TMI Blog2018 (3) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in section 40a(ia) of the Act came into effect from 1 April 2013, the assessee could not produced the said evidences during the course of the assessment proceedings, which were concluded prior to 19.02. 2013. The assessee only requested for remitting the matter back to the file of the AO for verification of the certificate and accordingly deciding the issue. Hence, we remit this issue back to file of the AO for limited verification only to give effect to the direction mentioned above. - ITA No. 4411/Mum/2016 And ITA No. 4287/Mum/2016 - - - Dated:- 16-3-2018 - SRI MAHAVIR SINGH, JM AND SRI G. MANJUNATHA, AM For The Revenue : Rajat Mittal, DR For The Assessee : Kirit Kamdar, AR ORDER PER MAHAVIR SINGH, JM: These cross appeals are arising out of the order of CIT(A)-2, Mumbai in appeal No. CIT(A)-2/IT/151/2012-13 dated 01-03-2016. The Assessment was framed by Deputy Commissioner of Income Tax, Range-1(2), Mumbai (In short DCIT) for the A.Y. 2010-11 vide order dated 19-02-2013 under section 143(3) of the Income Tax Act, 1961(hereinafter the Act ). 2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable to the reimbursement of expenses made to the appellant s sister concerns. Accordingly, the AO is directed to the delete the said addition made by him. Aggrieved, now Revenue is in appeal before us. 5. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has filed partwise breakup detail of reimbursement made to group of companies. It was claimed by the assessee that these expenses were reimbursed to the group companies at a cost without any markup and hence the same do not warrant deduction of tax at source. The assessee filed certificates issued by group of companies certifying that the payments is in the nature of reimbursement of expenses and certificate states as under: - -Reimbursement of expenses received by from the Appellant was on cost-to-cost basis, without any mark-up; -Tax was already withheld at appropriate rates on payments made to third parties, on behalf of the appellant; and -No deduction for the reimbursed expenses was claimed as a deduction in the return of income for AY 2010-11. 6. Now, the learned Counsel for the assessee before us stated that the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of the case and in law, the Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in disallowing advertising and promotion expenses relating to ML Team lease Services Pvt Ltd of Ps 18916055/- under section 40(a)(ia) of the Act Without prejudice to the above ground of appeal: 1.2 On the facts and in the circumstance of the case and in law, in case disallowance made by the Assessing Officer is confirmed. Assessing Officer be directed to restrict disallowance under section 40(a)(ia) of the Act to the extent of expenditure payable outstanding as at the end of the previous year 1.3. On the facts and in the circumstance of the case and in law, the Appellant submits that the benefit of second proviso to section 40(a)(ia) of the Act inserted by the Finance Act 2012, ought to be given retrospective effect and applied for year under appeal. 9. At the outset, the learned Counsel for the assessee stated that the party Team Lease Service Pvt. Ltd has already filed a certificate, under Rule 31ACB of the Income Tax Rules, 1962 prescribing form No. 26A, whereby an account certificate need to be furnished under section 201 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. 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 examine whether or not, on a fair, just and equitable interpretation of law- as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an intended c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the second proviso to Section 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. 10. In view of the above position, we find that the assessee has provided the details of the recipient of the payments, on which no tax is deducted, that:- (i) has furnished his return of income ( ROI ) under section 139 of the Act; (ii) has taken into account such sum for computing income in such ROI, and (iii) has paid the tax due on the income declared by him in such ROI. We find that Central Board of Direct Taxes (CBDT) has notified Rules 31ACB with effect from 19.02.2013 prescribing Forms 26A as per which an account s certificate needs to be furnished under section 201 of the Act. Further, as per the provisions of the above notification, Form 26A comprises of main form and Annexure A. The main form is required to be filled in by the payer whereas Annexure is required to be certified by an Accountant (Accountant for this purpose will include a Chartered Accountant). It was explained before us that the assessee has not submitted the following documents befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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