Search Results For: disallowance


QUERY: The assessee filed his return of income for A.Y. 2008-09 returning profit on sale of shares/units of mutual funds under the head ‘Income from Business’. The Assessing Officer completed the assessment u/s. 143(3) by reclassifying transactions of purchase and sale during the same day as Speculative Transactions. He did not allow interest claimed which was debited to P & L Account. Subsequently, he issued a notice u/s. 154 of the Act proposing to disallow interest claimed u/s. 14A on the ground that assessee has also earned dividend income. The assessee responded to the show cause by stating that this is not mistake apparent on the record but without prejudice also enclosed with the letter a working amount disallowable under Rule 8D. Subsequently, on the oral request of the AO, a further letter was filed giving consent to the AO to pass an order u/s. 154 and disallow amount u/s. 14A. The AO instead of disallowing the amount as per working filed, disallowed the entire amount debited to P & L Account. Can the assessee now file an appeal on the ground that the consent cannot confer jurisdiction on the AO when there is none under the statute? Kindly explain the principle that there is no estoppels against law.
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Yes, the right of appeal has been specially conferred on the assessee by the statute and it is unfettered right which cannot be taken away by any understanding.

QUERY: X Ltd. has issued debentures on which interest is payable every six months on December 31st and June 30th. The debentures are listed on the stock exchange. As per the consistently followed accounting practice, the company has made provision for interest on debentures for the period January 2010 to March 2010. However, it has neither deducted nor paid the TDS in respect of such provision. The tax is deducted and paid on or after each coupon date, and hence will be deducted and paid on 30th June, 2010. Certificates for TDS will be to the persons who are the registered holder of debentures as on the coupon date. The company wants to reconfirm whether the practice followed by it is correct in law or not? Please advise the company as to whether the amount of interest provided has to be included in the quarterly E-TDS return for March, 2010? Whether interest debited in P & L A/c. would be disallowed under section 40a(ia) of the Act?
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– From January 1 to March 31, 2010, “interest accrued but not due”, for which provision has been made in the accounts. However, it will be due only on June 30, 2010 and would be credited to payees account or suspense account or payable account

QUERY: The assessee is a Co-Operative Society and maintaining accounts on mercantile system of accounting. During the financial year 2008-09 (Asst. yr. 2009-10) on the basis of actuary valuation made provisions of Rs. 80 lakhs towards employees gratuity fund and during the same financial year deposited full amount to the LIC under Group Gratuity Life Assurance Scheme. The AO wants to disallow as on the ground that it is not Approved Gratuity Fund. Assessee’s pleas is that the same is allowable u/s. 40A(7) read with section 43B. In past so many years the same was allowed by the AO though no specific reference was made.

Kindly let us know the legal view with case law if available.
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S. 29 of the Act reads as under:

“The income referred to in section 28 shall computed in accordance with the provisions contained in sections 30 to 43D”.

S. 43B reads as under:

QUERY: Employee’s contribution unpaid is disallowable u/s. 43B?
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Section 43B reads as under:

“Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under the Act in respect of –

(b) Any sum payable by the assessee as an employer by way of contribution

QUERY: Whether the decision of GC India Technology Centre P. Ltd. vs CIT [327 ITR 456 (SC)] can be taken advantage under section 40(a)(ia) to say that tax was not chargeable and hence tax need not be deducted on the payment?
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Yes, the Supreme Court has confirmed that the obligation to deduct tax at source arises only if “sum is chargeable under the provisions of the Act” but it is not clear from the query how any interest,

QUERY: Assessee has not deducted tax at source on certain provisions made on last day of the financial year? Assessee refers to the decision of Special Bench of ITAT and takes a view that no disallowance u/s. 40(a)(ia) can be made?
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The view of the assessee is not correct. In fact, the Special Bench in Merilyn Shipping & Transports v. ACIT [136 ITD 23 (Visakhapatnam) (SB)] has specifically held that the provisions of section 40(a) (ia) are applicable to the amounts of expenditure which are payable as on March 31 of every year. However, the said provisions could not be invoked to disallow expenditure which has been actually paid during previous year without deductions of tax.

QUERY: S. 40(a)(ia) lays down that the expenditure mentioned therein viz., interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or payment to a contractor/ sub-contractor on which tax is deductible at source under Chapter XVIIB, but has not been deducted or after deduction not been paid, would not be allowed as a deduction in computing the business income of the payer-assessee till such TDS is paid within specified time limit. Can Assessing Officer disallow the depreciation on the amount capitalized on which no TDS was deducted, for payments made to contractor who is resident?
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Section 40 starts with “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”: –

(ia) any interest, commission or brokerage, [rent, royalty] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor,

QUERY: A Pvt. Ltd., and B Ltd. are sister concerns. A Pvt. Ltd. has made the payment of job work charges to B Pvt. Ltd. A.O. has made the disallowance of job work charges u/s. 40(a)(ia) for non deduction of TDS, in the hands of A Pvt. Ltd. B Pvt. Ltd, offers the job work income from A Pvt. Ltd., in the return of income. Since A Pvt. Ltd., closes its business operations in subsequent year, it cannot claim deduction of the TDS deposited to the credit of government will A Pvt. Ltd., still be liable for disallowance u/s. 40(a)(ia)?
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Yes. As per section 28 of the Income-tax Act 1961, the assessee should carry on the business during the year. Section 28 reads as under:

“The following income shall be chargeable to income tax under the head” Profits and gains of business or profession” –

QUERY: During the year, the amounts have been paid to the contractors and shown as ‘advances for supply of labour’. However, at the end of the year, the same have been transferred to ‘labour charges’, on which no tax was deducted. The Assessing Officer has disallowed the said payments under section 40(a)(ia) of the Act, whether action of Assessing Officer is correct?
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Section 40(a)(ia) reads as under:

“any interest, commission or brokerage rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub contractor,

QUERY: While making the assessment, the Assessing Officer has disallowed certain of expenses mentioned in section 40(a)(ia) of the Act, on the ground that no tax been deducted at proper rate, whether disallowance is justified?
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In DCIT vs. S. K. Tekriwal [48 SOT 515 (Kol)], the Tribunal held that the condition laid down under section 40(a)(ia) for making addition is that tax is deductible at source and such tax has not been deducted. If both the conditions are satisfied, then such payment can be disallowed under section 40(a)(ia). But where tax is deducted by the assessee,