No disallowance u/s 40(a)(ia) if TDS certificate clearly refers to the assessee being exempted and the fact that TDS on rent payment would only result in refund of the same

No disallowance u/s 40(a)(ia) if TDS certificate clearly refers to the assessee being exempted and the fact that TDS on rent payment would only result in refund of the same

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No disallowance u/s 40(a)(ia) if TDS certificate clearly refers to the assessee being exempted and the fact that TDS on rent payment would only result in refund of the same

 

ITO Vs DLF Ltd

 

– Revenue’s appeal dismissed : DELHI ITAT

 

Whether when TDS certificate clearly refers to the assessee being exempted and the fact that TDS on rent payment would only result in refund of the same, no disallowance u/s 40(a)(ia) is warranted – YES: ITAT

 

 the TDS certificates held that the recipient charitable trust are exempted from tax and the deduction of tax by the assessee and again claiming refund would only be futile exercise of utilizing resources of the Revenue without any ultimate collection of taxes.

 

 The certificate has exempted the amount of rent mentioned in the certificate from deduction of the tax at source. 

 

The Court held that this is a revenue neutral case and deduction of tax at source would not have made additional gain to the Revenue. 

 

Thus, it is unreasonable to penalize the assessee by way of imposing tax and interest liability under section 201(1) and 201(1A) of the Act. 

 

The CIT(A) has also noted that in the appellate proceeding against the quantum of assessment for AY 2007-08 in the case of assessee, the FAA has deleted the disallowance made by the Assessing Officer u/s 40(a)(ia) for non-deduction of tax on the rent paid by the assessee to these two trusts.

 

 

 Thus, the CIT(A) on such issue in dispute and accordingly uphold the same;

 

 when the payment for the services have been rendered to be part of interest u/s 2(28A) by the CIT(A), he was not required to give the specific finding as whether the services are not professional services covered u/s 194J of the Act.

 

 

 Moreover, it held that u/s 194J professional services means ‘services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of a countenance your technical consultancy or interior decoration or advertisement or such other professional notified by the board for the purpose of section 44AA of the Act’.

 

 Thus, the services in question for which payment has been made by the assessee are not falling in the professional services u/s 194J.

 

 Hence, the CIT(A) is justified in deleting the tax and interest liability raised on this issue.

 

ITA No.3608/Del/2015

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