9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (7) TMI 1661 - AT - Income TaxDisallowance u/s 40(a)(ia) - scope of section 40(a)(ia) as amended by the Finance act 2012 - retrospectively of law as amended - whether the proviso is applicable from 1.4.2005 or from 01/04/2013 - HELD THAT As relying onf Ansal Landmark Township Private Ltd. 2015 (9) TMI 79 - DELHI HIGH COURT we hold that the proviso to the section is applicable from 01.04.2005, that the deductee had paid the taxes on the income that was subject of TDS provisions that no action could be taken against the assessee making the payment to HL. The basic aim of chapter XVII is to ensure that no portion of income remains untaxed. To ensure it TDS provisions were introduced-the person making payment was made responsible to deduct tax and pay it with the government account. But the proviso to section 40(a)(ia)made it clear that if the deductee pays the taxes on the entire income liable for taxation then no action would be taken against the deductor. The proviso is quite logical. It ensures that whole of the taxable income is taxed. Once the specific purpose is served there is no justification to indulge in unnecessary litigation. It is not the case of the AO or the FAA that the deductee had not paid the taxes on the taxable income or that it was not paid within the prescribed time limit. Therefore reversing the order of the FAA we decide the effective ground of appeal in favour of the assessee.
Issues:
1. Disallowance of interest expenses under section 40(a)(ia) of the Income-tax Act, 1961. 2. Applicability and interpretation of the second proviso to section 40(a)(ia) of the Act. 3. Retrospective effect of the proviso to section 40(a)(ia) from 01.04.2005. Issue 1: Disallowance of interest expenses under section 40(a)(ia) of the Income-tax Act, 1961: The assessee, a software development company, filed its return of income declaring a loss. The Assessing Officer (AO) disallowed interest expenses of Rs.10,39,94,746 under section 40(a)(ia) due to non-payment of TDS on the interest accrued to M/s. Hubtown Ltd. The assessee argued that it was facing liquidity issues and relied on CBDT instructions and judicial decisions to support its case. The AO disallowed the claim, stating that the assessee's actions were not in line with statutory provisions. The First Appellate Authority (FAA) upheld the AO's decision, emphasizing the need for tax deduction as per the Act. Issue 2: Applicability and interpretation of the second proviso to section 40(a)(ia) of the Act: The FAA rejected the assessee's argument that the second proviso to section 40(a)(ia) applied retrospectively and curatively. The Authorized Representative (AR) contended that the deductee had disclosed the amount in its revised return and had not claimed TDS credit. The Departmental Representative (DR) supported the FAA's decision, stating that the amendment was not retrospective. The Tribunal noted that the core issue was the retrospective application of the proviso from 01.04.2005 or 01/04/2013. Referring to a Delhi High Court judgment, the Tribunal held that the proviso had retrospective effect from April 1, 2005, and that as long as the deductee paid taxes on the income subject to TDS, no action could be taken against the deductor. Issue 3: Retrospective effect of the proviso to section 40(a)(ia) from 01.04.2005: The Tribunal, based on the Delhi High Court judgment, concluded that the proviso to section 40(a)(ia) applied from 01.04.2005. It emphasized that the aim of TDS provisions was to ensure taxation of the entire income, and if the deductee paid taxes on the income, no action should be taken against the deductor. The Tribunal overturned the FAA's decision, ruling in favor of the assessee and allowing the appeal. Conclusion: The Tribunal allowed the appeal, holding that the proviso to section 40(a)(ia) had retrospective effect from 01.04.2005 and that the deductee's payment of taxes on the income subject to TDS exempted the assessee from disallowance under section 40(a)(ia). The Tribunal emphasized the logical and just nature of the proviso in ensuring taxation of the entire income and avoiding unnecessary litigation.
|
