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DCIT-8(3) R. No.217 Aayakar Bhavan M.K. Marg Mumbai 400 020 Vs. Rohm & Haas (India) Pvt. Ltd. 121/122 Solitaire Corporate Park Andheri (E) Mumbai 400 096
April, 14th 2015
                 MUMBAI BENCH "D", MUMBAI
                        ITA No. 4026/Mum/2011
                        Assessment Year: 2005-06

        DCIT-8(3)            Rohm & Haas (India) Pvt. Ltd.
        R. No.217 Aayakar    121/122 Solitaire Corporate
        Bhavan M.K. Marg Vs. Park Andheri (E)
        Mumbai 400 020       Mumbai 400 096
                             PAN:AAACR 2855 F
              (Appellant)                   (Respondent)

                        Assessee by : Shri M. P. Lohia
                         Revenue by : Shri Love Kumar

                  Date of hearing : 19.03.2015
           Date of Pronouncement : 10.04.2015



      This appeal has been preferred by the Revenue against order
dated 02.02.2011, passed by the Ld.CIT(A)-18, for the quantum of
assessment passed u/s 143(3) of the Act for the A.Y. 2005-06.

2.    In Ground no. 1 and 2, Revenue has challenged the disallowance
U/S 40(a)(ia) of Rs.54,12,000/-, being the principal amount adopted by
the AO, corresponding with the excess TDS of Rs.2,70,613/- claimed to
be reversal of excess TDS.
3.    In Ground no. 3 and 4, the Revenue has challenged the direction
of the Ld. CIT(A), for allowing the deduction on account of legal and
professional charges.
                                   2                   ITA No. 4026/Mum/2011
                                                      Assessment Year: 2005-06

4.   Brief facts relating to ground no. 1 and 2 are that, Assessing
Officer during the course of the assessment proceedings, from the
details of other liabilities noted that an amount of Rs.44,63,919/- has
been shown there on account of TDS, whereas, the assessee has filed
the details in respect of payment of TDS of Rs.41.94 lakhs. Regarding
the balance amount, the assessee stated that same was in the nature of
excess provisions made which has been reversed. He noted that the
assessee could not file the details in respect of the principal amount
involved and how it was in the nature of excess provision and why the
same has been reversed. The principal amount on the basis of TDS
amount, he held that will come to Rs.54.12 lakhs, which shall be
disallowed u/s 40(a)(ia). He further noted that assessee has made
payment of Rs.14.02 lakhs to contractors which has been capitalized as
part of fixed assets on which depreciation has been claimed. It was
submitted by the assessee that same is outside the purview of section
40(a)(ia) as the same was not claimed as deduction in the computation
of income. The Assessing Officer held that section 194C provides that
assessee was liable to deduct TDS on the said amount and therefore,
the claim of depreciation for 25% which was Rs.3,51,447/- would be
disallowed u/s 40(a)(ia).

5.   Before the Ld. CIT(A), the assessee submitted that under the head
other liabilities appearing in the balance sheet, an amount of
Rs.44,63,919/- was shown on account of TDS. The appellant has
reversed certain provision of expenses during the year and accordingly,
the corresponding TDS amount was also reversed. Since the assessee
as reversed the expenses the same was not claimed as deduction. Thus,
the disallowance made by the AO should be deleted. Regarding
                                      3                      ITA No. 4026/Mum/2011
                                                            Assessment Year: 2005-06

disallowance of depreciation he submitted that same could not have
been disallowed u/s 40(a)(ia), because the assessee has capitalized the
payment as part of fixed assets. The Ld. CIT(A) after considering the
entire facts has confirmed the disallowance of depreciation of
Rs.3,51,447/-, however, has deleted the disallowance to Rs.54,12,000/-
after observing and holding as under:-

     "On the issue of the disallowance of Rs.54,12,000/- on account of
     reversal of excess TDS of Rs.2,70,613/-, the AO has mentioned
     that the assessee has not filed details in respect to the principal
     amount involved and why excess provision should be reversed.
     The AO estimated the principal amount at Rs.54.12 lakhs and
     disallowed u/s 40(a)(ia). The appellant has explained that out of
     total other liabilities appearing in the balance sheet, an amount of
     Rs.44,63,919/- was shown on account of TDS. The appellant has
     paid TDS of Rs.41.94 lakhs and the AO also has observed that
     the appellant filed details with respect to payment of Rs.41.94
     lakhs. The amount of provision of TDS, which remained unutilized
     i.e. the amount of Rs.2,70,613/- represent excess provision made
     under the head other liabilities in the balance sheet. The reversal
     of excess provision of TDS does not attract provisions of section
     40(a)(ia) and the action of the AO to estimate the principle
     amount at Rs.54.12 lakhs and making disallowance u/s 40(a)(ia)
     is found to be not valid hence the addition is deleted."

6.   Regarding disallowance of legal and professional charges, which
was made by the AO, the Ld. CIT(A), directed the AO to verify the same
as the assessee has filed the invoices before the AO along with the
petition/application u/s 154. The relevant observations are as under:-

     "Ground no. 8 is regarding disallowance of legal and professional
     charges amounting to Rs.20,82,784/-. The AO has discussed this
     issue at Para-9 of the assessment order. The AO asked for copies
     of bills of GGI Services Clearing & Forwarding Pvt. Ltd. of
     Rs.14,50 lakhs and S. Nandkumar of Rs.6.33 lakhs. In course of
     assessment proceedings the bills could not be produced, the AO
     therefore made disallowance. As the appellant had already filed
     writ petition u/s 154 along with copies of invoices of these two
     parties, the AO shall rectify the mistake."
                                               4                           ITA No. 4026/Mum/2011
                                                                          Assessment Year: 2005-06

7.      After hearing both the parties it is seen that, so far as deletion of
disallowance u/s 40(a)(ia) of Rs.54,12,000/-, the assessee has reversed
some of the expenses in its account and accordingly, the corresponding
TDS amount has also been reversed. Such a reversal of excess provision
of TDS cannot attract provision of section 40(a)(ia) because there is no
claim for corresponding expenses as deduction. Accordingly, finding of
the Ld. CIT(A) is affirmed.

8.      Regarding disallowance of legal and professional charges, it is
seen that assessee has filed the invoices before the AO, along with the
application u/s 154. The Ld. CIT(A) has merely directed the AO to rectify
the mistake after considering the copies of invoices. Thus, there is no
illegality in such a direction of the Ld. CIT(A). Accordingly, the direction
of the Ld. CIT(A) is affirmed and AO is directed to consider the invoices
while adjudicating the petition of the assessee. Accordingly, Revenue's
appeal is dismissed.

9.      In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on this 10th day of April, 2015.

                Sd/-                                                               Sd/-
      (B.R. BASKARAN)                                                    (AMIT SHUKLA)
     ACCOUNTANT MEMBER                                                 JUDICIAL MEMBER
Mumbai, Dated: 10.04.2015
Copy to: The Appellant
         The Respondent
         The CIT, Concerned, Mumbai
         The CIT(A) Concerned, Mumbai
         The DR "D" Bench
                                        //True Copy//
                                                            By Order

                                              Dy/Asstt. Registrar, ITAT, Mumbai.
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