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M/s Satyam Petrochemicals Versus The Dy. Commissioner of Income Tax

2016 (6) TMI 332 - ITAT PUNE

Additions u/s 40(a)(ia) due to Short deduction of tds - Held that:- Provisions of section 40(a)(ia) are not attracted where there is short deduction of tax. Accordingly, no disallowance under section 40(a)(ia) in respect of payments made to M/s Mangalmurti Roadlines wherein the assessee had made short deduction of tax can be made. See Apollo Tyres Ltd. vs. DCIT [2013 (11) TMI 209 - ITAT COCHIN] - Decided in favour of assessee - ITA No. 1860/PN/2013 - Dated:- 31-5-2016 - Shri R. K. Panda, AM And .....

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d assessment year on 28.09.2009 declaring total income of ₹ 2,04,89,380/-. The case of the assessee was selected for scrutiny under CASS and accordingly first notice under section 143(2) of the Income Tax Act, 1961 (in short the Act ) was issued to the assessee on 20.08.2010. During the course of scrutiny assessment proceedings, the Assessing Officer inter-alia made disallowance under section 40(a)(ia) of the Act for non-deduction of tax/short deduction of tax at source on the payments mad .....

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y confirming the disallowance to the tune of ₹ 20,90,575/-. In respect of short deduction of tax on the payments made to Mangalmurti Roadlines, the CIT(A) remitted the matter back to the file of the Assessing Officer for verification of the TDS amount remitted to the Govt. exchequer. The CIT(A) directed the Assessing Officer to restrict the disallowance to the extent of payments/credits not covered by TDS. 4. Aggrieved by the order of the CIT(A), the assessee is in second appeal before Tri .....

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ncy fees respectively for new chemical project u/s 40(a)(ia) of the Act. He ought to have held that no tax was required to be deducted on these payments and provisions of sec. 40(a)(ia) were not applicable. 3. Without prejudice to ground 2 above, the learned CIT(A) ought to have allowed depreciation on these project fees and consultancy fees by treating them as part of capital assets. 4. The learned CIT (A) erred on facts and in law in upholding in principle the disallowance of Carriage Outward .....

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viso to section 40(a)(ia) of the Act where an assessee fails to deduct the whole or part of the tax in accordance with the provisions of Chapter XVII-B and the assessee is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then 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. To support his submissions, the ld. AR placed reliance on the decision of Co-ordinate Bench of the .....

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h of the Tribunal in the case of Apollo Tyres Ltd. vs. DCIT reported as (2013) 155 TTJ 470 (Coch.) and the decision of Delhi Bench of the Tribunal in the case of ACIT vs. Pankaj Bhargava reported as (2013) 36 CCH 343 (Del.-Trib.). 6. On the other hand, Shri S. K. Jadhav representing the Department vehemently supported the findings of the CIT(A) on issue. The ld. DR contended that since the assessee has failed to deduct tax at source on the payments made to the respective parties, the Assessing O .....

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ovisions of section 40(a)(ia) are attracted even in case of short deduction of tax at source. The ld. DR prayed for dismissing the appeal of the assessee and confirming the impugned order. 7. We have heard the submissions made by the rival parties and perused the orders of the authorities below. The Ground No.1 & 2 raised in the present appeal is with respect to the disallowance made under section 40(a)(ia) on the following payments :- (i) Payments to M/s Pankaj & Co. for erection of Ele .....

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be made in view of the proviso inserted by the Finance Act, 2012 w.e.f. 01.04.2013. We find that similar issue had come up before the Co-ordinate Bench of the Tribunal in the case of Vivek Dattatraya Gupte - HUF vs. ITO (supra). Similar legal plea was raised in the aforesaid case taking the shelter of the newly inserted second proviso to section 40(a)(ia) of the Act. The Co-ordinate Bench of the Tribunal while dealing with the issue held as under :- 10. Now, coming to the second aspect of the i .....

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0(a)(ia) of the Act was inserted by Finance Act, 2012 w.e.f. 01.04.2013, whereby it is provided that the disallowance u/s 40(a)(ia) of the Act would not be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the Act. The stand of the assessee is that the said proviso should be understood as retrospective in nature as it has been introduced to eliminate unintended consequences which may cause undue hardships to the tax payers. It was pointe .....

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ibunal and the correctness or otherwise of the contentions raised was not examined by the lower authorities. Therefore, the Tribunal restored the matter back to the file of the Assessing Officer for examination afresh, following the decision of the Cochin Bench of the Tribunal in the case of Antony D. Mundackal (supra) in a similar circum stance. The Ld. Representative submitted that the matter be restored back to the file of the Assessing Officer in the light of the order of the Tribunal dated .....

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ntained in its order dated 06.01.2014 (supra). Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard before passing an order afresh on this aspect as per law. 11. The issue raised in the present appeals is squarely covered by the order of Tribunal (supra) and following the same parity of reasoning, we deem it fit to restore the matter back to the file of Assessing Officer, who shall consider the plea of the assessee based on the provisions of the .....

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er. The Assessing Officer after granting an opportunity of hearing to the assessee shall decided this issue afresh in accordance with law. Accordingly, Ground Nos.1 & 2 raised in the appeal by assessee are allowed for statistical purposes. 10. Ground No.3 raised in the appeal is an alternate to the Ground Nos.1 & 2. Since we have already accepted the plea of the assessee in respect of Ground Nos.1 & 2, the Ground No.3 has become infructuous. 11. In Ground No.4, the assessee has assai .....

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ments instead of ₹ 21,507/-. Admittedly, there was short deduction of tax by the assessee on the aforesaid payments. The Assessing Officer made disallowance of the entire amount. In first appeal, the CIT(A) granted partial relief to the assessee. The contention of the ld. AR is that no disallowance is to be made on the payments where there is short deduction of tax. Reliance has been placed on the decision rendered in the case of Apollo Tyres Ltd. vs. DCIT (supra). The Cochin Bench of the .....

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ent, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 13 .....

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aning as in clause (a) of the Explanation to section 194J; (iv) "work" shall have the same meaning as in Explanation III to section 194C; (v) "rent" shall have the same meaning as in clause (i) to the Explanation to section 194-I; (vi) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of subsection (1) of section 9;" Therefore, section 40(a)(ia) enables the assessing officer to disallow any payment towards interest, commission or brokerag .....

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after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,- (i) At one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) At one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such intere .....

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