RAJIVE BHALLA, J. (ORAL)
CM-2752-CII-2014
Allowed as prayed for.
ITA-77-2014
The revenue is before us challenging order dated 14.06.2013, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’ New Delhi, (hereinafter referred to as the ‘ITAT’), dismissing an appeal filed by the revenue to challenge order dated 29.03.2011, passed by the Commissioner of Income Tax (Appeals), Faridabad (hereinafter referred to as the ‘CIT(A)’.
Counsel for the revenue submits that the following substantial questions of law arise for adjudication:-
“1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the decision of Ld. CIT(A) in deleting the disallowance of Rs. 26,50,236/- which was made by the AO u/s 40(a)(ia) even when the assessee voluntarily admitted during the course of assessment proceedings that the TDS was not deducted on these payments.
2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the decision of Ld. CIT(A) in deleting the disallowance of Rs. 23,46,941/- which was made by the Assessing Officer by invoking section 14A of the Income Tax Act, 1961 particularly when the investment in shares of M/s Lakhani India Ltd. which yield dividend income are not forming part of the total income by virtue of section 10(33) of the Income Tax Act and hence since dividend did not form the part of total income and when the financial burden incurred by the assessee for acquiring shares should have been proportionately disallowed by invoking section 14A of the Income Tax Act?”
Counsel for the revenue submits that as the assessee did not inform the assessing officer that he had deducted and deposited TDS, the CIT(A) erred in allowing an application for additional evidence and accepting documents adduced by the assessee to prove that he had deducted and deposited TDS. As regards question No. 2, it is argued that deletion of disallowance of Rs. 23,46,941/- is contrary to Section 14(A) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) as dividend does not form an integral part of the assessee's income and, therefore, expenditure incurred by the assessee for acquiring shares should have been proportionately disallowed under Section 14(A) of the Act.
We have heard counsel for the appellant-revenue and perused orders passed by the ITAT and the CIT(A).
The assessing officer, passed an order against the respondent/assessee alleging failure to deduct and deposit TDS. The assessee filed an appeal and during appellate proceedings, filed an application for additional evidence appending therewith evidence to prove that requisite TDS had been deducted and deposited. The assessee also filed form 16-A in support of this assertion. The CIT (A) accepted the additional evidence and set aside the order passed by the assessing officer. The argument that additional evidence could not have been allowed at the appellate stage, disregards the fact that the revenue did not controvert the assessee's assertion regarding deduction and deposit of TDS nor did it contest the correctness of form 16-A. A relevant extract from the order passed by the ITAT, would place the aforesaid conclusion in its correct perspective:-
“6. On the first issue of disallowance u/s 40A(ia) the Ld. Commissioner of Income Tax (Appeals) has given a clear finding of fact that the assessee had in fact deducted TDS from the payments of commission and service charges to Shri J.C Arora by treating the same as salary and that the amount has been remitted to the government. On this factual findings, which are not controverted by the Ld. D.R, we have no other alternative but to up hold the order of the First Appellate Authority and dismiss ground no. 1 of the revenue.”
Consequently, we answer the first question against the revenue.
As regards the second question, counsel for the appellant is unable to distinguish judgment passed by this Court in ITA-970-2008, “Commissioner of Income Tax, Faridabad v. Lakhani Marketing Incl., Faridabad, decided on 02.04.2014, in the case of the assessee where a similar question has been answered against the revenue. Consequently, we answer question No. 2 also against the revenue and dismiss the appeal accordingly.