Case Law – Provisions of section 40(a)(ia) of the Act for disallowance of expenses cannot be made applicable for short deduction of tax at source such as if tax was deducted @ u/s 194C in place of 10% u/s 194J.

 CIT (IT) v. Samsung Heavy Industries Company Limited [2025:UHC:5945 – DB] ITA No. 10 of 2024 dated 10.07.2025.

“8. In view of the law laid down by Hon’ble Supreme Court in the aforesaid case, this Court has no hesitation in upholding the finding returned by learned Income Tax Appellate Tribunal, wherein it has held that Section 40(a)(ia) of the Income Tax Act, 1961 cannot be made applicable to short deduction of tax at source and the disallowance made was directed to be deleted. This finding of learned Income Tax Appellate Tribunal is based on the judgment rendered by Hon’ble Calcutta High Court in the case of Commissioner of Income Tax Vs. S.K. Tekriwal (supra). Learned Income Tax Appellate Tribunal have negated the submission of the revenue, which relied on the decision of Kerala High Court in the case of Commissioner of Income Tax Vs. PVS Memorial Hospital Ltd.(supra), by relying on the judgment passed by the Hon’ble Apex Court in the case of “Commissioner of Tax Vs. Vegetable Products”, reported in [1973] 88 ITR 192 (SC), wherein it was held that when there are divergent views of various non-jurisdictional High Courts on an identical issue, the construction that is favorable to the assessee should be considered.

9. Learned counsel for the appellant further submitted that the judgment of Hon’ble Kerala High Court has been challenged before the Hon’ble Supreme Court in Special Leave to Appeal No. 26075-26076 of 2016 M/s. PVS Memorial Hospital Ltd. Vs. The Commissioner of Income Tax and, vide order dated 02.11.2018, the Hon’ble Supreme Court granted leave in the matter and now it has been converted to Civil Appeal No(s). 10915-10916/2018 and, as per the website of Hon’ble Supreme Court, the case is ripe-up for final hearing and is still pending consideration before the Hon’ble Supreme Court, therefore, the hearing of present Appeal may be deferred till decision in the aforesaid Civil Appeal.

 10. We do not find any infirmity in the order of the Income Tax Appellate Tribunal.”

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