2016 (4) TMI 555 - AT - Income Tax

Rectification of mistake - judgement of the Hon ble High Court of Delhi in the case of Ansal Land Mark Township (P) Ltd. 2015 (9) TMI 79 - DELHI HIGH COURT was cited and relied upon by the assessee(s) which was not recorded by the Tribunal while deciding the appeals of the assessees - disallowance u/s 40(a)(ia) - Held that - Rectification allowed - Looking to the totality of the facts of the case, we deem it proper to modify our order passed as below We find that the AO has made disallowance on the basis that the expenditure, like spare-parts expenses of ₹ 1,17,237/- and tyre & tube expenses of ₹ 5,23,119/- are separately debited in the profit & loss account. Therefore, it can be assumed that the repairs and maintenance expenses of ₹ 4,58,971/- debited to the profit & loss account was purely in the nature of labour charges for repairs and maintenance and did not include any expenditure on account of purchase of any components/parts. We find that the AO has not made any enquiry with regard to the nature of expenditure. However, before the ld.CIT(A), the assessee has given separate account of replacement of spares and labour charges. The assessee has relied on the judgement of the Hon ble High Court of Delhi in the case of CIT vs. Ansal Land Mark Township (P) Ltd. reported at (supra), wherein it has been held that the amendment in the Finance Act, 2012, dated 01/04/2013 being curative to be treated as retrospective in nature. Accordingly we direct the AO to decide the issue in the light of the judgement of the Hon ble High Court of Delhi in the case of Ansal Land Mark Township (P) Ltd. The rationale behind the insertion of the second proviso to section 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from April 1, 2005, merits acceptance. Needless to say that the Assessing Officer will afford reasonable opportunity of being heard to the assessee(s) and then decide the issue afresh

Summary

Issues involved:
1. Modification/recalling of Tribunal's order based on judgment of Hon'ble High Court of Delhi.
2. Disallowance of transportation commission and repairs and maintenance expenses under section 40(a)(ia) of the Act.
3. Interpretation of contractual terms for commission payments.
4. Application of curative amendment retrospectively.
5. Restoration of issues to the file of AO for decision afresh.

Comprehensive analysis:
1. The judgment involved two miscellaneous applications filed by different Assessees seeking modification/recalling of the Tribunal's common order dated 21/10/2015 in light of the judgment of the Hon'ble High Court of Delhi in the case of Ansal Land Mark Township (P) Ltd.
2. The issue revolved around disallowance of transportation commission and repairs and maintenance expenses under section 40(a)(ia) of the Act due to non-deduction of tax at source. The Assessees argued that the receipts were not contractual and that the payments did not exceed the prescribed limit for tax deduction.
3. The Tribunal's order observed that the AO made disallowance based on the assumption that the expenditure was required to be deducted. The Assessees contended that there were no contractual terms for commission payments and that the concerned party had offered the receipts as income. The Tribunal directed the AO to decide the issue afresh in light of the judgment of the Hon'ble High Court of Delhi, emphasizing the retrospective application of the curative amendment.
4. The judgment highlighted the importance of the curative amendment in section 40(a)(ia) and its retrospective effect from April 1, 2005. It cited the rationale behind the insertion of the second proviso and emphasized that the provision was not intended as a penalty for tax withholding lapses but as a compensatory deduction restriction.
5. Ultimately, the Tribunal modified its order to consider the judgment of the Hon'ble High Court of Delhi and directed the AO to decide the issues afresh, affording the Assessees a reasonable opportunity to present their case. The miscellaneous applications were disposed of accordingly, emphasizing the importance of fair and just interpretation of the law in tax matters.