TMI Blog2019 (4) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... D. [2015 (9) TMI 79 - DELHI HIGH COURT], we set aside the impugned order of Ld CIT(A) and remand the issue back to AO and the AO is directed to verify the fact regarding the payment of the tax by the recipient and if the AO finds that the recipient has included the amount in the total income in its return of income and paid taxes thereon, then the disallowance made by the AO by invoking the provisions of section 40(a)(ia) of the Act be deleted. Unexplained cash credit - advance money for purchase of goods - HELD THAT:- Advance made by the payer in this relevant assessment year as well as the fact that the goods for the amount in question has been sold by the assessee and the entire amount was adjusted in the next assessment year has not been found to be false even though brought to the notice of the department the assessee has discharged the onus casted upon it u/s. 68 of the Act. The facts narrated above has been corroborated by the assessee by placing these documents before us by producing the ledger account of M/s. Trisita Cellular which has been found placed and ledger account of M/s. Trisita Cellular for AY 2013-14 along with copies of invoice raised by the assessee found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o was pleased to uphold the action of the AO. Aggrieved, the assessee is before us. 5. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the issue raised in this ground of appeal of the assessee is regarding disallowance made by AO u/s. 40(a)(ia) of the Act for want of deduction of tax at source in respect of commission/incentive/discount to the retailers of re-charge vouchers/coupon. The assessee is a sole proprietor in the business of distribution of M/s. UWPL recharges cards during the year under consideration. The assessee had debited the expenses of ₹ 36,66,441/- on account of incentive disbursed to the retailers. The AO disallowed the claim of deduction as the assessee has not deducted tax for the amount in question and nomenclature adopted by assessee (incentive) was not acceptable to the AO, since, according to him, it partakes the character of commission, the assessee had failed to deduct tax at source as per sec. 194H of the Act, therefore, he disallowed ₹ 36,66,441/- on account of commission expenses u/s. 40(a)(ia) of the Act. Though it was brought to the notice of the Ld. CIT(A) that ₹ 34,40,34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. ACIT, 27 taxmann.com 219 wherein the facts of that case was that the assessee was a Franchise of BSNL and it received commission on gross value of purchase and on such commission, BSNL had deducted tax at source u/s. 194H of the Act. The assessee in turn had also appointed subfranchisees for selling product of BSNL. From its own commission it received from BSNL, the assessee allowed trade discount to sub-franchisees. The AO treated the trade discount as commission and disallowed the same by applying sec. 40(a)(ia) of the Act on the plea that assessee has not deducted tax at source u/s. 194H. The question before the Bench was whether trade discount made available to sub-franchisees was a compensation by foregoing part of the commission already subjected to tax at source by BSNL and it could not have suffered taxation u/s. 194H. And whether, therefore, disallowance u/s. 40(a)(ia) of the Act was unjustified. For both the questions the Tribunal answered in the affirmative in favour of assessee, therefore, relying on the ratio decidendi of both these decisions and the Delhi Tribunal s order in Rakesh Kumar Vs. CIT, ITA No. 3386/Del/2014 dated 13.08.2018, we allow this ground of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid taxes on the returned income. We note that the Tribunal has held in a plethora of decisions that insertion of 2nd proviso to sec. 40(a)(ia) of the Act is curative. 9. We note that the Finance Act 2012 made an amendment of section 201 40(a)(ia) of the Act. In accordance with this amendment, the payer assessee would not be deemed to be in default if the recipient of income, has taken into account the amount received from the payer in computing income as declared in the return and has paid due tax on the returned income. We note that the Tribunal has held that the insertion of second proviso to sec. 40(a)(ia) of the Act is curative and it has retrospective effect w.e.f. 1st April, 2005, being a date from which Sec. 40(a)(ia) of the Act was inserted by the Finance (No. 2) Act, 2004. In view of this, we are of the view that matter needs fresh adjudication in the light of the fact that the AO will carry out necessary verification. In CIT v. Ansal Land Mark Township Pvt. Limited [ITA 160/2015 161/2015, dated 26/08/2015], High the Hon'ble Delhi High Court held that the 2nd proviso to section 40(a)(ia) has retrospective effect from 01/04/2005: 14. The Court is of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chased the goods within the financial year 2011-12 and finally the dealer purchased goods in the next year and the entire amount was adjusted with the goods purchased within the financial year 2012-13. So, it was pleaded before the Ld. CIT(A) that the said amount cannot be treated as income of the assessee because the entire amount is adjusted with the sale made by the assessee within the next AY 2013-14. However, the Ld. CIT(A) did not give any heed to the plea of the assessee. From the facts narrated above, we note that there is a difference between credit representing trade advances and liability to give goods by the assessee in assessee s normal business activity; and a credit representing monies received from another person. It is because of this distinction, a liability which arises as a result of any purchase relating to any corresponding credit to the account of the supplier cannot be added u/s. 68 of the Act. More so, when the purchase has been carried out in the next assessment years and has not been found to be false even though the fact of squaring up the same was brought to the notice of the Ld. CIT(A) by bringing to his notice that the assessee had infact sold the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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