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2019 (8) TMI 230 - ITAT MUMBAITDS u/s 194C - Disallowance of Service Coupon u/s. 40(a) (ia) - default u/s 201(1) - HELD THAT:- Payments made by the assessee to its dealers for providing free services in lieu of service coupons is not in the nature of any reimbursement of expenditure incurred by such dealers, and is in fact in the nature of payment of consideration pursuant to a contract, as per which the dealer provides such services to the ultimate customers. Accordingly, in our considered view the assessee was obligated to have deducted tax at source at the time of making of such payments towards service coupons to its dealers. As is discernible from the orders of the lower authorities, as the assessee had failed to deduct tax at source as per mandate of Sec.194C, therefore, the lower authorities had rightly concluded that the said amount was liable to be disallowed under Sec. 40(a)(ia) of the I-T Act. As the assessee which remained under an obligation to deduct tax at source under Sec.194C had failed to comply with the said statutory obligation, therefore, subject to our observations recorded herein below the provisions of Sec.40(a)(ia) were clearly attracted. Disallowance u/s 40(a)(ia) is assessee is not a Assessee in default under the first proviso to sub-section (1) of Sec.201 - Scope of second proviso of Section 201(1) inserted vide the Finance Act, 2012 w.e.f 01.04.2013 - HELD THAT:- As per the second proviso of Sec. 40(a)(ia), where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum, but is not deemed to be an assessee in default under the first proviso to sub-section (1) of Sec.201, then, for the purpose of Sec. 40(a)(ia) it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee, subject to the condition that the said resident payee satisfies certain conditions viz. (i) has furnished his return of income under Sec.139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income. At this stage, we may herein observe that though the second proviso had been made available on the statute vide the Finance Act, 2012 w.e.f 01.04.2013, however, the same as held in the case of CIT Vs. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] shall be applicable retrospectively, i.e even for the years prior to A.Y 2013-14. A similar view had also recently been taken by the Hon’ble High Court of Punjab & Haryana in the case of PCIT Vs. Mobisoft Telesolutions Pvt. Ltd. [2018 (10) TMI 989 - PUNJAB AND HARYANA HIGH COURT] while disposing off the appeal of the assessee before them for A.Y 2011-12. We are of the considered view that in case the assessee satisfies the conditions envisaged in sub-section (1) of Sec.201, then it cannot be held to be an assessee in default, and as per the second proviso of Sec. 40(a)(ia) no disallowance would be called for in its hands. We thus for the said limited purpose restore the matter to the file of the A.O for making necessary verifications. In case the assessee is able to demonstrate before the A.O that it had duly complied with the conditions envisaged in the second proviso of Sec.40(a)(ia) r.w.s 201(1), then the disallowance to the said extent made under Sec. 40(a)(ia) in its hands shall stand vacated.
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