TMI Blog2012 (7) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax (Appeals), Chandigarh dated 15.06.2011 relating to assessment year 2008-09 against the order passed under section 143(3) of the Income-tax Act (in short 'the Act'). 2. The assessee has raised the following grounds of appeal: 1. That the order of the assessing officer as upheld by the Commissioner of Income Tax (Appeals) Chandigarh is bad in law and is beyond all the cannons of law and justice. 2. That the order of the Assessing Officer as upheld by the Commissioner of Income Tax (Appeals) Chandigarh disallowing Rs. 1,01,33,9537- u/s 40(a)(ii) of the Income Tax Act being the amount of advance made to the contractor for acquisition of its capital asset more so when the same has been adjusted within 3 months and tax has been deducted and deposited before the filing of the return is bad in law and needs to be set-aside. 3. The only issue raised in the present appeal is against the disallowance made by the Assessing Officer by invoking provisions of section 40(a)(ia) of the Act for non-deduction of tax at source under section 194C of the Act. 4. The brief facts of the case are that the assessee is a cooperative society and is providing credit facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bill, a photocopy of the bill and vouchers for Rs. 89,30,960.50 paise being the value out of which Rs. 1,38,0697- in respect of the Amritsar project i.e. Rs. 50,61,506.25 paise. Further I am also enclosing a copy of the bill and other connected documents in respect of Ludhiana project whereby the advance of Rs. 55,26,886.70 paise has been adjusted out of the gross amount of the bill at Rs. 1,37,30,122.70 paise against which tax has been deducted at Rs. 3,11,1257- on the gross value of the bill. It may however be submitted here that after seeking the legal advice in this behalf the above noted assessee deducted TDS at the time of payment only i.e. in the case of secured advances at the time of extending the advance however the same was adjusted while deducting the tax at source at the time of making the payment of the bill." 5. The TDS deducted on the said payment was deposited on or before 8.7.2008 i.e. before the date of filing the return of income which in the present case was 30.9.2008. 6. The Assessing Officer while completing the assessment had allowed the benefit of adjustment made at Rs. 20,41,875/- on 18.3.2010 and made disallowance of Rs. 1,01,33,953/- for non d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . at the fag of the financial year 2007-08 and the said advance was adjusted in the months of the next financial year 2008-09 and once the total bill was raised the tax was deducted and deposited in the account of the Government. The said TDS has been deducted by the assessee before filing of return i.e. before 8.7.2008, whereas the return of income was due to be filed by the assessee on or before 30.9.2008. 12. The issue arising in the present case is whether in view of the non deduction of tax out of the advance payment made by the assessee to the contractor for supply of material is hit by the provisions of section 40a(ia) of the Act. 13. Section 40(a)(ia) of the Act provides that in case where any interest, commission or brokerage, rent, royalty, fees for professional services or technical services were payable to a resident, or amounts payable to a contractor or sub-contactors, being resident, on which tax was deductible at source under Chapter XVII-B and where such tax has not been deducted or after deduction has not been paid, then such amount would not be deducted while computing income under the head 'income from profits and gains of business or profession'. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act is to be assigned strict interpretation, in view of the object of Legislation, which is intended from the replacement of the words in the proposed and enacted provision from the words "amount credited or paid" to "payable". Hence, in my view, my answer to the question referred by Hon'ble President to the Special Bench is as under: The provisions of section 40(a)(ia) of the Act are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS." 15. In view of the ratio laid down by the Special Bench (supra), the provisions of section 40(a)(ia) of the Act are not applicable on the amount of expenditure which has been paid by the assessee. Applying the above said ratio laid down by Special Bench in Merilyn Shipping Transports ( supra ) to the facts of the present case, where the amount totaling Rs. 1,21,75,828/- has been paid to M/s Deepak Builders, contractor during the year under consideration itself, mere non-deposit of TDS deducted thereon does not merit any disallowance in the hands of the assessee. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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