PCIT-4, Kolkata Vs Linde India limited (Calcutta High Court)

Court: Calcutta High Court
Head Notes:

PCIT-4, Kolkata Vs Linde India limited
Date- 5th September 2022
Forum-Calcutta High Court
Sub-Whether disallowance u/s 40(a)(ia) for non deduction of tax at source can be made even when the expenditure is not debited to profit and loss account?

The Calcutta high court in this case was considering whether when an assessee makes advance payment towards import of capital goods which is not debited to profit and loss account, whether the liability to deduct tax at source arises u/s 195 and in case of non deduction whether addition can be made u/s 40a(ia). The assessee contended that as the amount was not debited to profit and loss account, no addition could be made and even otherwise it was only an advance payment towards import of capital goods.

However, the department contended that the payment was made towards a composite contract which included fees for technical services and thus the amount was liable for deduction of tax at source. The Court however, interpreting Section 29 of the Income-tax Act,1961 as per which the income has to be computed from business and profession u/s 30 to 43B and as Section 40 starts with a non obstante clause and the object behind incorporation of non obstante clause in a section is to give the enacting part of such section an overriding effect either over all provisions of the Act or upon some provisions in case of conflict between statutory provisions. Finally relying on the decision in the case of Mark Auto Industries (2013) 358 ITR 43(P&H), the court dismissed department’s appeal by holding that if the disputed amount is neither debited from the profit and loss account of the business or profession nor has been deducted while computing the profits and gains of business or profession, Section 40 of the Income Tax Act do not come into operation as such amount cannot be said to have been deducted in computing the income chargeable under such head.

This judgement is important from TDS standpoint

Ramesh Patodia
06-09-2022

Law:
Section(s): Section 29,30 to 43B, 40a(ia), 195 of Income-tax Act,1961
Counsel(s): Counsels
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Uploaded By Ramesh Patodia
Date of upload: September 6, 2022

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