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2016 (8) TMI 52 - ITAT KOLKATA

2016 (8) TMI 52 - ITAT KOLKATA - TMI - Delay in deposit of tds - Addition U/s 40(a)(ia) of payment made towards Labour Charges - Held that:- Amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, any payment of tax deducted at source during previous years relevant to and from AY 05-06 can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. If payments are made as aforesaid, .....

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The CIT-A also did not make such enquiries. We therefore, set aside the order of CIT-A on this issue and remanded the same to the AO to make enquiries from the aforesaid three parties and affording opportunities to the Assessee and decide the issue afresh - Disallowance on motor car and telephone expenses and other expenses - Held that:- Taking into consideration the fact that there were some defects pointed out in the TAR [Tax Audit Report] and keeping in mind that there is always an eleme .....

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the assessee will be entitled to claim deduction u/s. 24(b) of the Act on the ground even if the assessee is assumed to be a coowner, yet u/s. 26 of the Act the claim of assessee for deduction ought to have been allowed - Decided in favour of assessee. - I.T.A. No. 2458/KOL/ 2013 - Dated:- 27-7-2016 - Shri P. M. Jagtap, Accountant Member And Shri S.S. Viswanethra Ravi, Judicial Member Shri S.K. Kanodi, FCA, ld. AR for the assessee Shri Sudipta Guha, JCIT, ld. Sr. D.R., for the Department ORDER .....

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e of C.I.T vs. M/S Virgin Creations (Cal.)(ITA T No.302 of 2011). 2. On the facts and in the circumstances of the case the Ld. C.I.T.(A) is not justified in confirming the addition of ₹ 8,76,4001- under the head purchase discount without any basis. 3. On the facts and in the circumstances of the case the Ld.C.I.T (A) is not justified in confirming the disallowance of 20% of Motor Car Expenses and Telephone Expenses i. e .. 20% of( ₹ 3,18,848/- + ₹ 76,211 ) = ₹ 79,011/- an .....

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ssee had made payments of labour charges of ₹ 13,99,171. The assessee was liable to deduct tax at source on such payments u/s. 194C of the Act. The assessee deducted tax at source on the payments made to sub-contractors and payment of the tax so deducted was paid to the credit of the Government only on 22.7.2009. As per the provisions of section 40(a)(ia) of the Act, any payments made to a contractor or a subcontractor who is a resident for carrying out any work on which tax is not deducte .....

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ate for filing the return of income. Since tax deducted on the aforesaid payment was not deposited to the credit of the Government before 31.03.2009, the Assessing Officer disallowed the claim of the assessee for deduction of ₹ 13,99,171. On appeal by the assessee, the CIT(Appeals) upheld the order of the AO. Before the CIT(A), the assessee had submitted that since tax deducted has been paid on 22.7.2009, i.e., on or before the due date for filing the return of income u/s.139(1) of the Act .....

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to be narrated. 4. The legislative history of the provisions of Sec.40(a)(ia) of the Act is as follows: Section 40 has certain clauses providing for the amounts which are not deductible. Sub-clause (ia) of clause (a) of section 40 was inserted by the Finance (No.2) Act, 2004 with effect from 1st April, 2005 reading as under:- 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computed the income chargeable under the head Profits and .....

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: Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Explanation. - For the purposes of this sub-clause, - (i) commission or brokerage shall have the same meaning as in clause (i) of the .....

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view to augment compliance of TDS provisions, it is proposed to extend the provisions of section 40(a)(i) to payments of interest, commission or brokerage, fees for professional services or fees for technical services to residents, and payments to a resident contractor or sub-contractor for carrying out any work (including supply of labour for carrying out any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-secti .....

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sequent years. [Clause 11] 6. Thereafter the Finance Act, 2008 made amendment to clause (a) in subclause (ia) in section 40 with retrospective effect from 1st April, 2005. The section as amended by the Finance Act, 2008 read as under:- (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of lab .....

