TMI Blog2015 (11) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we uphold the order of the ld. CIT(A). - Decided against revenue. Addition U/s 40(a)(ia) - payment of interest to Non-banking Finance Company (In short NBFC) without deducting TDS - CIT(A) deleted the addition - Held that:- On issue of amount already paid during the year or amount shown payable as on 31st March of every year, the various courts have different views i.e. in favour of the assessee and against the assessee. The Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court) has held that when there are to views on an issue, the view in favour of the assessee has to be preferred. Therefore, we confirm the order of the Ld. CIT(A). Further the recipient are NBFC, therefore, not possible to not be assessed to tax, these payments were related for A.Y. 2009-10 and return for A.Y. 2009-10 already might have been filed by these NBFC by including these interests receipts as their income. Therefore, we do not find any reason to interfere in the order of the Ld. CIT(A).- Decided against revenue. - ITA No. 757/JP/2012 - - - Dated:- 10-4-2015 - SHRI R.P. TOLANI, JM SHRI T.R. MEENA, AM For The A ppellant: Shri Purushottam Kas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he work order was allotted to the assessee by RSEB that means sale of the material supplied to the DISCOMs has begun in other words sale of the assessee has taken place for the material to be supplied by him. Therefore, the plea of the assessee is not tenable to him. He further observed that when there was no material available with the assessee wherefrom he supplied the goods on 17/04/2008 for ₹ 51,66,768/- of 101.813 KM of cable. Thus, he treated the purchase in transaction dated 17/04/2008 at ₹ 51,66,768/- through undisclosed source and made the addition of the same. Further he also verified the total sales during the year was 610.715 KMs, however, the purchases were shown of 562.810 KMs cable. There were difference in sale and purchase by 47.905 KMs. The Assessing Officer gave further reasonable opportunity of being heard on this issue, which was availed by the assessee but it has been held that no documentary evidence of explanation submitted by the assessee was filed. He calculated the average rate of purchase of cable per KM @ ₹ 31,463.03/- and accordingly, total value of difference in cable at ₹ 15,07,235/- was treated as income from undisclosed sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.04.2008 and 19.04.2008 by making purchases from M/s Galaxy Concab India Private Limited. The material was tested in the laboratory of Jaipur Vidyut Vitran Nigam Limited 17.04.2008. Since the material was approved, the appellant raised the bill dated 17.04.2008 on the electrical company for cable quantity of 101.813 km. The supplier namely Galaxy Concab India Pvt. Ltd. supplied the material on 18.04.2008 and 19.04.2008. The challan of goods supplied to JVVNL furnished by the appellant clearly mentioned that the buyer of these goods was M/s Hind Construction i.e. assessee and the consignee was JVVNL. Further, the assessee had filed challan for supplying these goods wherein on the back side of it, complete details of the goods received by JVVNL duly certified by the JVVNL engineer and other official were mentioned. It also proved that on 17.04.2008, only the bill was raised. The actual goods were supplied on 18.04.2008 and 19.04.2008 after making purchases from M/s Galaxy Concab India Private Limited. The A.O. had also not disputed the challan and bills of the suppliers. Considering all these facts, I find that the A.O. had not brought any evidence on record to support his allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise, there was no dispute as to the fact that the assessee had already included the entire sale proceeds of the lesser material supplied by him in the sale proceeds. Thus when entire sale proceeds were declared in sales, there was no reason to make further addition for investment which was otherwise also verifiable from the deductions made by JVVNL in respect of the sale bills raised. Under these circumstances, the addition made by the A.O. has no legs to stand and cannot be sustained. I, therefore, direct the A.O. to delete the addition of ₹ 15,07,235/-. This ground of appeal is allowed. 4. Now the Revenue is in appeal before us. The learned D.R. vehemently supported the order of the Assessing Officer. 5. At the outset, the learned A.R. for the assessee reiterated the arguments made before the ld CIT(A) and submitted as under:- 1. To understand the issue raised by the AO, it is necessary to know the process by which goods are supplied to the electricity companies. The same is as under:- (a) The successful bidder in the tender is awarded the contract to supply the material. For this the supply agreement is entered into. In pursuance to the said agreement the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eper has certified the receipt of the material indicating the complete detail of the material which was supplied by the supplier on account of the assessee. 4. From these details it is evident that assessee has no undisclosed stock on 17-04-2008. The assessee has raised the bill on 17-04-2008 in respect of the same material which was supplied directly by its supplier Galaxy Concab India Private Limited at the site of the Electricity Company. Therefore question of having supplied the material out of the alleged undisclosed stock do not arise. In view of the above, the order of the CIT(A) be upheld by dismissing the ground of the department. The Ld. A.R. further submitted as under:- 1. The issue which arise for consideration in this ground is whether the difference in the quantity mentioned in the bills raised by the assessee and the quantity procured by the assessee is undisclosed investment of the assessee or such variation is on account of lesser supply of the quantity than the invoiced quantity or use of old material of cable lines dismantled for which RMD deduction was made by the JVVNL. 2. The process of raising of the bills by the assessee is that initially after i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.11.2008) 5084167 1779458 203367 3508075 184736 357889 19 (21.1.2009) 2536679 887838 101467 1750309 92171 271877 129754 Total 1805766 Copy of all the above bills is at. From the above table it can be noted that the JVVNL has made the deductions for lesser supply of the material/use of dismantled cables vis a vis the invoiced quantity in the name of RMD penalty. The deductions made are almost equal to the value of the addition of short purchases made by AO. Therefore, it is incorrect on the part of the AO to allege that assessee has supplied more quantity than what has been purchased/ procured by it. In view of the above, the order of the CIT(A) be upheld by dismissing the ground of the department. 6. We have heard the rival contentions of both the parties and perused the material on record. The Ld. AR for the assessee has explained the process of supply the goods through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is payable on which tax is deductible and such tax has not been deducted. Therefore, the non deductibility would arise only when tax is not deducted on an amount which is payable. If an amount has been actually paid without deduction of tax at source, section 40(a)(ia) would not apply on such payment. In Chapter XVII B, the liability of deduction of tax at source arises both at the time of payment or at the time of credit whichever is earlier U/s 40(a)(ia), the expenses are not allowable only when tax is not deducted on the payment outstanding at the year end. This view finds support from the recent decision of ITAT Vishakhapatnam Special bench in case of M/s Merilyn Shipping Transport Vs. ACIT (136 ITD 23). In Section 40(a)(ia) word payable used is to be assigned strict interpretation in view of the object of the Legislation, which was intended from the replacement of words in the proposed and enacted provision from the work amount credited or paid to payable, This view is also supported by the decision of jurisdictional ITAT, Jaipur Bench in the case of JVVNL Vs DCIT ITA No. 132/JP?2009 dated 30/04/2009 and ACIT Vs. Sethi Construction Company ITA No. 697/JP/2009. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has to be preferred deleted the disallowance. He also relied on the following case laws: (i) DCIT Vs. Ananda Marakala (2014) 150 ITD 323 (Bang.) (Trib.) (ii) ITO Vs. M/s Theekathir Press (Chennai)(Trib.) ITA No. 2076(Mds)2012 dt. 18.09.2013 The issue of applicability of TDS on amount payable as on 31st march only is also covered by the decision of the Hon ble ITAT Jaipur Bench in case of JVVNL V. DCIT 123 TTJ 888 wherein it was held that section 40(a)(ia) applies only when the amount is payable and not where the expenditure is paid. Therefore where the assessee has made actual payment, the provisions of section 40(a)(ia) is not applicable. 2. It may also be pointed out that second proviso to section 40(a)(ia) inserted by FA, 2012 w.e.f. 01.04.2013 has provided that where an assessee fails to deduct tax on the sum paid to the resident but such resident payee has furnished the return, taken into account such sum for computing income and has paid the tax due on the income declared by him then it will be deemed that assessee has deducted and paid the tax on such sum on the date of furnishing of return by the resident payee. All the finance companies to which asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed. From the above it can be noted that the amendment made by FA (No.2) Act, 2014 w.e.f. 01.04.2015 is to remove unintended and undue hardship and therefore this amendment should be give retrospective effect as per the various decisions stated above. It is also submitted that the Supreme Court in case of CIT Vs. Vatika Township Pvt. Ltd. 109 DTR 33 has held that legislations which modify accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect. However, if legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. There ..... 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