TMI Blog2023 (4) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 30% of expenditure in light of amended provisions of section 40(a)(ia) of the Act by the Finance Act, 2014 w.e.f. 01.04.2015 and thus rejected. Yet another alternate plea of the assessee in light of second proviso to section 40(a)(ia) of the Act inserted by the Finance (no.2) Act, 2019 w.e.f. 01.04.2020, we find that the assessee could not justify its arguments in light of necessary evidences including declaration of income by the payee in the return of income and consequent certificate from the Accountant as prescribed under the law. Therefore, we are of the considered view that, alternate plea of the assessee in light of second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2019 w.e.f. 01.04.2020 cannot be accepted and thus, rejected. We are of the considered view that there is no error in the reasons given by the CIT(A) to sustain additions made by the AO towards disallowance of expenditure u/s. 40(a)(ia) of the Act for non-deduction of TDS u/s. 194C of the Act. Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject alternate plea taken by the assessee. Decided against assessee. - ITA Nos.: 1136 & 1137/Chny/2017 - - - Dated:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the assessee on applicability of provisions of section 194C of the Act, and consequent disallowance of expenses u/s. 40(a)(ia) of the Act. But, in respect of alternate plea of the assessee in light of Hon ble Supreme Court in the case of CIT vs Calcutta Export Company reported in 2018 93 Taxman.com 51 (SC), directed the AO to disallow 30% of expenses incurred by the assessee without deducting TDS u/s. 40(a)(ia) of the Act, by considering amendment made by the Finance Act, 2010 to provisions of section 40(a)(ia) of the Act. The revenue filed Miscellaneous Application and argued that as per the latest decision of Hon ble Supreme Court in the case of Shri. Choudhary Transport Company vs ITO (2020) 272 Taxman 472 SC, an amendment to section 40(a)(ia) of the Act brought in through Finance Act, 2014 is only prospective in nature, but not retrospective and thus, for these assessment years the benefit of amended provision cannot be given to the assessee. The Tribunal after considering the contentions of the Miscellaneous Petition filed by the revenue has recalled the appeal filed by the assessee for both assessment years qua alternate plea of the assessee in light of amendment to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008 was provided retrospective operation by the legislature itself. For ready reference, we may reproduce in juxtaposition the main part of Section 40(a)(ia) of the Act as it would read after the amendments of 2008, 2010 and 2014 respectively, as under13:- (i) After the amendment by Finance Act, 2008 40. Amounts not deductible. - Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession ,- (a) in the case of any assessee- *** *** *** (ia) any interest, commission or brokerage, rent, royalty14, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work(including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid,- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, thirty per cent. of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid15: Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.16 *** *** *** 19.2. The aforesaid amendment by the Finance (No.2) Act of 2014 was specifically made applicable w.e.f. 01.04.2015 and clearly represents the will of the legislature as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in the month of March if the tax deducted at source on such expenditure has been paid before the due date of filing of the return. It is important to mention here that the amendment was given retrospective operation from the date of April 1,2005, i.e., from the very date of substitution of the provision. 20. Therefore, the assesses were, after the said amendment in 2008, classified in two categories namely: one, those who have deducted that tax during the last month of the previous year and two, those who have deducted the tax in the remaining eleven months of the previous year. It was provided that in the case of assessees falling under the first category, no disallowance under section 40(a)(ia) of the Income-tax Act shall be made if the tax deducted by them during the last month of the previous year has been paid on or before the last day of filing of return in accordance with the provisions of section 139(1) of the Income-tax Act for the said previous year. In case, the assessees are falling under the second category, no disallowance under section 40(a)(ia) of Income-tax Act where the tax was deducted before the last month of the previous year and the same was credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he section to give the section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. 28. The purpose of the amendment made by the Finance Act,2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes the subject matter of an order under section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation, i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe out the adverse effect and the financial stress. Such could not be the intention of the Legislature. Hence, the amendment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot limited only to the amount outstanding and this provision equally applies in relation to the expenses that had already been incurred and paid by the assessee; that disallowance under Section 40(a)(ia) of the Act of 961 as introduced by the Finance (No.2) Act, 2004 with effect from 01.04.2005 is applicable to the case at hand relating to the assessment year 2005-2006; and that the benefit of amendment made in the year 2014 to the provision in question is not available to the appellant in the present case. These answers practically conclude the matter but we have formulated Question No. 4 essentially to deal with the last limb of submissions regarding the prejudice likely to be suffered by the appellant. 5. In this case, the assessment year involved in present appeals are assessment year 2009-10 2010-11, which are prior to amendment to section 40(a)(ia) of the Act by the Finance Act, 2014 w.e.f. 01.04.2015 and thus, the assessee is not entitled for 30% disallowance towards expenditure incurred without deduction of tax at source, as held by the Hon ble Supreme Court. Therefore, we are of the considered view that, there is no merit in the alternate plea taken by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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