{"id":513,"date":"2015-11-02T09:17:28","date_gmt":"2015-11-02T09:17:28","guid":{"rendered":"http:\/\/carajput.com\/blog\/?p=513"},"modified":"2021-12-15T00:17:26","modified_gmt":"2021-12-14T18:47:26","slug":"entire-law-on-disallowance-under-section-40aia","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/entire-law-on-disallowance-under-section-40aia\/","title":{"rendered":"Entire law on disallowance under section 40(a)(ia)"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e6b0ff4fec4\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e6b0ff4fec4\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/entire-law-on-disallowance-under-section-40aia\/#ENTIRE_LAW_ON_DISALLOWANCE_UNDER_SECTION_40AIA\" title=\"ENTIRE LAW ON DISALLOWANCE UNDER SECTION 40(A)(IA)\">ENTIRE LAW ON DISALLOWANCE UNDER SECTION 40(A)(IA)<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/entire-law-on-disallowance-under-section-40aia\/#Held\" title=\"Held :\u00a0\">Held :\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/entire-law-on-disallowance-under-section-40aia\/#WHAT_IS_DISALLOWANCE_UNDER_SECTION_40AIA\" title=\"WHAT IS DISALLOWANCE UNDER SECTION 40(A)(IA),\">WHAT IS DISALLOWANCE UNDER SECTION 40(A)(IA),<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/entire-law-on-disallowance-under-section-40aia\/#Controversy_related_to_Section_40aia\" title=\"Controversy related to Section 40(a)(ia):-\">Controversy related to Section 40(a)(ia):-<\/a><\/li><\/ul><\/nav><\/div>\n<p><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/11\/Untitled35A.png\" rel=\"attachment wp-att-1736\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-1736\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/11\/Untitled35A-300x190.png\" alt=\"Untitled35A\" width=\"734\" height=\"465\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/11\/Untitled35A-300x190.png 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/11\/Untitled35A.png 462w\" sizes=\"(max-width: 734px) 100vw, 734px\" \/><\/a><span style=\"color: #3366ff;\"><strong><strong>Jitendra <\/strong><\/strong><\/span><\/p>\n<h2 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"ENTIRE_LAW_ON_DISALLOWANCE_UNDER_SECTION_40AIA\"><\/span><span style=\"color: #000080;\"><strong>ENTIRE LAW ON DISALLOWANCE UNDER SECTION 40(A)(IA)<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"color: #3366ff;\"><strong><strong>Mansukhlal Shah v. DCIT (Mum.)(Trib.)<\/strong><\/strong><\/span><\/p>\n<p style=\"text-align: justify;\">Section 40(a)(ia): Merilyn Shipping 136 ITD 23 (SB) should be followed in view of approval by Allahabad HC and dismissal of SLP by Supreme Court. In any event as two views are possible, view in favour of assessee should be followed. Amounts already paid without <a href=\"https:\/\/carajput.com\/tds.php\">TDS<\/a> cannot be disallowed.<\/p>\n<p style=\"text-align: justify;\">(i) The assessee, having made the payment, section 40(a)(ia) cannot be attracted because it speaks of the amount \u201cpayable\u201d and it does not cover the amount already paid. The ITAT Chennai Benches have taken into consideration the decision of the ITAT Special Bench in the case of Merilyn Shipping &amp; Transport 136 ITD 23 (SB),<\/p>\n<p style=\"text-align: justify;\">(ii) the order of which was suspended by the High Court but at the same time there was a subsequent judgement of the Hon\u2019ble Allahabad High Court in the case of M\/s. Vector Shipping Services (P) Ltd. wherein it was held that section 40(a)(ia) applies only to those amount which remains payable by the end of the previous year. In other words, in respect of payments already made section 40(a) (ia) is not attracted: \u2013 i. ACIT vs. M\/s. Eskay Designs \u2013 ITA No.1951\/Mds\/2012 dated 09.12.2013. ii. ITO vs. Theekathir Press \u2013 ITA No. 2076\/Mds\/2012 &amp; CO No. 155\/Mds\/2013 dated 18.09.2013.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Held\"><\/span><strong>Held :\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\">(iii) Though there are contrary decisions of the other Hon\u2019ble High Courts, i.e. Hon\u2019ble Calcutta High Court and Hon\u2019ble Gujarat High Court, in the light of the decision of the Hon\u2019ble Allabahad High Court it can be said the there can be two views possible in this matter in which event the one which is in favour of the assessee has to be followed in the light of the decision of the Hon\u2019ble Supreme Court in the case of Vegetable Products Ltd. 88 ITR 192.<\/p>\n<p style=\"text-align: justify;\">(iv) Hon\u2019ble Allahabad High Court in the case of CIT vs. Vector Shipping Services (P) Ltd.(supra) has held that for disallowing expenses from business and profession on the ground that TDS has not been deducted, amount should be payable and not which has been paid by end of the year.