TMI Blog2021 (8) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 40A(2) of the Act is not correct. Unexplained expenditure u/s. 69C - CIT(A) has given a categorical finding that the assessee has paid professional fees to her husband. However, the ld. CIT(A) has not discussed anything about the 69C addition. Once the assessee has shown payment made to her spouse as professional fees and the same was offered by the assessee's spouse for taxation by filing the return of income, the provisions of section 69C of the Act has no application. Whether the assessee is in default under section 201 of the Act on account of failure to deduct TDS under section 194J of the Act warranting invocation of section 40a(ia)? - whether the operation of second proviso to section 40a(ia) of the Act introduced through Finance Act. 2012 with effect from 01.04.2013 is prospective or retrospective? - The effect of the said proviso is to introduce a legal fiction where an assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such assessee is deemed not to be an assessee in default in terms of the first proviso to sub-section (1) of section 201 of the Act, then, in such event, it shall be deemed that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 9-8-2021 - V. Durga Rao, Member (J) And G. Manjunatha, Member (A) For the Appellant : C. Subramanian, C.A. For the Respondents : R. Anita, JCIT ORDER Per V. Durga Rao, Judicial Member These four appeals filed by the same assessee are directed against separate orders of the ld. Commissioner of Income Tax (Appeals) 12, Chennai, all dated 21.03.2018 relevant to the assessment years 2008-09, 2009-10, 2010-11 and 2011-12. The assessee has raised following common grounds for adjudication: 1. The order of the Commissioner of Income Tax (Appeals)-12 in confirming the additions is against the weight of evidence and probabilities of the case. 2. Ground 1-Disallowance of Commission paid to Dr. S.P. Ganesan 1.1. The appellant submits that the payment of commission was fully reflected in the books and its details/nature was explained during the course of assessment. The assessing officer is therefore incorrect in concluding the same as unexplained expenditure U/s. 69C 1.2. The appellant submits that the assessing officer is incorrect in restricting the expenditure to 8% of the gross profit U/s. 40A(2)(b). 1.3. The appellant subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, particularly to give effect to the section as a whole .... If strict construction leads to a result not intended to be subserved by the object of the legislation, and if another construction is possible apart from the literal construction, then that construction should be preferred . 1.9. The appellant also relies on the ratio of the below Judgments: Hon'ble Delhi High Court in the case of CIT Vs. Rajinder Kumar (362 ITR 241). Hon'ble Delhi High Court in the case of CIT Vs. Naresh Kumar (362 ITR 256). Delhi High Court in the Case of Ansal Landmark Township Pvt. Ltd. (377 ITR 365) 1.10. It would therefore be observed that the disallowance is not justified on all counts. 3. Ground 2 - Disallowance of loss on sale of share: The appellant submits that the Assessing Officer erred in disallowing ₹ 18,22,127/- reflected in the return of income as loss on sale of shares. 4. Ground 3 Disallowance of asset write off - ₹ 29,63,848/- 1.1. The appellant submits that the asset write off is due to obsolescence in technology and the assessing officer is incorrect in allowing the same. The appellant submits that the assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onability of the payments, the AR of the assessee has stated that Dr. S.P. Ganesan is the Medical Director and Chief Executive Officer and Clinical Pathologist for various Hitech Diagnostic Centre. In charge of all the medical, technical and administration of the Centres. It was further submission that Dr. Ganesan's responsibilities include conducting test in Haematology, Clinical Pathology, Biochemistry, Endocrinology, etc. and all the final medical investigation reports are signed by him. It was further submission that the professional fee is fixed about 15% of the gross receipts. Considering the nature of the high speciality medical investigation conducted and reported, the professional fees paid should be considered reasonable and equivalent to prevailing rates. 3.1. The Assessing Officer after considering the explanations of the assessee has noted that the assessee has not submitted any details to prove that the fees paid on par with other doctors, who have issued reports. The Assessing Officer further noted on perusal of the records that Dr. Ganesan, the assessee's husband has disclosed professional receipts of ₹ 1,6299,951/- from M/s. Hitech Diagnostic Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mean that the assessee can make disproportionate payments and observed that the assessee has not deducted TDS under section 194J of the Act and is hit by the provisions of section 40a(ia) of the Act. 4.1. So far as second proviso inserted by Financial Act, 2012, whether it is prospective or retrospective, he has relied on the decision in the case of Thomas George Muthoot v. CIT, Kerala High Court (no citation) and also in the case of Sivamurthy v. Addl. CIT, Shimoga (2016), 76 Taxmann.com 94, ITAT, Bangalore and confirmed the order of the Assessing Officer. 