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2014 (5) TMI 1140 - AT - Income TaxDisallowance of claim on account of additional cost of land - poof of obligation as per the development agreement to make any such payment - Held that - We find the Assessing Officer has not doubted the payment to the land owners but disallowed the amount of ₹ 18 lakhs on the ground that assessee was under no obligation as per the development agreement to make any such payment. The existence of a Civil Suit on the impugned land because of which the development work on the land could not be carried out for a long time was within the knowledge of the Assessing Officer. There is no dispute to the fact that the payment of ₹ 18 lakhs has been made on 17-07-2007 although the development agreement was dated 17-05-2005 and the payment have been made by crossed account payee cheque to the land owners. In view of the above and in view of the detailed reasoning given by the Ld.CIT(A) we find no infirmity in his order. Addition u/s 40(a)(ia) - retrospectivity - Held that - The assessee has made a new legal argument that the Finance Act, 2010 has amended the first proviso to section 40(a)(ia) w.e.f. 01-04-2010 and it has been held by various judicial authorities that such amendment is retrospective in nature. It is the submission of the Ld. Counsel for the assessee that the second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01-04-2013 wherein it is stated that disallowance u/s.40(a)(ia) of the Act need not be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the I.T. Act., therefore, this should also be held as retrospective since it has been introduced to eliminate unintended consequences which may cause undue hardship to the tax payers. We find some force in the above argument of the Ld. Counsel for the assessee. We find the Cochin Bench of the Tribunal in the case of Antony D. Mundackal (2013 (12) TMI 67 - ITAT COCHIN ) relied on by Ld. Counsel for the assessee, had an occasion to decide an issue in the light of the above argument and has restored the issue to the file of the Assessing Officer with certain directions. Thus we restore this issue to the file of the Assessing Officer with a direction to examine the above contention of the assessee and decide the issue afresh and in accordance with law.
Issues Involved:
1. Deletion of disallowance of Rs. 18,00,000/- as additional cost of land. 2. Confirmation of addition of Rs. 1,80,440/- under section 40(a)(ia) for non-deduction of TDS. Issue-wise Detailed Analysis: 1. Deletion of disallowance of Rs. 18,00,000/- as additional cost of land: The Revenue appealed against the CIT(A)'s decision to delete the disallowance of Rs. 18,00,000/- made by the Assessing Officer (AO). The AO observed that as per the development agreement dated 17-5-2005, the assessee was granted development rights for a land at Baner for Rs. 61,00,000/-. Due to a civil suit, the development work was delayed, and the assessee paid an additional Rs. 18,00,000/- to the landowners on 17-7-2007. The AO disallowed this payment, arguing it was not mentioned in the original agreement and thus not a contractual liability. The assessee contended that the additional payment was agreed upon due to the delay in payment caused by the litigation, which increased the land's price. A memorandum of understanding was made, and the payment was made via crossed account payee cheque. The CIT(A) deleted the disallowance, citing that compensation for breach of contract is an allowable business expense, supported by judicial precedents such as CIT Vs Amalgamated Development Ltd and others. Upon review, the Tribunal upheld the CIT(A)'s decision, noting that the AO did not dispute the payment's occurrence but disallowed it based on the absence of an obligation in the original agreement. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's grounds. 2. Confirmation of addition of Rs. 1,80,440/- under section 40(a)(ia) for non-deduction of TDS: The assessee's cross-objection challenged the CIT(A)'s confirmation of the addition of Rs. 1,80,440/- under section 40(a)(ia) for non-deduction of TDS on payments made to "Akruti" for printing. The CIT(A) upheld the AO's disallowance based on the audit report indicating no TDS was made. The assessee argued that disallowance under section 40(a)(ia) applies only to amounts payable, not already paid, referencing the Chennai Tribunal's decision in ITO Vs. M/s. Theekathir Press and the Supreme Court's judgment in CIT Vs. Vegetable Products Ltd. Alternatively, the assessee contended that amendments to section 40(a)(ia) by the Finance Act, 2010 and 2012 should be applied retrospectively, citing judicial decisions supporting this view. The Tribunal noted the Pune Bench's decision in Shri Vinay Ashwinikumar Joneja Vs. ITO, which held that section 40(a)(ia) applies even if no amount is payable at year-end. However, considering the new legal argument about retrospective application of amendments, the Tribunal found merit in the assessee's contention. Following the Cochin Bench's approach in Antony D. Mundackal Vs. The ACIT, the Tribunal restored the issue to the AO to examine the applicability of the second proviso to section 40(a)(ia) and decide afresh, ensuring due opportunity for the assessee. Conclusion: The Tribunal dismissed the Revenue's appeal regarding the Rs. 18,00,000/- disallowance and allowed the assessee's cross-objection for statistical purposes, remanding the issue of Rs. 1,80,440/- addition to the AO for reconsideration.
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