TMI Blog2016 (8) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... es. 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:- 24-6-2016 - Shri Joginder Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member For The Assessee : Shri Ajay R. Singh (AR) For The Revenue : Shri B.S. Bist (Sr.DR) ORDER Per Ashwani Taneja (Accountant Member): These appeals are filed by the assessee and revenue pertaining to same assessee and filed against separate orders of Ld. order of Ld. Commissioner of Income Tax (Appeals), {(in short CIT(A) }, passed against assessment order u/s 143(3) of the Act. 2. During the course of hearing, arguments 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 disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business or profession ,- (a) ................ (ia) any interest, commission or brokerage, 67[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 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, 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 previous year in which such tax has been paid:] 70[Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various judgments of the Hon ble Supreme Court as well that of the Hon ble High Courts of the country to press the point that it has been specifically 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 the assessee brought to our notice that the issue relating to the operation of the newly inserted proviso, whether prospective or retrospective in nature, has already been raised before the Pune Bench of the Tribunal in the case of ITO vs. M/s. Gaurimal Mahajan Sons ITA No.1852/PN/2012 decided on 06.01.14, as well as before the Cochin Bench of the Tribunal in the case of Antony D. Mundackal vs. ACIT ITA No.38/Coch/2013 decided on 29.11.13, which decision also finds reference of the order of the Pune Bench of the Tribunal in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of sec. 194C are wide enough to cover oral contracts also. A contract is normally reduced in writing in order to make clear the terms and conditions, obligations of the parties to the contract etc. If the conditions of contract are otherwise understood by the parties, in view of the repeated transactions, in our view, the absence of a written contract would not make any difference. In the instant case, the assessee is repeatedly given works to the polishing people and hence the terms and conditions of the work would be clearly understood by both the parties. Accordingly, 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 value of aluminium extrusions, without knowing tax implications. However, we notice that the assessee did not furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 by the Finance Act, 2012 with effect from 1.4.2013 is clarificatory in nature and hence the benefit of the same should be applied retrospectively. However, the correctness of this contention has not been examined by the tax authorities. Hence, in the interest of natural justice, we are of the view that this contention of the assessee requires examination at the end of the assessing officer. Accordingly, we modify the order of the Ld.CIT(A) and set aside this ground to the file of the Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it has retrospective effect from April 1, 2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. The first proviso to section 201 (1) of the Act has been inserted to benefit the assessee. It also states that where a person fails to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident, such person shall not 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 Hon ble High Court that where the payees had filed returns and offered the sums received to tax, then no disallowance could be made under section 40(a)(ia). 3.4. It was further submitted by the Ld. Counsel that in the year before us also most of the payees are same as were in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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