 40(a)(ia) when TDS deposited within extended time for ITR filing. Even otherwise over a period of two years effect is revenue neutral

ABCAUS Case Law Citation:
ABCAUS 2388 (2018) 06 ITAT

The instant appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) inter alia in deleting the disallowance of made by Assessing Officer (AO) by applying the provisions of section 40(a)(ia) of the Income-tax Act, 1961 (Act)for non deposit of tax deducted at source (TDS).

During the assessment proceedings the AO found that the assessee made payment for expenses without deducting TDS from the said payments in terms of section 194C of the Act.

The assessee admitted the fact of non-deduction of TDS. Hence, the AO disallowed the expenditure claimed.

Aggrieved by the addition made, the assessee preferred an appeal before the CIT(A). The assessee submitted that it had in fact deducted tax in terms of section 194C of the Act but had not deposited the tax in the government account by the normal due date of filing of return, however, the TDS had actually been made within the extended period for filing of return as allowed by the CBDT vide its order u/s 119 of the Act for the relevant assessment year.

The CIT-A observed that for the relevant assessment year, the CBDT had vide order u/s 119 extended the due date of filing of return of income in the case of appellant from 30.9.2010 to 15.10.10.

The CIT-A opined that since the provision of section 40(a)(ia) refer to due date specified in sub-section (1) of section 139 for filing of return of income, once the due date of filing of return of income has been extended by the Board, the extended date shall also apply for purpose of compliance with section 40(a)(ia).

The CIT-A further observed that the Board had extended time for filing of return of income in view of disturbance of general life caused by floods and heavy rains, it was reasonable to consider that the extension shall apply in respect of deposit of TDS as well. The floods & heavy rains would impact activity like deposit of TDS in bank in the same manner as filing of return. Therefore, while order u/s 119 dated 27.9.2010 refers to filing of return and did not specifically refer to section 40(a)(ia), the benefit of extension of due date of filing of return shall be available even for purpose of section 40(1)(ia).

The CIT-A observed that that It is well settled position of law that where there is ambiguity and two plausible views exist in a matter, the view favorable to the assessee should be adopted. The appellant had deposited TDS u/s 194C well within the extended due date for filing of return of income. Therefore, the disallowance of same under section 40(a)(ia) was not proper.

CIT-A also noted that even if a view was to be taken that the amount was to be disallowed in this year, then in view of proviso to section 40(a)(ia), deduction for the same would have to be given in subsequent year on payment basis. Thus, over a period of two years, the exercise would be revenue neutral and there would be no net impact on income or tax liability.

Considering all these factors, the CIT(A) deleted the disallowance.

The Tribunal opined that CIT-A had rightly observed that TDS had been remitted to the Govt. within the extended period for filing of return as vivid from the facts and in any case if disallowed this year, the assessee could have got the claim allowed in the next year on the strength of the TDS certificate as per the proviso to sec. 40(a)(ia) of the Act. So in any way the action of CIT(A) had in no way prejudiced the Revenue.

ITAT upheld the order of CIT(A) and dismissed this ground of appeal.

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