TMI Blog2016 (10) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... id receipt in its return of income, then the payer (the assessee herein) should not be treated as assessee in default. Accordingly no disallowance u/s. 40(a)(ia) of the Act could operate in that scenario. The said proviso though inserted by the Finance Act 2012 w.e.f 1-4-2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT]. Thus we deem it fit and appropriate in the interest of natural justice and fair play to set aside this issue to the file of AO to decide the issue afresh in the light of the aforesaid judgment. Accordingly, we direct the AO to verify whether the payees have included the subject-mentioned receipts in their respective returns and paid taxes thereon or not. If that is so, then disallowance u/s. 40(a)(ia) of the Act shall not be made in the hands of assessee. Accordingly, assessee’s ground is allowed for statistical purposes. - ITA No.216 & 327/Kol /2016 - - - Dated:- 26-8-2016 - Shri N.V.Vasudevan, Judicial Member and Shri Waseem Ahmed, Accountant Member For The Assessee Shri S. Jhajharia and Shri Sujoy Sen, AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf by way of reimbursement on the alleged ground that the assessee firm had failed to deduct tax at source on the said sum u/s. 194C(1) of the Act. The decisions taken by both the AO the Ld. CIT(A) without properly considering and appreciating the facts and the explanation furnished by the assessee firm were wholly unwarranted, uncalled for and bad in law. 4. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in confirming the arbitrary disallowance u/s. 40(a)(ia) of the Act of the payment of legal professional charges of ₹ 30,000/- (inclusive of the payment of out-of-pocket expense of ₹ 14,000/- un a/c of conveyance etc.) made to the tax consultant Sri Subhas Mitra during the year itself on the alleged ground that the assessee firm had failed to deduct tax at source on the entire sum u/s. 194J of the Act. The decisions taken by both the AO the Ld. CIT(A) without properly considering and appreciating the facts and the explanation furnished by the assessee firm were wholly unwarranted, uncalled for and bad in law. 5. For that in view of the facts and circumstances of the case the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter TDS deduction. No license is required to render the supervisory services. Only gate pass is issued by the Authority concern which needs to be submitted back. TDS has been paid @ 2% because it is a works contract. The AO has not made any effort to verify the transactions. However, CIT(A) has upheld the decision of AO by observing that assessee and its relatives are having majority of share holding in M/s Macleod Fuels Pvt. Ltd. The accounting entries for these transactions were passed on 31.03.2009 for the year. The expense claimed has been named as commission and so that TDS @10% will be applicable. The assessee is not able to provide sufficient evidence that the services have been rendered. Being aggrieved by the order of ld. CIT(A) assessee came in second appeal before us. 7. Before us Ld. AR submitted that the provisions of section 40A(2) of the Act has not been applied by the AO for making the aforesaid disallowances. The expenses claimed by the assessee are genuine and accordingly these should be allowed for deduction. On the other hand the ld. DR relied on the order of Authorities Below. 8. We have heard the rival parties and perused the materials available on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. At the outset we find that there is amendment of proviso to Sec. 40(a)(ia) of the Act r.w.s 1st proviso to Sec. 201, wherein, if any payee has paid the taxes by offering / disclosing the said receipt in its return of income, then the payer (the assessee herein) should not be treated as assessee in default. Accordingly no disallowance u/s. 40(a)(ia) of the Act could operate in that scenario. The said proviso though inserted by the Finance Act 2012 w.e.f 1-4-2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:- Question : Whether the second proviso to Section 40(a)(ia) (inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not? Held : Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l due to non deduction of TDS. The assessee claimed that the payment made under the head Port Expenses including unloading of the material, stevedoring etc. are actually the part of purchase. However the AO disregarded the claim of the assessee by holding that these expenses are in addition to the purchase amount and represents loading and unloading including other services. Accordingly the AO disallowed the same for the violation of section 194C r.w.s. 40(a)(ia) of the Act and added to the total income of the assessee. 15. