2022 (12) TMI 574 - AT - Income Tax

Disallowance u/s 40(a)(ia) - non-deduction of tax at source on the professional charges paid to three persons - non-submission of details regarding payment of the above mentioned amount to different professionals - Scope of amendment brought in by the Finance Act (No. 2) 2014 effective from 01/04/2015 made in the provisions of Section 40(a)(ia) for 100% disallowance of expenditure, the disallowance u/s 40(a)(ia) of the Act was limited to the extent of 30% of such expenditure - HELD THAT - As similar issue came for adjudication and the Tribunal relying on various decision including the decision of Amruta Quarry Works 2016 (7) TMI 1246 - ITAT AHMEDABAD and decision of Neena Kual 2019 (5) TMI 1697 - ITAT MUMBAI held that the amendment brought in by Finance Act No. 2 of 2014 restricting the disallowance u/s 40(a)(ia) of the Act to the tune of 30% of the expenses was made effective from 01/04/2015. But thereafter, clause 14.3. of the explanatory memorandum to Finance Bill 14 was said to be brought to effect to remove hardships faced by the assessee and thus, the said amendment was held to be clarificatory in nature and applicable retrospectively. Since the ld. D/R failed to bring any binding decision in its favour and the decision relied upon by the assessee is squarely applicable on the issue involved in the instant appeal, we are inclined to hold that 100% disallowance of Rs.2,85,500/- made u/s 40(a)(ia) of the Act be restricted to 30% i.e., Rs.85,650/-. Thus the assessee gets relief of Rs.1,99,850/-. Ground Nos. 1 2 raised by the assessee are partly allowed.

Summary

Issues Involved:
Appeal against order of National Faceless Appeal Centre regarding addition of professional charges under Section 40(a)(ia) of the Income Tax Act, 1961 for Assessment Year 2006-07.

Detailed Analysis:

1. Grounds of Appeal:
The appellant contested the order of the National Faceless Appeal Centre (NFAC) regarding the addition of Rs.2,85,500 on the grounds of non-submission of payment details to professionals. The appellant argued that no notice was received, depriving them of a hearing opportunity. The counsel referred to a decision in a similar case to support the retrospective application of an amendment limiting disallowance under Section 40(a)(ia) of the Act.

2. Arguments and Counterarguments:
The appellant's counsel cited a Co-ordinate Bench decision to support their case for restricting the disallowance under Section 40(a)(ia) to 30% of the expenditure. The Revenue representative opposed this argument, supporting the lower authorities' decision.

3. Judgment and Relief Granted:
After considering the submissions and records, the Tribunal noted that the appellant, a Limited Company, had previously received partial relief in the assessment. The Tribunal referred to previous decisions to conclude that the amendment to Section 40(a)(ia) was clarificatory and applicable retrospectively. Consequently, the disallowance of Rs.2,85,500 was restricted to 30%, providing relief of Rs.1,99,850 to the appellant. Grounds 1 and 2 of the appeal were partly allowed, while ground 3 was noted as general in nature.

4. Conclusion:
The Tribunal partially allowed the appellant's appeal, granting relief by restricting the disallowance under Section 40(a)(ia) of the Act. The judgment emphasized the retrospective application of the clarificatory amendment and the importance of providing a fair hearing opportunity to the appellant. The decision was pronounced on 31st October, 2022, in Kolkata.