No disallowance u/s 40(a)(ia) for short deduction of TDS

0 comments Tuesday, December 11, 2012


Facts: The assessee was engaged in trading of agricultural products. During the course of assessment proceedings, from the tax audit report in Form No. 3CD the Assessing Officer noted that the tax auditor had quantified the amount of Rs. 40,41,233 disallowable under section 40(a)(ia). However, in computation of income the assessee had added back only Rs. 20,16,778. The remaining amount of Rs. 20,24,455 was therefore, disallowed by the Assessing Officer.

Before the Commissioner (Appeals), the assessee submitted that the Assessing Officer ought to have allowed expenditure on which tax had been deducted and should have disallowed the expenditure on which no tax had been deducted. Alternatively, it was argued that proportionate disallowance of Rs. 15,75,239 should have been made.
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Reimbursement of expenses not liable to service tax-Rule 5(1) is ultra vires

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Delhi High Court has in a very important case namely Intercontinental Consultants and Technocrats Pvt Ltd Vs UOI held that reimbursement of expenses cannot be charged to service tax by treating the same as part of service charges. Rule 5(1) of Service Tax (Determination of value) Rules has been held as ultra vires to the extent it brings the reimbursement of expenses within the ambit of service tax

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