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ng the last month of the previous year but paid after the said due date ; or (B) during any other month of the previous year but paid after the end of the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. ; 7. The Finance Act, 2008 brought out amendment to section 40(a)(ia) w.r.e.f. 1.4.2005 by relaxing earlier position to some extent. It made two categories of defaults causing disallowance on the basis of t .....

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te u/s 139(1), the deductibility of the amount was kept intact. The second category included cases other than those given in category first. To put it simply, if tax was deductible and was so deducted during the first eleven months of the previous year, that is, up to February, 2005, the disallowance was to be made if the assessee failed to pay it before 31st March, 2005. 8. Then came the amendment to section 40(a)(ia) by the Finance Act, 2010 with retrospective effect from 1st April, 2010. The .....

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ecified in subsection (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 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. 9. From the above provision as amended by the Finance Act, 2010 with retrospective effect from 1st April, 2010 it can be seen .....

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n sub-section (1) of section 139. The Finance Act, 2010 has not tinkered with this position. The second category of the Finance Act, 2008 which required the deposit of tax before the close of the previous year in case of deduction during the first eleven months, as a pre-condition for the grant of deduction in the year of incurring expenditure, has been altered. The hitherto requirement of the assessee deducting tax at source during the first eleven months of the previous year and paying it befo .....

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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. 10. The question as to whether the Amendment by the Finance Act, 2010 as aforesaid is prospective or retrospective from 1.4.2005 came up for consi .....

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nch held that the amendment brought out by the Finance Act, 2010 to section 40(a)(ia) w.e.f. 01.04.2010, is not remedial and curative in nature. 11. Prior to the decision of the Special Bench, identical issue had come up for consideration before the ITAT Kolkata Bench in the case of Virgin Creations Vs. ITO, Ward 32(4), Kolkata ITA No. 267/Kol/2009 for AY 05-06. The issue that arose for consideration was disallowance of expenses u/s.40(a)(ia)claimed as deduction while computing income from busin .....

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ere paid without deduction of tax at source. Interest on loans were credited to the creditors account on 31.3.2005 to the extent they were paid after the due date for filing return of income u/s.139(1) of the Act, the disallowance was made u/s.40(a)(ia) of the Act. Before the Tribunal, the Assessee contented that the amendment by the Finance Act, 2010 with retrospective effect from 1st April, 2010 whereby amount of tax deducted at the time of making payment in respect of expenditure referred to .....

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record, keeping in view of the fact that though the Ld.D.R. submitted that the decisions of the Coordinate Benches are not binding and the Kolkata benches may take a different view, since Mumbai Bench after analyzing the provisions of Sec.40(a)9ia) since its inception and various amendments made to the same including the suggestion made by the Industry in the form of representation in their pre-budget memorandum to the Hon ble Finance Minister and by applying the decision of the Hon ble Apex Co .....

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ition and to remove the hardships which was being caused to the assessee belonging to such category, amendments have been made in the provisions of Section 40(a)(ia) by the Finance Act, 2010. The said amendments, in our opinion, thus are clearly remedial/curative in nature as held by the Hon ble Supreme Court in the case of Allied Motors Pvt.Ltd. (supra) and Mom Extrusions Ltd. (supra) and the same therefore would apply retrospectively w.e.f. 1st April, 2005. In the case of R.B.Jodha Mal Kuthial .....

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date of filing of its return of income for the year under consideration. This being the undisputed position, we hold that the disallowance made by the A.O. and confirmed by the learned CIT(A) on account of freight charges by invoking the provisions of Section 40(a)(ia) is not sustainable as per the amendments made in the said provisions by the Finance Act, 2010 which, being remedial/curative in nature, have retrospective application , we find no reason to deviate from the decisions of the ITAT .....

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Mr. Nizamuddin and gone through the impugned judgment and order. We have also examined the point formulated for which the present appeal is sought to be admitted. It is argued by Mr. Nizamuddin that this court needs to take decision as to whether section 40(A)(ia) is having retrospective operation or not. The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April 1, 2005 and April 28, 2006 and the same were paid by the assessee .....

