TMI Blog2015 (11) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 - P Madhavi Devi, JM And B Ramakotaiah, AM For the Appellant : Mr P Raviseshagiri Rao For the Respondent : Smt Nivedita Biswas ORDER Per B. Ramakotaiah, AM This appeal by assessee is against the Order of the Ld. CIT(A), Tirupati dated 27.02.2015. Assessee is aggrieved on the disallowance made under the provisions of section 40(a)(ia) of entire sub contract payments at ₹ 29,04,44,502. Assessee has raised the following grounds: 1. The order of the learned Commissioner of Income- Tax (Appeals) is erroneous to the extent it is prejudicial to the appellant. 2. The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition of ₹ 29,04,44,502/- made by the Assessing Officer by applying the provisions of Sec.40(a)(ia) of the I.T. Act. 3. The learned Commissioner of Income-tax (Appeals) ought to have considered the fact that the provisions of Sec.194C have no application to the payments made by the appellant to its constituents and, therefore, no TDS need be made. 4. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the amounts were paid during the previous year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, he dismissed the grounds pertaining to this issue. Assessee is aggrieved. 3. After considering the rival contentions and perusing the transactions as recorded by the assessee in the books of accounts and P L account, we are of the opinion that assessee is not passing on the entire amount received as part of the contract to its constituents. In fact, TDS made on the contract payments was claimed by the assessee and not by the constituents. Therefore, there exist some contractual relationship. Amounts received by the assessee were subjected to TDS by the principal and at the same time assessee also admits that TDS was done on the subcontract payments made to its constituents. The issue is not whether assessee is liable to deduct TDS or not. Assessee having deducted the tax, paid belatedly as per the details furnished in the assessment order as under: Sl. No. Amount of tax deducted from subcontract payments. Year of deduction Due date as stipulated u/s.40(a)(ia) Actual date of remittance into Central Government Account. 1. 53,31,687 2010-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 40(a)(ia) are in the nature of additional measures to ensure the deduction and deposit cash (TDS) within the time in the Government account. Thus, ground Nos. 2 and 3 are decided against the assessee. 3.1. Since the facts are similar to the above said case, we approve the action of the A.O. and Ld. CIT(A) in holding that assessee is liable for deduction of tax on the sub-contract amounts paid, based on the entries in the books of accounts as placed before us. 4. Now the issue is, whether provisions of section 40(a)(ia) can be invoked for denying the deduction of entire contract payments for delay in remitting the TDS made. This issue was decided in favour of the assessee by the Coordinate Bench of ITAT, Bangalore in the case of DCIT Circle-1, Udupi vs. Ananda Marakala (2014) 48 taxmann.com 402 (Bangalore-Trib.). In that case also A.O. invoked provisions of section 40(a)(ia) and the relevant observations of the Bangalore Tribunal in the case of Ananda Marakala (supra) are as under : - The Finance Act, 2008 brought out amendment to section 40(a)(ia) w.e.f 1-4-2005 by relaxing earlier position to some extent It made two categories of defaults causing disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - As per the new amendment, the disallowance will be made if after deducting tax at Source, the assessee fails to pay the amount of tax on or before the due date specified in sub-section (1) of section l39 of the Act. The effect of this amendment is that now the assessee deducting tax either in the last month of the previous year or first eleven months of the previous year shall be entitled to deduction of the expenditure in the year of incurring it, if the tax so deducted at source is paid on or before the due date u/s 139(1). This is the only difference which has been made by the Finance Act, 2010. (Para 17). - Further liberalization of provisions of section 40(a)(ia) was made through amendment brought by the Finance Act, 2012. With a view to liberalize provisions of section 40(a)(ia) of the Act Finance Act, 2012 brought amendment with effect from 1- 4-20] 3. (Para 21). - The provisions of section 40(a)(ia) are meant to ensure that the Assessee's perform their obligation to deduct tax at source in accordance with the provisions of the Act. Such compliance will ensure revenue collection without much hassle. When the object sought to be achieved by those prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - The provision nowhere requires that the amount which is payable must remain so payable throughout during the year. If the assessee's interpretation is accepted, it would lead to a situation where the assessee who though was required to deduct the tax at source but no such deduction was made or more flagrantly deduction though made is not paid to the Government, would escape the consequence only because the amount was already paid over before the end of the year in contrast to another assessee who would otherwise be in similar situation but in whose case the amount remained payable till the end of the year. There is no logic why the legislature would have desired to bring about such irreconcilable and diverse consequences. - Secondly, the principle of deliberate or conscious omission is applied mainly when an existing provision is amended and a change is brought about. The Special Bench was wrong in comparing the language used in the draft bill to that used in the final enactment to assign a particular meaning to section 40(a)(ia). Accordingly, Merilyn Shipping Transport (supra) does not lay down correct law. The correct law is that section 40(a)(ia) covers not onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 11. Even though the above stated proviso was inserted with effect from April 1, 2013, the Agra Bench of the Tribunal in the case of Rajiv Kumar Aggarwal in I.T.A.No. 337/Agra/2013 order dated May 29,2013, following the jurisdictional High Court in the case of CIT v. Rajinder Kumar reported in [2014] 362 ITR 241 (Delhi) and held that the second proviso is declaratory and curative in nature and has retrospective effect from April 1, 2005. The relevant findings of the Agra Bench of the Tribunal cited (supra) reads as follows : 6. However, the stand so taken by the Special Bench was disapproved by the Hon'ble Delhi High Court in the case of CIT v. Rajinder Kumar reported in (2014) 362 ITR 241 (Delhi). While doing so, their Lordships observed that, the object of introduction under section 40(a)(ia) is to ensure that TDS provisions are scrupulously implemented without default in order to augment recoveries ... failure to deduct TDS or deposit TDS results in loss of revenue and may deprive the Government of the tax due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only a mean of recovering, due taxes on income embedded in the payments made by the assessee. That is how, as we have seen a short while ago, the Hon ble Delhi High Court has visualised the scheme of things as evident from their Lordships reference to augmentation of recoveries in the context of 'loss of revenue' and depriving the Government of the tax due and payable. 6. In this case, assessee has placed on record evidence that constituents has filed the returns of income and claimed TDS, whatever is deducted by the assessee which was also duly allowed. In view of this, there is no dispute that constituents have accounted for the incomes and also paid taxes accordingly. In view of this, following the Coordinate Bench decisions supra, we are of the opinion that the provisions of amendment brought in Finance Act, 2012 are to be considered as clarificatory and as assessee has deducted tax and also paid though belatedly, we are of the opinion that provisions of section 40(a)(ia) can be liberally interpreted so as to exclude the amounts from the purview of the above section. A.O. is directed to allow the expenditure as claimed. Assessee s grounds are allowed accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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