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee has submitted that it is only the reimbursement of the expenses incurred by Bhatia International Ltd to M/s Orissa Stevedores Pvt. Ltd. Therefore TDS provisions are not applicable. However the ld. CIT(A) disregarded the claim of the assessee by observing as under:- 7. Ground No. 6: In such respect, the appellant has contended that such sum is mere reimbursement of the expenses of Bhatia International Ltd., on the basis of Debit Note raised by MM/s Orissa Stevedores Ltd., In such respect, the appellant has further contended that M/s Orissa Stevedores Ltd, who are the ultimate ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid judgment. Accordingly, we direct the AO to verify whether the payees have included the subject-mentioned receipts in their respective returns and paid taxes thereon or not. If that is so, then disallowance u/s. 40(a)(ia) of the Act shall not be made in the hands of assessee. Accordingly, assessee s ground is allowed for statistical purposes. 18. Coming to next issue is that Ld. CIT(A) erred in disallowing the professional charges paid to Subash Mitra amounting to ₹ 30,000/- out of which ₹ 10,000/- were out of pocket expenses on account of non deduction of TDS. 19. At the outset, we find that Ld.CIT(A) upheld the action of AO by observing that the contention of assessee regarding the reimbursement does not hold good. Hence there is violation of sec 194J. The ld. AR also requested us to restore the matter to the AO for fresh verification in terms of the in terms of the order of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) (Supra) . Respectfully following the aforesaid decision of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd. , (supra) we deem it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the interest free fund so given and hence the disallowance in such respect was not justified following number of judgments including that of Hon ble Supreme Court. The appellant further contended that the appellant had sufficient interest free advances from customer which were exceeded in such respect was not correct. Having considered the submission and the AO s contention, I find that, sum has given interest free to M/s Civia Investments Ltd. and Swati Mining P. Ltd. and the appellant s contention are correct and hence the said two concerns cannot be considered for the purpose of computation of interest. However, the appellant s contention that such sum has given interest free to related concerns have been given interest free fund of the appellant on a perusal of the Audited Accounts as on 31.3.2009, it was observed that the appellant had current liability to an extent of ₹ 8,70,80,084/- out of which advances from parties were only ₹ 1,15,03,656/- and the balances were sundry creditors. Further, it was observed that the appellant had inventory of ₹ 6,15,39,717/- and debtors of ₹ 1,22,119,033/-. Hence, it cannot be considered in any manner that the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us submitted to consider the interest amount of loan from the bank only but we reject the same as unsecured loan is also loan bearing fund. In view of above we direct the AO to consider the above stated interest amount for the disallowance under section 36(1)(iii) of the Act. Hence this ground of the assessee is partly allowed. Coming to Revenue appeal ITA 327/Kol/2013. 25. Grounds raised by the Revenue per its appeal are as under:- 1. That on the facts and in the circumstances of the case the L d CIT(A)-XXXVI, Kolkata, erred in admitting additional evidence at the time of appellate proceedings in contravention of Rule 46A n restricting the addition of ₹ 20,56,564 to ₹ 2,36,663 on account of disallowance of interest u/s 36(1)(iii) wherein documents relating to Chiva Investment Pvt. Ltd. and Swati Mining P t. Ltd. were accepted. 2. That on the facts and in the circumstances of the case the L d CIT(A)- XXXVI, Kolkata s order is perverse insofar as the restriction of addition of ₹ 20,56,564 to ₹ 2,36,663/- on account of disallowance of interest u/s 36(1)(iii) as he has not decided the issue on the AO s contention and findings that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent value of stock and hence the difference in value as shown in the Audited Accounts and in the stock statement filed with the bank. I find strength in the argument of the appellant and it was also observed the valuation of the stock is on cost basis and such method has not been changed since earlier years. Hence the addition in such respect cannot be sustained. Hence, addition on account of undervaluation of stock of ₹ 56,15,283/- is deleted. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 30. Before us both the parties relied on the order of authorities below as favourable to them. At the outset, we find that the AO has not brought any defect in the books of account of assessee with regard to the maintenance of stock. As there was no flaw in the books of the assessee we are not inclined to interfere in the order of Ld. CIT(A). In the aforesaid facts and circumstances, we rely on the judgment of Hon ble Gujarat High Court in the case of JCIT vs. Riddhi Steel And Tubes (P) Ltd. (2014) 22 taxmann. 148 (Guj), wherein the head-note reproduced below :- Income from undisclosed sources u/s 69B-Amount of stock not fully disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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