TMI Blog2017 (6) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... hether this payment is sharing of the revenue at source and therefore the provisions of section 194C are not applicable? - Held that:- It is pertinent to note that this is more of a question of fact than law as to whether the payment in question are sharing of revenue or are in the nature of hire charges. We find that though the assessee filed the affidavits of the recipients in support of the claim however neither the AO nor the CIT(A) have conducted a proper enquiry to verify this fact rather the evidence produced by the assessee was rejected at threshold. Even the decisions relied upon by the assessee before us were also not considered by the authorities below. Therefore we have already set aside the issue of non-applicable of provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to the vehicle owners does not come under the purview of section 194C of the Act as it was not for hiring of the vehicle but it was sharing of revenue with the other owners of the vehicle. The AO did not accept the contention and explanation of the assessee and made disallowance of the said amount as per the provisions of section 40(a)(ia). The assessee challenged the action of the AO before the CIT(A) and contented that the assessee is in cab sharing arrangement with the cab owners and therefore the provisions of section 194C do not apply on the payments in question which is sharing of revenue. The CIT(A) did not accept the contention of the assessee and held that the alleged cab sharing arrangement has not been proved by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.09.2013 in ITA No. 1584/Bang/2012 and CO No. 58/Bang/2013. Thus the ld. AR has submitted that it is not an expenditure but sharing of the revenue at source itself and therefore it does not come under the purview of section 194C. 3. The second flag of this argument is that the recipients of this amounts has already taken into account the same for computing income in their return of income and paid tax due on the income declared by them. Therefore as per the second proviso in section 40(a)(ia) no disallowance can be made on this account. In support of his contention he has relied upon the decision of Hon ble Delhi High Court in case of CIT Vs Naresh Kumar (362 ITR 256) as well as in case of CIT Vs Ansal Land Mark Township (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he second proviso is prospective or retrospective in nature. At the outset we note that the Hon ble Delhi High Court while dealing with this question in case of CIT Vs Naresh Kumar (supra) held that the said proviso is explanatory and remedial in nature and therefore has to be applied retrospectively. By following the said decision the Hon ble Delhi High Court again in case of CIT Vs Ansal Land Mark Township (P.) Ltd. (supra) has held in para 13 and 14 as under. 13. Turning to the decision of the Agra Bench of ITAT in Rajiv Kumar Agarwal's case (supra ), the Court finds that it has undertaken a thorough analysis of the second proviso to Section 40(a)(ia) of the Act and also sought to explain the rationale behind its insertion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Section 40(a)(ia), as we see it, 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, 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)(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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance. 6. Accordingly, in view of the decision of Hon ble Delhi High Court the second proviso to section 40(a)(ia) has retrospective effect from 01.04.2005 and in case the recipients of the amount have taken into account for computation of their income offered to tax in the return of income then no disallowance can be made u/s. 40(a)(ia). Hence in the facts and circumstances of the case we set aside this issue to the record of the AO for limited purpose of verification of the facts whether the recipients have considered the amount in question for computation of their income offered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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