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Regina Jayprakash Versus ITO 22 (2) -4 Mumbai and Vica-Versa

2016 (8) TMI 252 - ITAT MUMBAI

TDS u/s 194C - non deduction of tds on freight paid - disallowance made u/s 40(a)(ia) - Held that:- In view of amendment made to second proviso to section 40(a)(ia) by Finance Act, 2012, the disallowance should not be made by the AO if the payments made to payees have been assessed in their respective hands. Under these circumstances, respectively following the order of the Tribunal in assessee’s own case for A.Y. 2007-08 as well as aforesaid order of Hon’ble Delhi High Court in the case of Ansa .....

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w to verify these facts directly from the payees and/or respective Assessing Officers of the payees. In case income of the payees are assessed and impugned sum has been included in the accounts of the payees, then no disallowance should be made u/s 40(a)(ia) in the hands of the assessee on account of non-deduction of tax at source. With these directions all appeals are treated as allowed for statistical purposes. - ITA NO.2561 /Mum/2012, ITA NO.1006/Mum/2013, ITA NO.1312/Mum/2013 - Dated:- 24-6- .....

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rguments were made by Shri Ajay R. Singh, Authorised Representative (AR) on behalf of the Assessee and by Shri B.S. Bist, Departmental Representative (DR) on behalf of the Revenue. 3. The common issue involved in all these appeals is with regard to disallowance made u/s 40(a)(ia) made by the AO on the ground that assessee failed to deduct TDS u/s 194C on the amount of freight paid. During the course of hearing, it was stated at the very outset by the Ld. Counsel of the assessee that similar issu .....

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ssessee in the case of Ansal Land Mark Township (P) Ltd. 373 ITR 635 3.1. Per contra, Ld. DR relied upon the judgments of Hon ble Kerla High Court in the case of Prudential Logistics And Transports v. ITO [2014] 364ITR 689 (Kerla). But Ld. DR had no objection if these matters are sent back to the file of the AO to be decided afresh in the light of correct legal position. 3.2. We have gone through the orders of lower authorities as well as order of the tribunal of A.Y. 2007-08. It is noted by us .....

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rovisions apply but he is not deemed to be an assessee in default under section 201 of the Act, which provides that if the payee of the such amount computed the same into his income tax return and has paid the due taxes, then such an assessee will not be deemed to be an assessee in default. The relevant provisions of section 40 (a)(ia) including the newly inserted proviso, for the sake of convenience are reproduced as under: Amounts not deductible: 40. Notwithstanding anything to the contrary in .....

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on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, 68[has not been paid on or before the due date specified in sub-section (1) of section 139 :] 69[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 prev .....

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eferred to in the said proviso.]..................... - 70. Inserted by the Finance Act, 2012, w.e.f. 1-4-2013. Section 201 of the Act being also relevant is reproduced as under: Consequences of failure to deduct or pay: 201. (1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so .....

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ident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed]........................... - 21. Inserted by the Finance Act, 2012, .....

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provided in the Act that the said proviso comes into operation w.e.f. 01.04.13 and that where the language of the section as well as the date of operation of such provisions has been mentioned specifically the courts cannot supply words to the provisions or amend the provisions to give it a different meaning and further that the newly inserted proviso under such circumstances is prospective in nature i.e. w.e.f. 01.04.13 and cannot be applied retrospectively. 12. At this stage, ld. counsel for t .....

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the Pune Bench of the Tribunal in the case of M/s. Gaurimal Mahajan & Sons (supra) on this issue. He has further submitted that after consideration of the matter, both the above co-ordinate benches of the Tribunal have restored this issue to the file of the AO to examine the contention of the assessee in this respect and decide the issue afresh in accordance with law. 13. We have perused the order of the Pune Bench of the Tribunal in the case of M/s. Gaurimal Mahajan & Sons (supra). The .....

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it is stated that disallowance u/s.40(a)(ia) of the Act need 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 I.T. Act., therefore, this should also be held as retrospective since it has been introduced to eliminate unintended consequences which may cause undue hardship to the tax payers. 8.2 We find some force in the above argument of the Ld. Counsel for the assessee. We find the Cochin Bench of the Tribunal in the case of A .....

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the assessee has contended before us that the provisions of sec. 194C shall not apply to the polishing charges. However, we notice that the assessing officer has given a clear finding that essential ingredients of a contract are very much available in the polishing works entrusted by the assessee. Further we notice that the CBDT, vide circular No.433 dated 25-09- 1985 (1986)(157 ITR St. 27) has clarified that the provisions of sec. 194C are wide enough to cover oral contracts also. A contract i .....

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ingly, we reject this contention of the assessee and hold that the provisions of sec. 194C shall apply to the polishing works given by the assessee. 7.1 According to Ld A.R, the assessee has acted as a conduit pipe in connection with the polishing works between the customers and the person doing polishing job. Accordingly, it was submitted that there is no profit element in the said transactions. The Ld A.R further submitted that the assessee has included the cost of polishing works in the sale .....

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ntify the polishing people and get the work done by themselves. Hence, we are of the view that it may not be correct to argue that the contract existed between the customers and the polishing people. In fact, the customer may not have any contact with the polishing people in this type of transactions. Hence, it is hard to believe the claim of the assessee that he has acted as mere conduit pipe between the customers and polishing people, Accordingly, the claim that the assessee stands in a fiduci .....

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dar Khan N Tunvar (357 ITR 312) and the Hon'ble Calcutta High Court in the case of CIT Vs. Crescent Export Syndicate (ITAT 20 of 2013) have held that the decision rendered by the Special Bench in the case of Meryline Shipping & Transports is not a good law. The Ld A.R, however, placed reliance on the decision of Hon'ble Allahabad High Court in the case of Vector Shipping Services (357 ITR 642). On a careful perusal of the decision given by Hon'ble Allahabad High Court, we notice .....

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verages Ltd(supra) in order to contend that the revenue is not entitled to recover taxes, if the recipient has declared the payments in his return of income. We notice that the above said decision was rendered in the context of the provisions of sec. 201(1) and hence, we are of the view that the ratio of the said decision cannot be applied to the disallowance made u/s 40(a)(ia) of the Act, 7.4 The last contention of the assessee is that the second proviso to sec, 40(a)(ia) of the Act, inserted b .....

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ficer with the direction to examine the above said contention of the assessee and decide the same in accordance with law, after affording necessary opportunity of being heard. We make it clear that we have, in effect, rejected all the contentions of the assessee except the ground relating to applicability of the second proviso to sec.40(a)(ia) of the Act to the year under consideration . 8.3 Since the above arguments are being advanced before the Tribunal for the first time and the correctness o .....

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. 14. Since in this case also the above arguments were raised by the assessee for the first time before the Tribunal and the contention of the assessee has not been examined by the lower authorities, hence, respectfully following the decisions of the co-ordinate benches of the Tribunal i.e. of Cochin Bench as well as of Pune Bench, we restore this issue to the file of the AO with a direction to examine the above raised contention of the assessee and decide the issue afresh, on this contention on .....

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ssue. It has been held by Hon ble High Court that section 40a)(ia) of the Income-tax Act, 1961, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The insertion .....

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be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under section 139. What is common to both provisos to sections 40(a)(ia) and 201(1) of the Act is that as long as the payee or resident has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee would not be treated as a person in default. With these observations it was held by .....

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