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erted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well. In view of the authoritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence we dismiss the appeal without any order as to costs. 13. It can be seen from the above decision of the Hon ble Calcutta High Court that Amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 as afore .....

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AO u/s. 40(a)(ia) of the Act. 14. In view of the above, we hold following the decision of the Hon ble Calcutta High Court, that Amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, any payment of tax deducted at source during previous years relevant to and from AY 05-06 can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. If payments are made as aforesaid, then no ded .....

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proceedings, the assesse was asked to submit details of each sundry Creditor, mentioning the opening balance, transaction made during the F.Y. i.e., both debit and credit entries and closing balance, as well as the assesse was also requested to submit party-wise list of purchase. On perusal of the details furnished by the Assessee, the AO noticed that there was discrepancy between the purchase and sundry creditor s party ledger in respect of following cases:- Sl.No. Name of the party Amount (Rs. .....

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ger and that is the root of cause of difference between the purchase and Sundry creditors balance. It is seen from the party ledger that the assessee had received payment from M/s. D.K Enterprises for ₹ 6,00,000/-, Jai Ambe Multi Trade (P) Ltd, for ₹ 1,50,000/- and from Riddhi Siddhi Enterprise for ₹ 1,26,440/- and the same were credited in the party ledger besides purchase as against payment made to the party was debited in the party ledger. The assessee was asked to clarify t .....

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. As the said cheques were not cleared the same had been reversed during the year and in the case of Riddhi Siddhi Enterprise the amount was received on behalf of sister concern, M/s. Ayush Steel. This contention of the assessee was not acceptable on the ground that the assessee merely stated in its submission dated 29-11-11 that cheques were issued but not cleared and the same had been reversed back, but in support of his contention, the assessee did not produce any supporting evidence to prove .....

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same the ld.AR of the assessee in her submission dated 15-12-2011 deposited in the office counter some unsigned party ledger of the sundry creditors of earlier year along with her submission claiming that these were unclear cheques and the same has been reversed during the year. The assessee's contention is not acceptable on the ground that the assessee made her submission in the office counter, but did not get the opportunity to produce the documents before the Assessing Officer so that he .....

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to do the same, so, no cognizance is given to such unsigned documents produced by the assessee. Moreover, it is also seen from the submitted documents that in the case of Jai Ambe Multi Trade (P) Ltd., in the last financial year 2007-08, a cheque was issued for ₹ 1,50,000/- on 12.06.2007. The assessee claims that such cheque amount was reversed in the ledger account of the financial Year 2008- 09 on 01.04.2008 i.e. near about after one year; the same was credited. The contention of the as .....

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bank statements, are not acceptable as in the course of assessment in spite of several opportunities given, the; A/R of the assessee failed to substantiate the facts. So, it is considered that the assessee had received such income in the nature of Purchase discount from the parties that had not been reflected in the P& L A/c. Considering the above, ₹ 8,76,400/- is treated as income of the assessee for the relevant assessment year and the same is added back to the total income of the a .....

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for a moment that the assessee had received purchase discount in that case, as per elementary accounting principles, the amounts would not have been credited in the books of sundry creditors but debited in their ledger. Thus, the contention of the AO to treat credit entries as purchase discounts is prima facie incorrect and without any logical reasoning. From the show cause dated 24-11-2011, Your Honour will kindly observe that there is no purchase from Riddhi Siddhi Enterprises and the AO has .....

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ques are issued to the party, the same are debited in the ledger accounts of the party. The AO also stated in the assessment order that since the assessee has failed to substantiate the claim with the help of bank statements in the course of assessment the contention of the assessee to treat the amounts as contra entries are not accepted. In this regard, it is humbly submitted that since the cheques were not presented to banks for payments by the creditors, no debits have been made at the bank a .....

