TMI Blog2013 (12) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is restored for fresh adjudication. - I.T.A. No. 38/Coch/2013 - - - Dated:- 29-11-2013 - Shri N. R. S. Ganesan, JM And B. R. Baskaran, AM,JJ. For the Petitioner: Shri P. Venugopal, CA For the Respondent: Shri K. K. John, Sr. DR ORDER Per B. R. Baskaran, Accountant Member: The appeal filed by the assessee is directed against the order dated 17-12-2012 passed by the Ld. CIT(A), Trivandrum and it relates to the assessment year 2009-10. 2. The disallowance of ₹ 93,68,320/- made by the Assessing Officer u/s. 40(a)(ia) of the Act, having been partially confirmed by the Ld. CIT(A), the assessee has filed this appeal before us. 3. The facts relating to the issue under consideration are stated in brief. The assessee is a dealer in aluminium extrusion products. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has paid a sum of ₹ 93,68,320/- as polishing charges and claimed the same as deduction. The Assessing Officer noticed that the process of anodizing and powder coating on aluminium extrusions is booked under Polishing charges . The assessee has sold the products after carrying out polishing wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat case the CIT(A) gave a finding that there was no oral or written agreement between assessee and transporters for carrying of good nor it was proved that the freight charges were paid to them in pursuance of a contract for specific period, quantity or price. The instant case is not of a transporter. There is no finding of any authority that no contract exists. Further as mentioned by the appellant in argument note, there is per unit rate of job work (mentioned as less than ₹ 20 per sq. lft. in the argument note) which means quantity of job work and price are specified in the case of the appellant. Aggrieved by the order passed by Ld CIT(A), the assessee has filed this appeal before us. 5. The Ld. Counsel for the assessee submitted that the aluminium extrusion materials purchased by the assessee from manufacturers come in mill finished form, i.e. in plain aluminium colour. However, most of the customers prefer to get them polished with the colours of their choice. Since the assessee does not have facilities for polishing, he gets the polishing work done through outsiders. On receipt of materials after polishing, the assessee used to raise the bill for cost of materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the decision of the Special Bench in the case of Merilyn Shipping Transports (136 ITD 23(SB)) to contend that the disallowance u/s 40(a)(ia) of the Act can be made only in respect of amount, which remain payable at the year end and it does not apply to the amount already paid. He further submitted that the view taken by the Special Bench in the above cited case has been approved by the Hon'ble Allahabad High Court in the case of CIT vs. Vector Shipping Services P Limited (I.T.A. No. 122/2013). 5.4 The Ld. Counsel further submitted that the persons to whom polishing charges were paid have declared the receipts in their respective returns of income. He submitted that the assessee has filed evidences to the tune of ₹ 22.68 lakhs before Ld CIT(A). Further, the assessee is in a position to produce evidences for another ₹ 50.97 lakhs. By placing reliance on the decision of the Hon'ble Supreme Court in the case of Hindustan Coco Cola Beverages Ltd., 293 ITR 226, the Ld. Counsel submitted that tax cannot be recovered from the payer, if tax has already been paid by the payee. 5.5 He further submitted that the Finance Act, 2010 amended the first provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us that the provisions of sec. 194C shall not apply to the polishing charges. However, we notice that the assessing officer has given a clear finding that essential ingredients of a contract are very much available in the polishing works entrusted by the assessee. Further we notice that the CBDT, vide circular No.433 dated 25-09-1985 (1986)(157 ITR St. 27) has clarified that the provisions of sec. 194C are wide enough to cover oral contracts also. A contract is normally reduced in writing in order to make clear the terms and conditions, obligations of the parties to the contract etc. If the conditions of contract are otherwise understood by the parties, in view of the repeated transactions, in our view, the absence of a written contract would not make any difference. In the instant case, the assessee is repeatedly given works to the polishing people and hence the terms and conditions of the work would be clearly understood by both the parties. Accordingly, we reject this contention of the assessee and hold that the provisions of sec. 194C shall apply to the polishing works given by the assessee. 7.1 According to Ld A.R, the assessee has acted as a conduit pipe in connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered by the Special Bench. Thus, the ratio of the said decision is different from that rendered in the case of Meryline Shipping and Transports by the Special bench. Hence, we are inclined to reject the contentions of the assessee on this point also. 7.3 The assessee placed reliance on the decision of Hon'ble Supreme Court in the case of Hindustan Coco-Cola beverages Ltd (supra) in order to contend that the revenue is not entitled to recover taxes, if the recipient has declared the payments in his return of income. We notice that the above said decision was rendered in the context of the provisions of sec. 201(1) and hence, we are of the view that the ratio of the said decision cannot be applied to the disallowance made u/s 40(a)(ia) of the Act. 7.4 The last contention of the assessee is that the second proviso to sec. 40(a)(ia) of the Act, inserted by the Finance Act, 2012 with effect from 1.4.2013 is clarificatory in nature and hence the benefit of the same should be applied retrospectively. However, the correctness of this contention has not been examined by the tax authorities. Hence, in the interest of natural justice, we are of the view that this contention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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