2019 (4) TMI 1889 - AT - Income Tax

Disallowance u/s. 40(a)(ia) - Scope of amendment - According to Ld. AR, 30% of the disallowance may be sustained in view of the amendment brought in by Finance Act No. 2 w.e.f. 01.04.2015 to section 40(a)(ia) which has been held to be curative in nature and hence, retrospective - HELD THAT - As pursuant to the Tribunal s direction the AO after examining the veracity of the vouchers submitted by the assessee against the payments made to various persons found out that payments have been made without deducting TDS and has found that there is no credence of the vouchers produced by the assessee so, he disallowed the expenditure claimed by invoking section 40(a)(ia) of the Act. CIT(A) confirmed the order of the AO. Before us, the Ld. AR taking note of the amendment brought in by the Finance Act No. 2 w.e.f. 01.04.2015 to sec. 40(a)(ia) of the Act prayed that 30% of the disallowance may be sustained and thus partial relief may be granted to the assessee. As held in the case of Punjab Infrastructure Development Board Ltd. 2015 (9) TMI 1663 - ITAT CHANDIGARH that though the aforesaid amendment has been brought w.e.f. 01.04.2015 it is curative in nature and so retrospective in operation and so following the ratio laid by the coordinate Bench of this Tribunal, we are inclined to allow the said prayer of the assessee, therefore, restrict the disallowance to 30%. The AO is directed to give relief in accordance to law as per the aforesaid direction.

Summary

Issues: Disallowance under section 40(a)(ia) of the Income-tax Act, 1961 for Assessment Year 2006-07.

Analysis:
1. The appeal was filed against the order of Ld. CIT(A)-13, Kolkata for AY 2006-07, specifically challenging the disallowance under section 40(a)(ia) of the Income-tax Act, 1961.
2. The main contention was the disallowance of a sum of ?8,96,450 under section 40(a)(ia) by the AO, which was affirmed by the Ld. CIT(A).
3. The appellant argued that the disallowance should have been restricted to 30% due to the retrospective effect of the amendment to section 40(a)(ia) brought in by the Finance Act No. 2 w.e.f. 01.04.2015.
4. The appellant relied on a previous decision by the Chandigarh Bench of the Tribunal in the case of DCIT Vs. Punjab Infrastructure & Development Board Ltd., where it was held that the amendment to section 40(a)(ia) is curative and retrospective in nature.
5. After considering the submissions, the Tribunal noted that the AO disallowed the expenditure claimed by the assessee for non-deduction of TDS based on the vouchers submitted. The Ld. CIT(A) upheld this decision.
6. The Tribunal, following the precedent set by the Chandigarh Bench, granted partial relief to the assessee by restricting the disallowance to 30% of the amount.
7. The Tribunal dismissed the last ground of appeal, which was of a general nature, and partly allowed the appeal of the assessee by granting relief in accordance with the direction given.
8. The order was pronounced on 3rd April 2019, with the appellant partially succeeding in challenging the disallowance under section 40(a)(ia) for the Assessment Year 2006-07.