TMI Blog2015 (6) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of TDS for payment to various parties under section 194C read with section 40(a)(ia) - CIT(A) deleted the addition - Held that:- The second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 1s t April, 2012 will apply in the case of the assesse. In order to rationalize the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, it is proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, the, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee had deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee. Thus restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Officer with regard to the recipients of the income and taxes paid by them. See Santosh Kumar Kedia Versus Income-tax Officer, Wd-56 (1) , Kolkat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establish that such amount was an investment. - Decided against revenue. Disallowance of motor car depreciation - CIT(A) deleted part addition - Held that:- CIT(Appeals) has rightly held that the addition to motor car was, in fact, depreciation calculated at the rate of 15% on the opening balance of ₹ 1,37,236/-. Even the Assessing Officer did not make any comment in the remand report. We, therefore, confirm the order of ld. CIT(Appeal s) on this point - Decided against revenue. - I.T.A. No. 433/KOL./2011 - - - Dated:- 21-5-2015 - Shri P.K. Bansal and Shri Mahavir Singh, JJ. For the Appellant Shri Kalyan Nath, JCIT, Sr. D.R. For the Respondent : Shri S. Dasgupta, C.A. ORDER Per P.K. Bansal: This appeal has been filed by the Revenue against the order of ld. Commissioner of Income Tax (Appeals) -XXXII, Kolkata dated 20.09.2010 for the assessment year 2007-08 by taking the following effective grounds of appeal:- (1) Ld. CIT(A) has erred in facts as well as in law in deleting the addition of ₹ 3,29,05,000/- on account of labour payment for non-deduction of tax under section 40(a)(ia) of I.T. Act, 1961. (2) Ld. CIT(A) has erred in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- 2.7. Now coming to the merits of the claim of the assessee, as already stated above, the A.O. has not offered any comments regarding the contents of the affidavit of Sh. Dilip Kr. Paul. The deposition of Sh. Dilip Kr. Paul that he was an employee of the assessee is found to be correct from the supporting evidences on A.O. 's record. The A.O. has noted in the assessment order, as also in his remand report, that the Salary Account along with Salary ledger was produced before him. From the Salary account it is observed that the assessee had paid salary to Sh. Dilip Kr. Paul during the year under consideration. This fact combined with the affidavit of Sh. Dilip Kr. Paul undisputedly established that Sh. Paul was an employee of the assessee. 2.8. From the assessment order it is not clear as to how and why the A.O. arrived at a conclusion that Sh. Dilip Kr. Paul was a sub-contractor of the assessee. During the course of assessment proceedings, when the A.O. raised question regarding the payments made to Sh. Dilip Kr. Paul, the assessee had explained to him that Sh. Dilip Kr. Paul was engaged to supervise the entire work and the site office maintenance of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no finding by the A.O. that the impugned payment was made by the assessee to Sh. Dilip Kr. Paul in pursuance to any contract between him and Sh. Dilip Kr. Paul. The facts of the case, as discussed in preceding paras, also do not indicate existence of any contract between the assessee and Sh. Dilip Kr. Paul laying Sh. Dilip Kr. Paul to be a subcontractor of the assessee. 2.12. In the light of the above discussion the disallowance of a sum of ₹ 3,29,05,000/- made by the A.O. is found to be misconceived and unjustified since Sh. Dilip Kr. Paul is found to be not a sub-contractor rather an employee of the assessee. Therefore, the said addition is deleted and ground no.2 of the appeal is allowed . 5. Before us, even though the ld. D.R. vehemently relied on the order of the Assessing Officer and contended that the assessee has not submitted any books of accounts, vouchers and bills before the Assessing Officer. All were filed before the ld. CIT(Appeals), but could not convince us as we noted that there is a clear-cut finding given by the ld. CIT(Appeals) that the assessee has duly produced the books of account as well as the bills, etc. before the Assessing Officer and even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. We have heard the rival submissions and carefully considered the same along with the order of tax authorities below. In our opinion, the said issue is clearly covered by the decision of this Tribunal in ITA No. 296/Kol/2012 in the case of Five Star Shipping Agency Pvt. Limited of even date, in which the Tribunal has taken a view that Contract need not be in writing. It may infer from the conduct of the parties. It may be oral also. Relevant portion of the order is reproduced as under:- 6. We have heard the rival submissions and carefully considered the same along with the order of the tax authorities below. The provisions of section 40(a)(ia) are very clear if the assessee fails to deduct the tax at source or after deduction has not paid before the due date specified in sub-section (1) of section 139, the same will not be allowed in computing the income under the head profit and gains of business or profession . The contention of the assessee, however, is that the provisions of section 194C are not applicable on the facts as there is no agreement or contract between the assessee and the persons from whom the trucks have been hired. The provision of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. Explanation.