TMI Blog2016 (7) TMI 1661X X X X Extracts X X X X X X X X Extracts X X X X ..... ensure it, TDS provisions were introduced-the person making payment was made responsible to deduct tax and pay it with the government account. But, the proviso to section 40(a)(ia)made it clear that if the deductee pays the taxes on the entire income liable for taxation then no action would be taken against the deductor. The proviso is quite logical. It ensures that whole of the taxable income is taxed. Once the specific purpose is served there is no justification to indulge in unnecessary litigation. It is not the case of the AO or the FAA that the deductee had not paid the taxes on the taxable income or that it was not paid within the prescribed time limit. Therefore, reversing the order of the FAA we decide the effective ground of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and so it could not make payment of the TDS within the due date of filing return u/s.139 of the Act.Relying upon the CBDT Instruction No.275/201/95-IT(B) dated 29.01.1997 and decision of Hon'ble Supreme Court in the case of Hindustan CocaCola Beverages Pvt. Ltd.(293 ITR 226),the assessee argued that the payer/deductor was not liable to pay the amount of short/non-deduction of tax u/s.201(1) in cases where the payee/deductee had already included the relevant income in his total income and paid tax thereon, that it had made payment of interest u/s.201(1) up to the date of return filed by the deductee, that there was no loss of revenue, that there ought to be no disallowance u/s.40(a) (ia)in its case.In this context, the AO held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 30.09.2012,that reversal was made about the capitalised interest on the premise that HL to whom interest was paid had filed its return u/s.139 of the Act and had no tax liability, that HL had filed its revised return on 01.02. 2013 and had reversed its claim for credit of TDS that was receivable from the assessee, that the scheme of Section 40(a)(ia) of the Act was aimed at ensuring that expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure had remained untaxed due to tax withholding lapses by the assessee, that section 40(a)(ia)of the Act could not be seen as intended to be a penal provision to punish the lapses of non-deduction of tax at source from payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 201 of the Act would operate in two different fields, that the assessee had to deduct tax as required under the provisions of the Act, that the reliance of the assessee in this regard on the judicial decisions in the cases of Hindustan Coca Cola Beverage (P) Ltd. was of no use, that the assessee had relied heavily on the amendments made by the Finance Act, 2012 in Sections 201 and 40(a) (ia),that the amendment was not curative.Finally,he upheld the order of the AO. 4. Before us, the Authorised Representative(AR)argued that amendment to the provisio to section 40(a)(ia)was retrospective and curative,that the deductee had disclosed the entire amount in its revised return of income, that it had not claimed credit for TDS, that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that proviso to the section was applicable retrospectively. In our opinion, the core issue to be decided is as to whether the proviso is applicable from 1.4.2005 or from 01/04/2013.We find that the Hon ble Delhi High Court has, in the case of Ansal Landmark Township Private Ltd. (377 ITR 635)dealt the issue at length and has held as under: Section 40(a)(ia) of the Income-tax Act,1961,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 a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going unt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d pay it with the government account. But, the proviso to section 40(a)(ia)made it clear that if the deductee pays the taxes on the entire income liable for taxation then no action would be taken against the deductor. The proviso is quite logical. It ensures that whole of the taxable income is taxed. Once the specific purpose is served there is no justification to indulge in unnecessary litigation. It is not the case of the AO or the FAA that the deductee had not paid the taxes on the taxable income or that it was not paid within the prescribed time limit. Therefore, reversing the order of the FAA we decide the effective ground of appeal in favour of the assessee. 6. Second Ground of appeal is not arising out of the order of the FAA. He ..... X X X X Extracts X X X X X X X X Extracts X X X X
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