2023 (4) TMI 274 - AT - Income Tax

TDS u/s 194C - disallowance of expenditure u/s. 40(a)(ia) - payments made towards CFS charges for non-deduction of TDS - Scope of amendment to section 40(a)(ia) by the Finance Act, 2014 - Assessee alternate plea in light of case of CIT vs Calcutta Export Company 2018 (5) TMI 356 - SUPREME COURT directed the AO to disallow 30% of expenses incurred by the assessee without deducting TDS u/s. 40(a)(ia) by considering amendment made by the Finance Act, 2010 to provisions of section 40(a)(ia) - HELD THAT - The assessment year involved in present appeals are assessment year 2009-10 2010-11, which are prior to amendment to section 40(a)(ia) of the Act by the Finance Act, 2014 w.e.f. 01.04.2015 and thus, the assessee is not entitled for 30% disallowance towards expenditure incurred without deduction of tax at source, as held in SHREE CHOUDHARY TRANSPORT COMPANY VERSUS INCOME TAX OFFICER 2020 (8) TMI 23 - SUPREME COURT . Therefore, we are of the considered view that, there is no merit in the alternate plea taken by the assessee for disallowance of 30% of expenditure in light of amended provisions of section 40(a)(ia) of the Act by the Finance Act, 2014 w.e.f. 01.04.2015 and thus rejected. Yet another alternate plea of the assessee in light of second proviso to section 40(a)(ia) of the Act inserted by the Finance (no.2) Act, 2019 w.e.f. 01.04.2020, we find that the assessee could not justify its arguments in light of necessary evidences including declaration of income by the payee in the return of income and consequent certificate from the Accountant as prescribed under the law. Therefore, we are of the considered view that, alternate plea of the assessee in light of second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2019 w.e.f. 01.04.2020 cannot be accepted and thus, rejected. We are of the considered view that there is no error in the reasons given by the CIT(A) to sustain additions made by the AO towards disallowance of expenditure u/s. 40(a)(ia) of the Act for non-deduction of TDS u/s. 194C of the Act. Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject alternate plea taken by the assessee. Decided against assessee.

Issues Involved:
1. Non-deduction of TDS on CFS charges at Chennai Port.
2. Applicability of amended provisions of section 40(a)(ia) by the Finance Act, 2014.
3. Alternate plea regarding second proviso to section 40(a)(ia) inserted by the Finance Act, 2019.

Summary:

1. Non-deduction of TDS on CFS charges at Chennai Port:
The assessee, a Custom House Agent, did not deduct TDS on CFS charges paid at Chennai Port, claiming no agreement existed with the recipients, unlike at Tuticorin Port where TDS was deducted. The AO disallowed Rs. 24,01,000/- under section 40(a)(ia) for non-deduction of TDS, which was upheld by the CIT(A).

2. Applicability of amended provisions of section 40(a)(ia) by the Finance Act, 2014:
The Tribunal initially directed the AO to disallow only 30% of expenses without TDS, based on the Finance Act, 2010. However, the revenue argued, citing the Supreme Court's decision in Choudhary Transport Company, that the 2014 amendment is prospective, not retrospective. The Tribunal agreed, stating the amendment applies only from assessment year 2015-16, thus rejecting the assessee's plea for 30% disallowance for assessment years 2009-10 and 2010-11.

3. Alternate plea regarding second proviso to section 40(a)(ia) inserted by the Finance Act, 2019:
The assessee's alternate plea under the second proviso to section 40(a)(ia), effective from 01.04.2020, was rejected due to lack of evidence, including the payee's income declaration and the required accountant's certificate.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to sustain the AO's additions for non-deduction of TDS under section 194C. The appeals for both assessment years were dismissed.

← Previous Next →