<\/p>\n<p style=\"text-align: justify;\"><strong><span style=\"color: #3366ff;\">(v) The said decision of Hon\u2019ble Allahabad High Court was made subject to Special Leave Petition filed before Hon\u2019ble Supreme Court and their Lordships vide their order dated 02\/07\/2014 in CC No.8068\/2014 have dismissed the SLP.<\/span><\/strong><\/p>\n<p style=\"text-align: justify;\">(vi) In view of above discussion, the decision relied upon by Ld. DR would have no application therefore the Hon\u2019ble ITAT accept the claim of the assessee to the extent of labour payments are made during the year under consideration and to that extent no disallowance should be made.(ITA No. 2293-2294\/Mum\/2013, dt. 4.03.2015) ( AY. 2005-06, 2006-07)<\/p>\n<p><a href=\"https:\/\/carajput.com\/blog\/provisions-of-section-40ai-are-not-attracted-on-depreciation\/\">Provision for Section-40AI are not Attracted to Depreciation<\/a><\/p>\n<p><strong>No addition under income tax for unexplained cash deposit if Sale amount excessed cross cash deposit in company bank Account.\u00a0<\/strong><\/p>\n<h3><span class=\"ez-toc-section\" id=\"WHAT_IS_DISALLOWANCE_UNDER_SECTION_40AIA\"><\/span><span style=\"color: #ff0000;\"><strong>WHAT IS DISALLOWANCE UNDER SECTION 40(A)(IA),<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>According to section 40(a)(ia), any amount payable to a resident, which is subject to TDS, would attract 30% disallowance if it is paid without TDS or if TDS deducted but is not deposited with the Govt till the due date of filing of income tax return<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Controversy_related_to_Section_40aia\"><\/span><span id=\"Controversy_related_to_Section_40aia\" style=\"color: #ff0000;\"><strong>Controversy related to Section 40(a)(ia):-<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In the event that tax deducted at source (TDS) is not deducted or paid from certain payments made to residents, For the purposes of computing income under the heading &#8220;Profits and profits of business or profession,&#8221; the entire amount of tax-deductible expenditure is disallowed under section 40(a)(ia). The total amount of expenditure being disallowed causes undue hardship.<\/p>\n<p>Non-deduction or non-payment of TDS on payments given to residents as described in section 40(a)(ia) of the Act should be limited to 30 percent of the amount of expenditure on which TDS is not deducted to lessen the hardship.<\/p>\n<p>Formerly, 100 % of such an amount was disallowed.<\/p>\n<p>Originally, non-deduction or non-payment of TDS on payments made to residents resulted in disallowance solely for a few specific types of payments (viz. interest, commission, brokerage, rent, royalty, fee for technical services or fee for professional services).<\/p>\n<p><strong>What amount to be disallowed under section 40(a)(ia) on short deduction or <a href=\"https:\/\/www.caindelhiindia.com\/blog\/corporate-and-professional-update-dec-27-2016\/\">non deduction<\/a> ?<\/strong><\/p>\n<p>Views:-<\/p>\n<p style=\"padding-left: 40px;\">a) 30 percentage of Complete amount.<\/p>\n<p style=\"padding-left: 40px;\">b) 30 percentage of sum which TDS short deducted or not deducted (Proportional basis).<\/p>\n<p style=\"padding-left: 40px;\">c) disallowance U\/s 40(a)(ia) is only for non deduction of TDS &amp; not short-deduction of TDS.<\/p>\n<p><strong>Popular Article :\u00a0<\/strong><\/p>\n<p><em><span style=\"color: #0000ff;\"><strong><a style=\"color: #0000ff;\" href=\"https:\/\/carajput.com\/blog\/three-tier-tp-documentation-threshold-requirement\/\">Three-tier TP Documentation &amp; threshold Requirement<\/a><\/strong><\/span><\/em><\/p>\n<p><a href=\"https:\/\/carajput.com\/blog\/tp-libor-is-the-best-benchmark-for-interest-free-loan-granted-to-ae\/\"><span style=\"color: #0000ff;\"><em><strong>TP : LIBOR IS THE BEST BENCHMARK FOR INTEREST-FREE LOAN GRANTED TO AE<\/strong><\/em><\/span><\/a><\/p>\n<p style=\"text-align: justify;\">For query or help, contact: <a href=\"mailto:singh@carajput.com\">singh@carajput.com<\/a>\u00a0\u00a0or call at 9555555480<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Jitendra ENTIRE LAW ON DISALLOWANCE UNDER SECTION 40(A)(IA) Mansukhlal Shah v. DCIT (Mum.)(Trib.) Section 40(a)(ia): Merilyn Shipping 136 ITD 23 (SB) should be followed in view of approval by Allahabad HC and dismissal of SLP by Supreme Court. In any event as two views are possible, view in favour of assessee should be followed. Amounts &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[150],"tags":[3701,322,3702],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/513"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=513"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/513\/revisions"}],"predecessor-version":[{"id":19844,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/513\/revisions\/19844"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=513"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=513"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=513"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}