TMI Blog2017 (2) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the addition made for violation of Section 194C is not maintainable and as such it is deleted, accordingly, ground no-3 is allowed. TDS liability on Instrument Hire Charges - Held that:- The assessee was an individual and the AO made disallowance for not deducting tax in respect of payments made towards labour and advertisement charges and the Coordinate Bench held the said disallowance is not maintainable in view of the order dt:11-03-2011 of Tribunal in the case of Smt.Keya Seth. [2011 (3) TMI 1135 - ITAT KOLKATA]. We find that the said Coordinate Bench discussed the relevant provisions of Section 194C(1) and 2 as existed in A.Y’s.2006-07 and 2007-08 together with the Circular No-3/2008 dated 12-03-2008 in detail and held that the Assessee being an Individual is under no obligation to deduct tax and provisions under section 194C(1) is not applicable to A.Y’s.2006-07 and 2007-08 for an individual. In the present case, the year under consideration is 2006-07, therefore, we find that the facts and the law laid down by the Coordinate Bench supra is applicable to the issue on hand. Thus, we hold that the disallowance as made for violation of section 194C and the addition the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1. For that in the facts and circumstances of the case the appellate order passed was in violation of principals of natural justice hence is bad in law and be quashed. 2. For that in the facts and circumstances of the case the Ld. Commissioner of Income Tax Appeals passed the appellate order without giving proper opportunity of hearing. 3. For that in the facts and circumstances of the case the disallowance of ₹ 87,388 /- on account of Studio Hire Charges by invoking the provisions u/s 40 (a)(ia) of the IT Act 1961 was not called for and hence the same be reversed. 4. For that in the facts and circumstances of the case the disallowance of ₹ 1,13,700/- on account of Instrument Hire Charges by invoking the provisions u/s 40(a)(ia) of the IT Act 1961 was not called for and hence the same be reversed. 5. For that in the facts and circumstances of the case the disallowance of ₹ 1,06,780/- on account of Artist Expenses by invoking the provisions u/s 40 (a)(ia) of the IT Act 1961 was not called for and hence the same be reversed. 6. For that in the facts and circumstances of the case the disallowance of ₹ 29,700/- on account of Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35/2015 dated 26.12.2015 is referred here. 3.1 The appellant has filed four grounds of appeal but the appellant has complied with the notice of hearing of appeal. It is pertinent to mention that the appellant was requested after repeated non-compliance vide letter dt. 11.02.2014 to comply. The appellant was duly informed that if you do not wish to avail yourself of this last opportunity of being heard in person or through authorized representative your appeal is liable to be dismissed. The relevant part of the letter dt. 11.02.2014 is reproduced below. The above mentioned appeal has been transferred from the Office of the Commissioner of Income Tax (Appeals)-XXXVI, Kolkata to the undersigned. The above mentioned appeal was fixed for hearing on 01.03.2012, 13.04.2012 and 11.01.2013 but non appeared. On all the occasions the A/R of the appellant, Shri Miraj D. Saha filed adjournment and it was considered accordingly. The case was fixed for hearing on 05.02.2014 at 10.30AM, but none appeared before the undersigned either personally or through an Authorised Representative to defend the appeal above. The case is fixed for hearing on 28.02.2014 at 10.30 AM and a fresh notice f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- to Solaris Studio Pvt. Ltd. It is observed from the submissions of the Assessee in explanation to the payment of ₹ 87,388/- on account of Studio Hire Charges that it is a practice of a Music Director to call musician at the hired studios for recording from different parties and sources as per his requirement and planning to play under his instruction. A music director having no set up to record music at his home and he has to arrange everything required by hire on rent and no contractual agreement is required for hiring the studios and musical instruments. Further the assesse submitted that the studios would charge the hire charges for using the studios setup on hourly basis and provides their studios room with furniture and equipment on rent to the music directors and pleaded the question of TDS deduction under section 194C does not arise. We find force in the submissions of the Ld.AR in this regard. The impugned addition as made by the AO is admittedly below the prescribed monetary limit as required u/section 194I of the Act, therefore, we hold that the addition made for violation of Section 194C is not maintainable and as such it is deleted, accordingly, ground no-3 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 194J and explanation 2 to clause (vii) of subsection (1) of Section 9 wherein it clearly stated that fees for technical services means any considerations including any lump sump consideration for the rendering of any managerial, technical or consultancy services including the provisions of services of technical or other personnel. For non- production of any lease or sub-lease agreement or any other-agreement regarding the instrument hire charges, the AO apprehended that the assessee must have hired the instruments on contract or sub-contract within the meaning of Section 194(C) and disallowed of ₹ 1,13,700/- on account of Instrument Hire Charges. The CIT-A dismissed the appeal of the Assessee for non- appearance. 