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2013 (12) TMI 5 - AT - Income TaxTax not deducted at source applicability of provisions of section 40(a)(ia) on the amount which is due on last day of the year or amount paid during the year also - Held that - As per amendment in Section 40 brought by the Finance Bill of 2004 - The legislature has replaced the words amounts credited or paid with the word payable in the enactment - Earlier year s provision can be allowed in subsequent years only if TDS is deducted and deposited - The terms payable and paid are not synonymous. Word paid has been defined in Section 43(2) of the Act to mean actually paid or incurred according to the method of accounting, upon the basis of which profits and gains are computed under the head Profits and Gains of Business or Profession - This is a case of conscious omission and when the language was clear the intention of the legislature had to be gathered from language used - Section 40(a)(ia) would cover not only to the amounts which are payable as on 31th March of a particular year but also which are payable at any time during the year Decided against assessee.
Issues Involved:
1. Disallowance of Rs. 20,97,689/- under Section 40(a)(ia) for non-deduction of TDS on freight payments. 2. Legality of the Assessing Officer's application of Section 40(a)(ia). 3. Confirmation of the disallowance by the CIT(A). Detailed Analysis: Disallowance of Rs. 20,97,689/- under Section 40(a)(ia) for Non-Deduction of TDS on Freight Payments: The primary issue in this appeal is the disallowance of Rs. 20,97,689/- under Section 40(a)(ia) of the Income Tax Act for non-deduction of TDS on freight payments. During the assessment proceedings, the Assessing Officer (AO) noted that the assessee paid Rs. 20,97,689/- towards freight to three individuals: Bimla Devi (Rs. 8,94,725/-), Sanjay Kumar (Rs. 6,57,589/-), and Ajay (Rs. 5,45,365/-) without deducting TDS. Consequently, the AO invoked Section 40(a)(ia) and disallowed the payment. Legality of the Assessing Officer's Application of Section 40(a)(ia): The assessee contended that Section 40(a)(ia) was inapplicable as the payments were already made. Reliance was placed on Tribunal decisions in K. Sirinivas Naidu Vs. ACIT and CIT Vs. Hasmukhbhai Saha. The CIT(A) discussed the issue in detail and confirmed the addition, maintaining the disallowance under Section 40(a)(ia). Confirmation of the Disallowance by the CIT(A): Before the Tribunal, the assessee argued that the Special Bench decision in ACIT Vs. Merilyn Shipping Transporters (140 TTJ 1 (SB) Vishakhapatnam) and the Allahabad High Court decision in CIT Vs. Vector Shipping Services (94 DTR) held that Section 40(a)(ia) was not applicable if the amount had been paid. Conversely, the Departmental Representative (DR) relied on the Gujarat High Court decision in CIT V. Sikandarkhan T Tunwar and the Calcutta High Court decision in CIT Vs. Crescent Export Syndicate (216 Taxman 258), which supported the AO's stance. The Tribunal, after hearing both parties, found no merit in the assessee's contention. It referenced the Chandigarh Bench's consistent following of the Gujarat High Court decision in CIT V. Sikandarkhan N Tunwar and the Calcutta High Court decision in CIT Vs. Crescent Export Syndicate, which overruled the Special Bench decision in Merilyn Shipping Transporters. The Tribunal emphasized that Section 40(a)(ia) disallows expenditure for which TDS was not deducted or paid, irrespective of whether the amounts were payable at the end of the year or paid during the year. The Tribunal concluded that the Gujarat High Court had thoroughly considered the issues raised in the Special Bench decision and held that Section 40(a)(ia) applies to amounts payable at any time during the year, not just those outstanding at the end of the year. Consequently, the appeal of the assessee was dismissed, and the disallowance under Section 40(a)(ia) was upheld. Conclusion: The Tribunal dismissed the appeal of the assessee, affirming the disallowance of Rs. 20,97,689/- under Section 40(a)(ia) for non-deduction of TDS on freight payments. The Tribunal upheld the legality of the AO's application of Section 40(a)(ia) and confirmed the CIT(A)'s decision, aligning with the Gujarat and Calcutta High Court rulings that Section 40(a)(ia) applies to amounts payable at any time during the year.
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