TMI Blog2015 (7) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... plied by the appellants to contradict this specific factual finding recorded by the Appellate Tribunal. Therefore, this contention cannot be accepted. Whether second proviso to Section 40(a)(ia) of the Act, introduced by the Finance Act 2012, being retrospective in operation, disallowance could not have been ordered invoking Section 40 (a)(ia) of the Act? - Held that:- Going by the language of Section 40(a)(ia), once it is found that there is failure to deduct tax at source, the fact that the recipient has subsequently paid tax, will not absolve the payee from the consequence of disallowance. In so far as the judgment in Hindustan Coca Cola case (2007 (8) TMI 12 - SUPREME COURT OF INDIA ) is concerned, that was rendered in the context of section 201(1), the object of which being compensatory in nature, cannot be of any assistance to the appellants to resist a proceeding under Section 40(i)(ia) of the Act. This contention, therefore, is only to be rejected. Section 40(a)(ia) makes it clear that the consequence of disallowance is attracted when an individual, who is liable to deduct tax on any interest payable to a resident on which tax is deductible at source, commits default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 40(a)(ia) when the payee has included the entire interest paid by the appellant in its total income and filed return of income accordingly? (iii) Did not the statutory Authorities and the Appellate Tribunal failed to follow the principle of law laid down by the Hon'ble Apex Court in M/s.Hindustan Coca Cola Beverages Pvt. Ltd. (293 ITR 226 (SC) where it was held that the payer is not liable to pay the amounts of short/non- deduction of tax u/s 201(1) in cases whether the payee has already included the relevant amount in its total income? (iv) Should not the statutory Authorities and the Appellate Tribunal accepted the contention that the second proviso inserted with effect from 1.4.2013 was intended to remove the unintended consequences and was a beneficial provision for removal of hardship and therefore, retrospective in operation and applicable to the appellant's case? (v) Did not the Appellate Tribunal err in law in not following the judgment of the Allahabad High Court in CIT Vs. M/s Vector Shipping Services (2013) 357 ITR 642 (All) which is in favour of the appellant by following the principle of law laid down in the case of CIT Vs. M/s Vegetables Products L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees or professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub- contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVIIB and such tax has not been deducted or, after deduction, has not been paid,-- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, or or before the due date specified in sub-section (1) of section 139; or (B) in any other case, on or before the last day of the previous year. 6.In so far as these cases are concerned, admittedly assessees are partners of the firms and during the assessment years in question they have paid interest to the firms without deducting tax as required under Section 194A. It was in such circumstances that the interest paid by them to the firms was disallowed as provided under Section 40(a)(ia), which order has been concurrently upheld. 7.The first contention raised before us was that under Section 194A, an individual is excluded from the liability to deduct tax and that therefore, disallowance is without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Appellate Tribunal. Therefore, this contention cannot be accepted. 11. The second contention raised was that second proviso to Section 40(a)(ia) of the Act, introduced by the Finance Act 2012, being retrospective in operation, disallowance could not have been ordered invoking Section 40 (a)(ia) of the Act. This contention was sought to be substantiated relying on the judgments in Allied Motor (P) Ltd. v. Commissioner of Income Tax [(1997) 224 ITR 677 (SC)] and Commissioner of Income Tax v. Alom Extrusions Ltd. [(2009) 319 ITR 306]. 12.The second proviso to Section 40(a)(ia) of the Act reads thus: Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVIIB on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. 13.Admittedly this proviso was inserted by Finance Act 2012 and came into force with effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallow the interest paid. First of all, Section 40(a)(ia) is in very categoric terms and the provision is automatically attracted, on the failure of an assessee to deduct tax on the interest paid by him. Therefore, going by the language of Section 40(a)(ia), once it is found that there is failure to deduct tax at source, the fact that the recipient has subsequently paid tax, will not absolve the payee from the consequence of disallowance. In so far as the judgment in Hindustan Coca Cola case (Supra) is concerned, that was rendered in the context of section 201(1), the object of which being compensatory in nature, cannot be of any assistance to the appellants to resist a proceeding under Section 40(i)(ia) of the Act. This contention, therefore, is only to be rejected. 17.Another contention that was pressed into service was that the appellants had already paid the amount and therefore, the provisions of Section 40(a)(ia), applicable only in respect of the amount which remains to be payable on the last day of the financial year, is not attracted. Therefore, according to the appellants, disallowance cannot be sustained. This contention was sought to be substantiated by relying on th ..... 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