10. Before us, the Ld.AR contends that the assessee is an individual and the provisions of section 194C as it was relevant to the AY 2006-07 i.e. under consideration and it is not applicable to the facts and circumstances of the present case concerning the instrument hire charges and argued that the assessee is not liable to deduct tax against the payment made towards instrument hire charges to an extent of ₹ 1,13,700. The Ld.AR argued that due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual carrying on the business of Ayurvedic (Cosmetic Division) and the consultancy on beautician and also related therapies . As claimed by the assessee, whether the provisions of Section 194(1) as existed in assessment years 2006-07 2007-08 will apply to the assessee or not? Admittedly, assessee has not deducted any TDS on advertisement payment and according to her, provisions of Section 194C(1) as existed in the relevant assessment years will not obliterate any duty on assessee to deduct TDS. Now, we have to examine this. The relevant provisions of Section 194C(1) (2) as exist in assessment year 2006-07 2007-08 reads as under :- (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and-- (a) the Central Government or any State Government ; or (b) any local authority ; or (c) any corporation established by or under a Central, State or Provincial Act ; or (d) any company, or (e) any co-operative society ; or (f) any authority, constituted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provisions of Section 194C(1) as existed in the relevant assessment years. No doubt, assessee s turnover exceeds the monetary limit as specified under clause (a) or clause (b) of Section 44AB and the assessee s accounts are subject to audit and the assessee has audited her accounts and filed Tax Audit Report along with return of income. We find that the Assessing Officer has made disallowance in view of the amended provisions of Section 194C(1) by the Finance Act, 2007 with effect from 01.06.2007 wherein it is proposed to amend Sub-Section (1) in Section 194C so as to include payments made by any individual or Hindu Undivided Family whose total sales / gross receipts or turnover from the business or profession carried on by him exceed monetary limit specified under clause (a) or clause (b) or Section 44AB during the financial year or immediately preceding financial year in which such sum is credited or paid to the account of the Contractor. This amendment takes effect from 1st day of June, 2007 and is applicable for and from assessment year 2008-09. In Section 194C(1) with effect from 01.06.2007, by the Finance Act, 2007, clause as inserted, reads as under :- (k) any indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of sub-section (1) of section 194C did not provide for deduction of tax at source on payments made by an individual or a Hindu undivided family to a contractor. 54.3 Considering the rising number of contracts being awarded by individuals and HUFs carrying on business or profession and the increasing volume of such payments to contractors, it was felt that there is need to require such persons to deduct tax at source from payments made by them to contractors. 54.4 There would be genuine difficulties if individuals or HUFs with small business turnovers or gross receipts of profession are required to deduct tax at source. An exception in such cases would be justified. Similarly the contracts awarded by an individual or a member of HUF of HUF exclusively for personal purposes merit exclusion. 54.5 Accordingly, the Finance Act, 2007, has substituted the said sub-section (1) to include in its ambit such individual or a Hindu undivided whose total sales, gross receipts or turnover from the business or profession carried on exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding financial yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate Bench supra is applicable to the issue on hand. Thus, we hold that the disallowance as made for violation of section 194C and the addition therein by invoking Section 40(a)(ia) of the Act is not maintainable and, therefore, the impugned amount to an extent of ₹ 1,13,700/- on account of Instrument Hire Charges is deleted and ground no-4 is allowed. 14. Ground no-5 relates to the payments to Artists and addition made thereon for violation U/Section 194C of the Act by invoking Section 40(a)(ia) of the Act. During the assessment proceedings, the AO found the payments to the tune of ₹ 3,55,472/- under the head Artist Expenses which includes payments of ₹ 1,06,780/- (Rs. 35,1801/- to Mr. Lalan Das, ₹ 40,300/- to Mrs. Mahua Das and ₹ 31,3001/- to Mrs. Lina Bhattacharya ) made without deducting any tax at source. In explanation the assessee stated vide his reply that he could not concentrate in his profession during the period due to some personal problems and not satisfied with the reply of the assessee the payment of ₹ 1,06,780/- under the head Artist Expenses was disallowed under the provisions of u/s. 40(a)(ia) of the Act and added to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) 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. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing lapse per se is separately provided for in Section 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee's tax withholding lapses did not result in any loss to the exchequer. Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position 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 deduction of tax at source by declining the deduction in respect of related payments, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance under the Act, but, however, mentioned the only the chapter VIIB of the Finance Act where the deduction at source commences to start from section 192. As rightly pointed by the Ld.AR in the absence of any charging section the disallowance thereon is not permissible. Ld.AR argued that the disallowance cannot be under sections 192, 194C and 194J of the Act as no such evidence brought on record to show that the said Assistant is an employee or carrying out any work under contract or rendered any professional or technical services to the Assessee as required under said charging sections. Therefore, we find force in the arguments of the Ld.AR and we hold that the addition made account of payment to Assistant to an extent of ₹ 29,700/- in the absence of any evidence is not maintainable, accordingly, ground no-6 raised is allowed. 20. Grounds 1 and 2 becomes infructuous in view of the discussion and decisions rendered by us in ground no s 3,4,5 and 6 above mentioned paras and ground no-7 being general need no adjudication, hence, all the grounds dismissed. 21. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court as di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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