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essee had specifically requested the AO to make direct enquiry from both the parties as he has already done in case of so many other creditors. Copy of ledger from DK Enterprises and Jai Je Multi Trade Pvt. Ltd. from 01-04-2007 to 31- 03-2009 (i.e. 2 years) and further certificate from them that cheque of ₹ 1,5O,OOO/- is reversal of cheque received in last year was submitted in original. The copy of ledger from both the parties are enclosed herewith as Annexure 8 and 9 and certificate from .....

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milar view has also been taken in the case of CIT -vs.- Daulat Ram Rawatmull (1973) 87 ITR 349 (Se) by the Hon'ble Apex Court. In the present case, the AO is making an allegation that credit entries made in the ledger of sundry creditor accounts are purchase discounts, without any evidence of the same. Moreover, the contention of the AO is also based on illogical reasoning which are evidently incorrect. If at all, the assessee would have received any discount, it would have not been credited .....

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the written submissions made by the A.R of the appellant as well as observation of the AO. The contention of the appellant is not acceptable as nowhere it is mentioned as reverse entry on the contrary. In the confirmation submitted by the party in response to notice issued u/s. 133(6) of the I.T Act, the same has been shown as payment and duly reflected in the Bank Account, and for that reason, the A/R of the appellant admitted their failure to substantiate their claim of reversal entry. As rega .....

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of ₹ 8,76,400/- is treated as income of the appellant for the relevant assessment year and the same is added back to the total income of the appellant as made by the AO. This ground of appeal is dismissed. 19. We have heard the rival submissions. It is seen from the ledger account of Jai Ambe Multi Trade Pvt. Ltd and & D.K Enterprises for 2 years i.e., 2007-08 and 2008-09 that the Assessee owed to the aforesaid parties a sum of ₹ 1,50,000/- and ₹ 6,00,000/- respectively. Th .....

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sessee. From the above one can infer that the assessee has not received any Purchase Discount. Further, when a cheque is reversed, the same can be accounted only by way of receipt voucher in bank book. Copy of Ledger account from both M/s. Jai Ambe Multi Trade (P) Ltd and D.K Enterprise from 01.04.2007 to 31.03.2008 and 01.04.2008 to 31.03.2009 were also perused in this regard. A confirmation letter from Jai Ambe Multi Trade (P) Ltd that cheque of ₹ 1,50,000/- was reversed, as it was not c .....

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nded the same to the AO to make enquiries from the aforesaid three parties and affording opportunities to the Assessee and decide the issue afresh. Ground no.2 is allowed for statistical purposes. 21. Ground no.3 relates to confirmation of disallowance on motor car and telephone expenses and other expenses. 22. The ld. CIT-A sustained the order of AO on the issue raised in ground no.3 by observing as follows:- 6.2 I have carefully examined and considered the written submission made by the A.R of .....

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y claimed as Telephone Expenses, being treated as wholly personal expenses, i.e totalling to ₹ 1,22,921/- is disallowed and added back to the total income of the appellant by the AO. In view of my observation, I uphold and confirm the addition made by the AO. The fails on this ground and I dismissed ground no.4 of the instant appeal. 23. Heard rival submissions. Taking into consideration the fact that there were some defects pointed out in the TAR [Tax Audit Report] and keeping in mind tha .....

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ved in his assessment order as under:- In the computation of total income, the assessee had claimed Loss on account of his self-occupied House Property where he had claimed interest on loan amounting to ₹ 1,50,000/-. However, from the certificate of loan issued by ICICI Bank, it is seen that the House Property Loan was sanctioned jointly with Mrs. Sangeeta Tekriwal and interest component was ₹ 1,94,458/- for the relevant financial year. Since the assessee is entitled for loss claimed .....

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he same has been accounted in his balance sheet The entire interest is being paid by assessee only and he has not recovered any interest from Mrs. Sangeeta Tekriwal. Therefore, assessee only is eligible for -deduction under section 24. Mrs. Sangeeta Tekriwal is not incurring any interest on the housing loan for the said property and is therefore not eligible for any deduction under section 24. Section 24 of the Act nowhere states that deduction will be allowed only to an assessee who has applied .....

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