9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (6) TMI 1354 - AT - Income TaxApplication of second proviso to section 40(a)(ia) - Retrospective or prospective effect - whether the second proviso to section 40(a)(ia) of the Act takes effect from 01.04.2013 is applicable to the assessee or not? - diversified views - HELD THAT - Since there exists two contradictory decisions we are of the considered opinion that the Hon ble Supreme Court in the case of CIT v. Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME COURT has held that the decision favourable to the assessee have to be acted upon. in the case of Star Investments Pvt. Ltd. 2016 (6) TMI 1428 - ITAT CHENNAI wherein the decision of Rajeev Kumar Agarwal 2014 (6) TMI 79 - ITAT AGRA has been followed which was affirmed by case of Ansal Landmark Township Pvt. Ltd. v. Addl. CIT 2014 (9) TMI 194 - ITAT DELHI as subsequently confirmed by the Hon ble Delhi High Court in the case of CIT v. Ansal Landmark Township Pvt. Ltd. 2015 (9) TMI 79 - DELHI HIGH COURT and the same was not reverted by the High Court. Thus held that second proviso to section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April 2005 - Decided against revenue.
Issues Involved:
1. Applicability of TDS provisions on business promotion expenses. 2. Applicability of the second proviso to Section 40(a)(ia) of the Income Tax Act from 01.04.2013. 3. Consideration of revenue loss to the department due to non-deduction of TDS. 4. Relevance of the Supreme Court decision in Hindustan Coca Cola Beverages case. 5. Interpretation of Board Circular No. 275/201/95-IT. Detailed Analysis: 1. Applicability of TDS Provisions on Business Promotion Expenses: The Revenue contended that the assessee should have deducted TDS on the business promotion expenses paid to its holding company, M/s. KPR Mill Ltd., as these payments were considered a "bundle of services" including rent, royalty, commission, etc. The Assessing Officer disallowed the expenses under Section 40(a)(ia) for non-deduction of TDS. However, the assessee argued that the payments did not fall under any specific TDS provisions (Sections 194C, 194H, 194I, or 194J) and were merely a revenue-sharing arrangement. 2. Applicability of Second Proviso to Section 40(a)(ia) from 01.04.2013: The Revenue argued that the second proviso to Section 40(a)(ia), which allows relief if the payee has paid taxes on the income, is effective from 01.04.2013 and should not apply to the assessment year 2010-11. The CIT(A) and Tribunal, however, relied on judicial precedents, including the ITAT Chennai in M/s. Foxconn India Developers and the Supreme Court decision in Hindustan Coca Cola Beverages, to hold that the proviso should apply retrospectively, as it is curative and intended to prevent undue hardship. 3. Consideration of Revenue Loss to the Department: The assessee demonstrated that M/s. KPR Mill Ltd. had accounted for the business promotion expenses in their income and paid taxes accordingly. The CIT(A) accepted this argument, noting that there was no revenue loss to the department since the income was taxed in the hands of the payee. 4. Relevance of Supreme Court Decision in Hindustan Coca Cola Beverages Case: The CIT(A) and Tribunal referenced the Supreme Court decision in Hindustan Coca Cola Beverages, which held that if the payee has paid the taxes on the income received, the payer should not be treated as an assessee in default for not deducting TDS. This precedent supported the assessee's case that the non-deduction of TDS should not result in disallowance of expenses if the payee had discharged their tax liability. 5. Interpretation of Board Circular No. 275/201/95-IT: The Revenue argued that the Board Circular No. 275/201/95-IT pertains only to the provisions of Section 201(1A) and does not address the broader question of TDS liability. The CIT(A) and Tribunal, however, focused on the practical application and intent of the law, emphasizing that the key issue was whether the income was ultimately taxed, not the procedural aspects of TDS compliance. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the expenses should not be disallowed under Section 40(a)(ia) due to non-deduction of TDS, as the payee had already paid taxes on the income. The second proviso to Section 40(a)(ia) was deemed applicable retrospectively to prevent undue hardship, aligning with judicial precedents and the intent of the law. The decision emphasized the principle that the disallowance under Section 40(a)(ia) is not intended to penalize procedural lapses if the income has been duly taxed.
|
