1. K. Associates v. ITO – [2021] 126 taxmann.com19 (Bangalore – Trib.)

Short Overview:

Assessee sold a property and declared Long term capital gain from the sale of such property.

During assessment proceedings, Assessing Officer (AO) found that assessee paid commission in connection with the sale of such property.

AO noticed that assessee failed to deduct TDS on the part of the commission paid. Accordingly, AO invoked the provisions of Section 40(a)(ia) and made additions to the total income returned by assessee.

Aggrieved by order of AO, assessee preferred an appeal before CIT(A), contending that the provisions of Section 40(a)(ia) are not applicable while computing income under the head Capital Gain.

Therefore, the disallowance made by AO cannot be sustained. CIT(A) proceeded on the basis that assessee can be treated as assessee in default under Section 201 and accordingly confirmed the order passed by AO.

On further appeal, Bangalore ITAT held that Section 40 stipulates that notwithstanding anything to the contrary contained in Section 30 to Section 38, the following amounts shall not be deducted while computing the income chargeable under the head Profits and gains of business or profession.

 Hence it is evident that the provisions of Section 40(a)(ia) are applicable while computing income chargeable under the head Profits and gains of business or profession, and it does not apply to any other heads of income.

Thus, provisions of section 40(a)(ia) would not be applicable while computing income under head capital gain.