2013 (6) TMI 895 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of job charges and forwarding & transportation charges u/s 40(a)(ia).
2. Applicability of the decision in Merilyn Shipping & Transport case.
3. Retrospective application of amendments to Section 40(a)(ia) and Section 201(1).
4. Verification of compliance with TDS provisions and filing of Form 26A.

Summary:

1. Disallowance of job charges and forwarding & transportation charges u/s 40(a)(ia):
The assessee, a company trading in soybean and oil, claimed deductions for job charges of Rs. 1,04,80,591/- paid to M/s. Kartik Solvex Pvt. Ltd. and forwarding & transportation charges of Rs. 11,22,460/- paid to M/s. Swastik Enterprises. The Assessing Officer disallowed these charges u/s 40(a)(ia) due to non-deduction of TDS. The CIT(A) partly deleted the disallowance, allowing relief of Rs. 86,10,068/- for job work charges and Rs. 8,49,445/- for professional and technical services, based on the decision in Merilyn Shipping & Transport.

2. Applicability of the decision in Merilyn Shipping & Transport case:
The CIT(A) relied on the decision of the I.T.A.T. Special Bench in Merilyn Shipping & Transport, which held that disallowance u/s 40(a)(ia) applies only to amounts payable at the year-end. However, the Andhra Pradesh High Court suspended this decision, making the CIT(A)'s reliance on it erroneous.

3. Retrospective application of amendments to Section 40(a)(ia) and Section 201(1):
The Finance Act, 2010 and 2012 amendments to Section 40(a)(ia) and Section 201(1) are clarificatory and retrospective. The amendments state that if TDS is deducted and paid before the due date of filing the return u/s 139(1), the expenditure should be allowed. The Tribunal referenced decisions from the Supreme Court and Kolkata High Court supporting the retrospective application.

4. Verification of compliance with TDS provisions and filing of Form 26A:
The assessee argued that the recipients of the payments had included these amounts in their income and paid due taxes, filing Form 26A. The Tribunal remanded the case to the Assessing Officer to verify the returns filed by the recipients and the certificates from Chartered Accountants, ensuring compliance with TDS provisions. The assessee was given an opportunity to substantiate its claims with additional documents.

Conclusion:
The appeals by the Revenue and the assessee were allowed for statistical purposes, and the cross objection was dismissed. The matter was remanded to the Assessing Officer for fresh consideration based on the Tribunal's observations.