JKG CONSTRUCTION PRIVATE LIMITED,DELHI V. INCOME TAX OFFICER WARD 13(1), DELHI

ITA 3619/DEL/2023

AI Insights

The case involves JKG Construction Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) concerning disallowances made under sections 36(1)(va) and 40(a)(ia) of the Income Tax Act, 1961. The disallowances were related to delayed payments of employee contributions towards PF/ESI and non-deduction/non-deposit of tax on interest paid to ECL Financial Ltd., respectively. The Tribunal found that the recipient company had included the interest in its income and paid taxes, which was not considered by the lower authorities. The matter was remanded back to the AO for further verification.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717759 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 13-12-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: R. K. SHARMA
• Keywords: Set aside; TDS
• Section: 143(3); 40(a)(ia)

Judgement Text

"ITA No.3619/Del/2023 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “C” BENCH: NEW DELHI BEFORE SHRI SUDHIR KUMAR, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3619/Del/2023 [Assessment Year : 2017-18] JKG Construction Pvt.Ltd., A-24, UGF,Yojana Vihar, Delhi-110092 PAN-AABCJ1045L vs ITO, Ward-13(1), Delhi APPELLANT RESPONDENT Appellant by Shri R.K.Sharma, Adv. Respondent by Shri Om Prakash, Sr.DR Date of Hearing 21.05.2025 Date of Pronouncement 13.08.2025 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by the assessee against the order dated 05.12.2023 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre, Delhi [“Ld.CIT(A)”] in Appeal No.CIT(A), Delhi-5/10453/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 21.12.2019 passed u/s 143(3) of the Act pertaining to assessment year 2017-18. 2. Brief facts of the case are that the assessee is a Private Limited company and e-filed its return of income on 01.03.2018, declaring loss of INR 14,01,568/-. The case of the assessee was taken up for scrutiny and after considering the submissions made, additions on account of delayed payment of interest on TDS and service tax amounting to INR 7,48,957/-, delayed payment of employee’s Printed from counselvise.com ITA No.3619/Del/2023 Page | 2 contribution towards PF/ESI disallowed u/s 36(1)(va) of the Act of INR 18,75,550/- and disallowance u/s 40(a)(ia) of the Act for non- deduction/non-deposit of tax of INR 4,13,60,549/- were made. 3. Against this, the assessee preferred appeal before Ld.CIT(A) who partly allowed the appeal of the assessee vide impugned order dated 05.12.2023 thus, the assessee was in appeal before the Tribunal by taking following grounds of appeal:- 1. “That the AO and Ld.CIT(Appeals) has completely erred on facts and in law in disallowing the Employee Contribution for Rs.18,75,500/-. 2. That the AO and Ld.CIT(Appeals) has completed erred on facts and in Law in disallowing interest on TDS amount for Rs.4,13,60,549/-.” 4. During the course of appellate proceedings, the assessee has taken additional grounds of appeal however, the same were not pressed thus, are dismissed at this stage only. 5. Ground of appeal No.1 is also not pressed hence, dismissed. 6. In Ground of appeal No.2, the AO made the disallowance by observing that the assessee has paid interest but no TDS was deposited to the credit of the Government account on the interest of INR 4,13,60,549/- during the year. The AO further observed that the interest was paid to ECL Financial Ltd and the claim of the assessee was that the said company had included the interest in its income and paid taxes thereon. However, no evidence was filed therefore, he disallowed the interest paid to ECL Financial Ltd. of Printed from counselvise.com ITA No.3619/Del/2023 Page | 3 INR 4,13,60,549/- by invoking the provision of section 40(a)(ia) of the Act. 7. Before us, Ld.AR for the assessee submits that the assessee alongwith petition under Rule 46A before Ld.CIT(A), had filed the necessary evidences of the income declared by ECL Financial Ltd however, the same has not been considered and the addition is confirmed by Ld.CIT(A). Ld.AR requested that matter may be sent back to the file of Ld.CIT(A)/AO so that the necessary evidences of payment of tax by the respective payee could be established and the interest expenses could be claimed as allowable in terms of the proviso to section 40(a)(ia) more particularly when the assessee is not treated as assessee in default u/s 201 of the Act. He prayed accordingly. 8. On the other hand, Ld. Sr.DR for the Revenue vehemently supported the orders of the lower authorities and requested for the confirmation of the disallowance made. 9. Heard the contentions of both the parties and perused the material available on record. From the perusal of the order of lower authorities, we find that there is no quarrel about non-deposit of TDS amount on the interest paid to ECL Financial Ltd. however, it appears that the assessee has been able to gather the evidences that the recipient company had paid taxes by including the same as income in its return of income which has not been considered by the lower authorities. As per second proviso to section 40(ia) when Printed from counselvise.com ITA No.3619/Del/2023 Page | 4 the assessee is not held as assessee in default under first proviso to sub-section (1) of section 201 of the Act, therefore, upon submissions of the necessary certificate with respect to the payment of tax by the recipient company on the amount of expenditure claimed by the assessee, no disallowance could be made u/s 40(ia) of the Act. Accordingly, we set aside the orders of the lower authorities on this issue and remand back the matter to the file of AO with the direction to make necessary verification of the facts on the basis of the certificate submitted by the assessee in this regard that the recipient company has paid due taxes on such interest amount and decide the issue in accordance with law. Assessee is also directed to participate and file all the necessary documents in support of the claim. With these directions, Ground of appeal No.2 of the assessee is partly allowed for statistical purposes. 10. In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 13.08.2025. Sd/- Sd/- (SUDHIR KUMAR) JUDICIAL MEMBER *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "