TMI Blog2016 (3) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived by the assessee on the sale of goddown amounting to ₹ 10,20,430/- was duly credited in the profit & loss account as prepared by the assessee and is part of the net profit as has been shown in the profit & loss account. In view of this fact, it is of the view that both the authorities below did not appreciate the provision of section 40(b)(v), Explanation 3 and misinterpreted definition of the book profit as given under Explanation 3 to section 40(b) of the Act. Accordingly set aside the order of the CIT (A) and delete the disallowance made by the AO - Decided in favour of assessee Addition on account of amount paid for the purchase of computer - entitlment for deduction u/s 37 - Held that:- As noted that even though the assessee claims the payment for such purchase of the computer has been made through cheque to the supplier of the computer but he could not adduce any evidence, confirmation of the party as well as copy of the invoice even though the sufficient opportunity was given to the assessee. No doubt, the assessee is entitled for deduction u/s 37 of any expenditure which has been incurred by the assessee for the purpose of the business but, in my opinion, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, and, therefore, he took the plea that the second proviso although inserted w.e.f. 1st April, 2013 but being curative in nature has retrospective effect and accordingly contended that the issue be restored to the file of the Assessing Officer so that the assessee can provide all the details in terms of the second proviso to section 40(a)(ia). I noted that the said submission of the ld. AR is duly covered by the decision of the ITAT, Kolkata Bench in the case of Santosh Kumar Kedia vs. ITO in ITA No.1905/Kol/2014 for the AY 2007-08 in which the Tribunal vide order dated 04.03.2015 held as under :- 5. I have heard rival contentions and gone through the facts and circumstances of the case. I find from first argument made by Ld. counsel for the assessee that the second proviso to section 40( a)(ia) of the Act inserted by the Finance Act, 2012 would apply in the instant case. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, I find that the first proviso to section 40(a)(ia) inserted by the Finance Act; 2010, which has been held to be curative and therefore, retrospective in its operation by the Hon'ble Calcutta High Court in ITAT No. 302 of 2011, GA 3200/2011, CIT v Virgin Creations decided on November 23, 2011 provides for allowance of the expenditure in any subsequent year in which tax has been deducted and deposited. The intention of the legislature clearly is not to disallow legitimate business expenditure. The allowance of such expenditure is sought to be made subject to deduction and payment of tax at source. However, in a case where the deductee/payee has paid tax and as such the person responsible for paying is no longer required to deduct or pay any tax, legitimate business expenditure would stand disallowed since the situation contemplated by the first proviso viz. deduction and payment of tax in a subsequent year would never come about. Such unintended consequence has been sought to be taken care of by the second proviso inserted in section 40(a)(ia) by the Finance Act, 2012. There can be no doubt that the second proviso was inserted to supply an obvious omission and make the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an accountant in such form as may be prescribed. The date of payment of taxes by the resident payee shall be deemed to be the date on which return has been furnished by the payer. It is also proposed to provide that where the payer fails to deduct the whole or any part of the tax on the payment made to a resident and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the such resident, the interest under section 201(1A)(i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident payee. Amendments on similar lines are also proposed to be made in the provisions of section 206C relating to TCS for clarifying the deemed date of discharge of tax liability by the buyer or licensee or lessee. These amendments will take effect from 1st July, 2012. II. Disallowance of business expenditure on account of non-deduction of tax on payment to resident payee. A related issue to the above is the disallowance under section 40(a)(ia) of certain business expenditure like interest, commission, brokerage, professional fee, etc. due to non-deduction of tax It has been pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that the salary paid to the partners is not to be paid on these profits. The profit on sale of the goddown has to be excluded for the purpose of computation of remuneration to the partners. He, therefore, recomputed the partners remuneration and disallowed a sum of ₹ 3,60,540/- out of ₹ 5,40,000/- claimed by the assessee as salary paid to the partners. When the matter went before the CIT (A), the CIT (A) confirmed the order of the AO. 6. I heard the rival submissions and carefully considered the same along with the order of the tax authorities below. It is not denied that the sum of ₹ 10,20,430/- was credited by the assessee in its profit loss account being profit on sale of the goddown. As per section 40 (b)(v) which laid out the quantum of remuneration payable to the partners lays down as under :- (v) any payment of remuneration to any partner who is a working partner, which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds the aggregate amount com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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