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2016 (3) TMI 1062 - ITAT DELHI

2016 (3) TMI 1062 - ITAT DELHI - TMI - Disallowance u/s 40(a)(ia) - addition on account of interest paid to various loan depositors without deduction of tax at source - Deemed date of payment of tax by the resident payee - Held that:- 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. The Assessing Office r shall carry out necessary .....

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the book profit has to be the profit as has been shown in the profit & loss account for the relevant previous year. The profit received 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 .....

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puter 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 assessee is bound to prove the genuineness of the expenditure. It is a case where the assessee has not discharge his onus proving the genuineness of the expenditu .....

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Appeals) erred in law and on facts of the case in sustaining the addition in a sum of ₹ 2,52,042/- made by the assessing officer on account of interest paid to various loan depositors without deduction of tax at source in complete disregard to the correct legal position and various judicial pronouncements. 4. The Ld. Commissioner of Income Tax (Appeals) again erred in law and on facts of the case in sustaining the addition of ₹ 1,44,000/- made by the assessing officer u/s 40(a)(ia) o .....

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of the tax at source amounting to ₹ 1,44,000/-. The AO, therefore, disallowed both the expenses u/s 40(a)(ia) of the Income-tax Act, 1961 (hereinafter the Act ). 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". Before h .....

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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 .....

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on, 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 .....

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here cannot be any question of further realisation of tax as the same income cannot be taxed twice. If the tax has been realised once, it cannot be realised once again, but that does not mean that the assessee will not be liable for payment of interest or any other legal consequence for their failure to deduct or to pay tax in accordance with law to the revenue." (emphasis supplied) That such was the legal position was accepted by the Central Board of Direct Taxes in its Circular No.275/20l .....

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covery can be made from the person responsible for paying of income from which he failed to deduct tax at source. In a case where the deductee/payee has paid the tax on such income, the person responsible for paying the income is no longer required to deduct or deposit any tax at source. In the similar circumstances, 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' .....

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erson 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 .....

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ments at the specified rates if the payment exceeds specified threshold. In case of nondeduction 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 c .....

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it can be said that payer has paid the taxes directly. Also, there is no clarity on the issue of the cut-off date, i.e; the date on which it can be said that the payee has discharged his tax liability. In order to provide clarity regarding discharge of tax liability by the resident payee on payment of any sum received by him without deduction of tax, it proposed to amend section 201 to provide that the payer who fails to deduct the whole or any part of the tax on the payment made to a resident p .....

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ed 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. Amend .....

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e, 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 nondeduction 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 pa .....

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ill, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years." The Hon ble jurisdictional High Court in the case of CIT vs. Ansal Landmark Township Pvt. Ltd. - 377 ITR 635 has taken the similar view. No contrary decision was brought to my knowledge by the ld. D.R. By respectfully following the said decision, I restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Offic .....

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addition of a sum of ₹ 3,60,540/- made by the AO on account of remuneration paid to partners of the assessee firm in excess of the limits prescribed u/s 40(b) of the Act. 5. The brief facts of the ground are that on perusal of the profit & loss account of the assessee, the AO noted that the assessee included a sum of ₹ 10,20,430/- being the profit on sale of the goddown on which it had been claiming depreciation form year to year. The AO was of the view that the salary paid to th .....

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th 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 .....

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fit" means the net profit, as shown in the profit and loss account for the relevant previous year, computed in the manner laid down in Chapter IV-D as increased by the aggregate amount of the remuneration paid or payable to all the partners of the firm if such amount has been deducted while computing the net profit. From the said Explanation 3, it is apparent that the book profit has to be the profit as has been shown in the profit & loss account for the relevant previous year. The prof .....

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