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2017 (6) TMI 246 - AT - Income TaxTDS u/s 194C - disallowance u/s. 40(a)(ia) - hire charges payment - whether the second proviso is prospective or retrospective in nature? - Held that:- The second proviso to section 40(a)(ia) has retrospective effect from 01.04.2005 and in case the recipients of the amount have taken into account for computation of their income offered to tax in the return of income then no disallowance can be made u/s. 40(a)(ia). Hence we set aside this issue to the record of the AO for limited purpose of verification of the facts whether the recipients have considered the amount in question for computation of their income offered to tax. Whether this payment is sharing of the revenue at source and therefore the provisions of section 194C are not applicable? - Held that:- It is pertinent to note that this is more of a question of fact than law as to whether the payment in question are sharing of revenue or are in the nature of hire charges. We find that though the assessee filed the affidavits of the recipients in support of the claim however neither the AO nor the CIT(A) have conducted a proper enquiry to verify this fact rather the evidence produced by the assessee was rejected at threshold. Even the decisions relied upon by the assessee before us were also not considered by the authorities below. Therefore we have already set aside the issue of non-applicable of provisions of section 40(a)(ia) by virtue of second proviso to said section we deem fit and proper that this issue of nature of payment also requires a proper verification and examination at the level of the AO. Accordingly, we set aside this issue to the record of the Assessing Officer for proper examination - Appeal of the assessee allowed for statistical purposes.
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