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2017 (2) TMI 398 - DELHI HIGH COURT

2017 (2) TMI 398 - DELHI HIGH COURT - TMI - TDS u/s 194C - payments made to a sister concern - Held that:- Since the amounts received by the payee, i.e., M/s Aakriti Creation Pvt. Ltd. were reported by it in the regular course of assessments, the disallowance of the entire amounts, under Section 40(a)(ia) of the Act in effect would render one payment which constitutes a transaction liable to income tax, twice over. Considering that Parliament remedied the law by amendment through insertion of th .....

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; in the event the A.O. is satisfied that the claim towards the payment does not include any income component but in fact constitutes reimbursement, the question of application of Section 40(a)(ia) would not arise. - ITA 436/2016 - Dated:- 24-1-2017 - MR. S. RAVINDRA BHAT & MR. NAJMI WAZIRI JJ. Appellant: Through: Mr. Zoheb Hossain, Advocate. Respondent: Through: Mr. Kapil Goel and Mr. Mukul Gupta, Advs. S. RAVINDRA BHAT (Oral):- 1. The question o .....

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ssments, the assessee explained that the expenditure was incurred towards reimbursements of the cost of raw materials resourced by the payee which was a sister concern. The assessee is engaged in the business of manufacture and export of garments and accessories and M/s Aakriti Creation Pvt. Ltd. does fabric work. The A.O. disallowed the amount and added it back to the assessee s returns, bringing it to tax. The CIT(A) granted the relief to the assessee in view of the decision of the Tribunal in .....

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ax collection would be thrown into disarray. It was submitted that the ITAT failed to take note of the fact that the second proviso to Section 40(a)(ia) was introduced only w.e.f. 01.04.2013 by way of an amendment and that the grant of relief in the circumstances of the case virtually made the statute prospective. The learned counsel for the assessee relied upon the previous rulings of this Court particularly upon Commissioner of Income Tax v. Dr. Jaideep Kumar Sharma, ITA 95/2015, decided on 19 .....

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xamined and after which the assessment orders were framed. The Ansal Land Mark Township (P) Ltd. (supra) had taken note of the Agra Bench of the ITAT decision in Rajiv Kumar Agarwal v. ACIT, ITA No. 337/Agra/2013. The Agra Bench had stated as follows: Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to .....

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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, in our considered view, 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 penalty for tax withholding lapse per se is separately provided for in Section 271C, and , section 40(a)(ai) does not add to th .....

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ition to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an intended consequence to punish the assessees for non .....

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