5. On appeal before us, the ld. Counsel for the assessee has submitted that the assessee's husband Dr. S.P. Ganesan is an highly qualified person and he is Medical Director and Chief Executive Officer, Clinical Pathologist for various Hitech Diagnostic Centre belonging to the assessee and In-charge of all medical, technical and administration of the centres. His responsibilities include conducting test in Haematology, Clinical Pathology, Biochemistry, Endocrinology, etc. Keeping in view all the responsibilities and qualifications of the assessee's spouse, payment was made as per MOU entered into between the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im, rejected the explanation of the assessee only on the count that the assessee has not produced any material towards payment made to other Doctors. If the Assessing Officer is not satisfied with the explanation given by the assessee, he should have been examined the payment made to other Doctors. In our opinion, the payment made to other Doctors is not simply sufficient, but, it needs to know what the qualifications of other Doctors are and what are the responsibilities and duties carried out by those Doctors. In this case, once the assessee has placed all the relevant materials before the Assessing Officer and submitted that the assessee's spouse is having specialized knowledge and looking after all the medical, technical and administration of all the Hitech Diagnostic Centre and discharge all the duties and responsibilities in conducting various tests and therefore, the agreed payment was made, in our opinion, the assessee has discharged the burden casted upon her to satisfy with the payment is reasonable as per the MOU. If at all the Assessing Officer is not agreed, he should have brought comparable case and by giving reasons, the disallowance ought to have been made. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 201 of the Act on account of failure to deduct TDS under section 194J of the Act warranting invocation of section 40a(ia) of the Act. In this case, the assessee has made payment of professional fees to her husband without deducting TDS. However, the assessee's spouse filed return of income and disclosed the professional fee receipt of ₹ 1,62,99,951/- from the Hitech Diagnostic Centre from the financial year 2007-08 relevant to the assessment year 2008-09. The Assessing Officer has disallowed the entire payment made to assessee's husband on the ground that the assessee has not deducted TDS under section 194J of the Act and for not deducting the same, section 40a(ia) of the Act applies. On appeal, the ld. CIT(A) confirmed the same. The first point for our consideration is whether the operation of second proviso to section 40a(ia) of the Act introduced through Finance Act. 2012 with effect from 01.04.2013 is prospective or retrospective. The ld. CIT(A) has relied on the decision of Hon'ble Kerala High Court in the case of Thomas George Muthoot v. CIT (supra) for the preposition that the above provision applies only prospective. However, the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above facts and circumstances of the case, the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) stands reversed and the ground raised by the assessee is allowed. The above decision for the assessment year 2008-09 mutatis mutandis applies to all the assessment years under appeal and no separate adjudication is required. 9. In the assessment year 2009-10 in I.T.A. No. 1329/Chny/2018, the assessee has also raised a ground towards addition on account of capital gains. In the assessment order, the Assessing Officer has noted that during the year the assessee sold the land at No. 9, Millers Road, Purasawalkam, Chennai for ₹ 5,11,00,000/-. Though the land was owned jointly by the assessee and her husband Dr, S.P. Ganesan, the acquisition of the land and the sale are entered in the books of the assessee. Hence, the Assessing Officer has considered the capital gains liability in the hands of the assessee and computed the sale consideration as per the agreement of sale at ₹ 5,11,00,000/- and brought to tax. 9.1. On appeal, it was submitted before the ld. CIT(A) that the land belongs to the assessee and her spouse Dr. S.P. Ganesan and it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration reflected in her books of account. It does not mean that the same is taxed in assessee's hands alone for the reason that the assessee along with her husband both purchased the property and both entered into sale agreement. 9.5. The next point for consideration is that whether capital gain has to be taxed in the assessment year 2009-10 or in the assessment year 2013-14. The ld. Counsel for the assessee has filed copy of the assessment order of assessee's spouse Dr. S.P. Ganesan for the assessment year 2013-14, wherein, assessee's spouse Dr. S.P. Ganesan has already paid advance tax of ₹ 2,00,00,000/-. Subsequently, during the course of assessment proceedings for the AY 2013-14, the Assessing Officer added ₹ 50,00,000/- to the income of the assessee (Dr. Ganesan) on the ground that the advance of sale consideration received was ₹ 2,50,00,000/- vide assessment order dated 16.03.2016. Before the authorities below, the AR of the assessee has not filed copy of the assessment order of the assessee reflecting the advance tax paid by her when she has offered the sale consideration for taxation. Under these facts and circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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