2015 (4) TMI 1140 - AT - Income Tax

Non deduction of tds - Addition on account of petty contract charges on account of hire charges - invoking section 40(a)(ia) - retrospectivity - Held that - The Tribunal in the case of M/s Gaurimal Mahajan & Sons (2015 (3) TMI 770 - ITAT PUNE ) dealt with another argument of the assessee to the effect that the second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2012 w.e.f. 01.04.2013 be applied retrospectively. Notably, the said second proviso to section 40(a)(ia) of the Act prescribes that the disallowance u/s 40(a)(ia) of the Act could not be made if an assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the Act. The Tribunal dealt with the plea of the assessee that such amendment was intended to eliminate undue hardships to the taxpayers and therefore it should be held as retrospective in nature. Thus we restore the matter back to the file of the Assessing Officer to adjudicate the issue afresh in accordance with the directions of the Tribunal in the case of M/s Gaurimal Mahajan & Sons (supra)

Summary

Issues involved: Disallowance of petty contract charges and hire charges under section 40(a)(ia) of the Income-tax Act, 1961 for the assessment year 2008-09.

Detailed Analysis:

1. Petty Contract Charges Disallowance: The Assessing Officer disallowed &8377; 18,23,975/- for petty contract charges and &8377; 13,52,950/- for hire charges under section 40(a)(ia) of the Act due to non-deduction of tax at source. The CIT(A) deleted the disallowance after considering that only &8377; 2,08,964/- of the petty contract charges remained outstanding as of 31.03.2008. The Tribunal referred to a similar Pune Bench decision and held that section 40(a)(ia) applies even if no amount is payable at year-end, reversing the CIT(A)'s decision.

2. Retrospective Application of Amendment: The Tribunal in another case discussed the retrospective application of the second proviso to section 40(a)(ia) inserted by the Finance Act, 2012. The proviso stated that disallowance under section 40(a)(ia) is not applicable if the assessee is not deemed an assessee in default under section 201(1). The Tribunal referred to a Cochin Bench decision and directed the issue to be examined by the Assessing Officer for adjudication, emphasizing the need for a fresh examination as the argument was raised for the first time.

3. Judicial Interpretations: The Tribunal rejected the contention that section 40(a)(ia) applies only to amounts payable, not paid, citing contrary decisions by the Gujarat and Calcutta High Courts. Additionally, the Tribunal dismissed the argument that the assessee acted as a conduit pipe in transactions, emphasizing the need for proof. The Tribunal also clarified that the decision in the case of Hindustan Coco-Cola beverages Ltd does not apply to disallowances under section 40(a)(ia).

4. Restoration to Assessing Officer: Following the above discussions and decisions, the Tribunal restored the matter back to the Assessing Officer for fresh adjudication in accordance with the law and directions provided in previous cases. The appeal of the Revenue was allowed for statistical purposes, and the order was pronounced on 10th April, 2015.