In a Recent Decision - Rajkot ITAT has taken a view that if tax is not deducted at the time of payment / credit, but deducted belatedly in the same year in March, such TDS can not be termed as tax deducted "at source" - and therefore disallowance u/s. 40(a)(ia) prevails, despite the fact that assessee paid the TDS before due date of filing ROI.
The Controversy revolving around sec. 40(a)(ia) carries itself to a step further with a renewed vigor, with a Recent Tribunal decision revolving around words “at source”, and thereby again importing applicability of Ch. XVII-B for time-limits of deduction, which otherwise have been held by various tribunals & High Courts as being govern by sec. 40(a)(ia) itself.
The questions which stems from this renewed controversy are
- Whether disallowance can be made u/s. 40(a)(ia), in cases when tax is not deducted “at source” ie. (at the time of payment/credit) – but has been deducted later in the same financial year, and especially in the month of March. (as applicable to AY 2005-06 & onwards) (after considering the amendment of Fin Act 2010 as retrospective)
- Meaning thereby, whether a belated deduction can not bring the assessee a sigh of relief, even if it has paid the same before due date of filing return of income u/s. 139(1), in case the belated deduction was in the month of March.
- Another probable controversy may arise, branching from above controversy that in cases where the assessee has already “paid’ the amounts claimed as expenditure, “how can the assessee, later on, deduct a tax from it – so as to make the deduction “at source”.
- Therefore, in the situations where expenditure has been paid off to the payee without TDS and later on even if the assessee has deducted the TDS by way of debiting the amount of TDS to the account of payee in the month of MARCH (as if it will be recoverable in future form the payee, and as the result will be debit balance of payee’s ledger), and thus paid it out of its own pocket; whether the disallowance of 40(a)(ia) would prevail ?
I have come across few decisions, which is against the above view taken by Rajkot ITAT, as placed by in this forum under : "40(a)(ia) - deduction "at source" - new controversy - Rajkot ITAT".
I request Ld. Experts to give me HC/SC Decisions covering the above Issue, if there are any ..