-For the purposes of this section,- (i) specified person shall mean,- (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in pursuance of a contract between the assessee and the transporters. Now the question arises before us, whether there is contractual r elationship between the assessee and the persons to whom the assessee had made the payments in the nature of hiring charges for goods carried vehicles. In our opinion, a contract need not be in writing; even an oral contract is good enough to invoke the provisions of Section 194C. As Hon ble Karnataka High Court has observ ed in the case of Smt J Rama Vs CIT (236 CTR 105), Law doe s not stipulate the existence of a written contract as a condition precedent for ( invoking the provisions of Section 194 C with respect to) payment of TDS . The transporters have received the payments from the assessee towards the transportation charges, therefore, the presumption normally be that one would proceed on the basis that there was a contract for hiring of goods carried vehicles. Therefore, if the assessee has made the payment for hiring the goods carried vehicles, the provisions of section 194C are clearly applicable. In our opinion, the ld. CIT(Appeals) was not correct in law that the assessee will be liable to deduct the TDS if the amount of a single con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct inserted by the Finance Act, 2012 would apply in the instant case. According to him, the second proviso is curative in nature intended to supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax. According to him, it has for long been the legal position that if the payee has paid tax on his income, no recovery of any tax can be made from the person who had failed to deduct the income tax at source from such amount. In Grindlays Bank v CIT, (1992) 193 ITR 457 (Cal) decided on September 5, 1989, it was held by the Hon'ble Calcutta High Court as follows at pages 469-470 of the reports: A point has been made by the assessee that as a result of this deduction the department is realizing the tax twice on the same income. It does not appear that this point was agitated before the Tribunal. We, however, make it clear that if the amount of tax has already been realised from the employees concerned directly, there cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be no doubt that the second proviso was inserted to supply an obvious omission and make the section workable. The insertion of second proviso was explained by Memorandum Explaining The provision in Finance Bill, 2012, reported in 342 ITR (Statutes)234 at 260 261, which reads as under:- E.RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS) AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS I. Deemed date of payment of tax by the resident payee. Under the existing provisions of Chapter XVII-B of the Income-tax Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. In case of non-deduction of tax in accordance with the provisions of this Chapter, he is deemed to be an assessee in default under section 201(1) in respect of the amount of such non-deduction. However, section 191 of the Act provides that a person shall be deemed to be assessee in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly. Therefore, the deductor cannot be treated as assessee in default in respect of non/short deduction of tax if the payee has discharged his ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission, brokerage, professional fee, etc. due to non-deduction of tax. It has been provided that in case the tax is deducted in subsequent previous year, the expenditure shall be allowed in that subsequent previous year of deduction In order to rationalize the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, it is proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, the, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee had deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee. These beneficial provisions are proposed to be applicable only in the case of resident payee. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. 11. No contrary decision was brought to our knowledge by the ld. D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is neither justifiable nor sustainable. Accordingly, the disallowance of ₹ 1,08,55,000/- is deleted . 15. We have heard the rival submissions and carefully considered the same. We noted that it is not denied by the ld. D.R. that the assessee has submitted forms 15J in terms of Rule 29D read with second proviso of sect ion 194C(3)(i). In view of this fact, we do not find that this ground warrants our interference in the order of ld. CIT(Appeal s). We accordingly dismiss this ground. 16. Ground No. 4 relates to the deletion of the addition of ₹ 20,39,240/-. Facts relating to this addition are that the Assessing officer noted that there was decrease in the value of asset s of the balance-sheet as on 31.03.2007 when compared to the balance-sheet as on 31.03.2006. But the assessee has not shown any receipt against sale or loss, therefore, he invoked the provision of section 69 and made the addition under section 69 of the Act as unexplained investment. When the matter when in appeal before the ld. CIT(Appals), ld. CIT(Appeal s) deleted the addition. 17. We have heard the rival submissions and carefully considered the same. We noted that it is a case where the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mately of the receipt. In our opinion, once the genuinity of the expenditure is proved, the onus is on the revenue to prove that the expenditure has not been incurred for the purpose of business especially when the expenditure has been incurred during the course of carrying on the business. Ld. CIT(Appeals), in our view, was justified in rest ricting the disallowance to 5% of the expenditure and it cannot be denied that some part of the expenditures might have not been wholly and exclusively incurred for the purpose of business. We accordingly confirm the order of ld. CIT(Appeals). Thus this ground stands dismissed. 20. Ground No. 6 relates to the deletion of addition of ₹ 1,04,800/-. The Assessing Officer noted that the assessee had paid a sum of ₹ 1,04,800/- in four instalments of ₹ 35,200/- to Kotak Mahindra and this amount has not been shown in the balance-sheet as investment. The Assessing Officer, therefore, added a sum of ₹ 1,04,800/- as undisclosed investment. 21. Ld. CIT(Appeals) deleted the addition by holding that in the Bank account statement of the assessee the amount of ₹ 1,04,800/- was shown as paid to M/s. Kotak Mahindra Bank Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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