2013 (9) TMI 367 - AT - Income Tax

Disallowance of Expenditure on TDS u/s 40(a)(ia) - the issue was as to the disallowance of claim of expenditure on the basis that the assessee deducted the tax but not deposited in the Government account within the period as prescribed under the statute and section 40(a)(ia) of the IT Act - Held that - The amendment by Finance Act, 2010 to section 40(a)(ia) cannot be applied to the assessment year in dispute i.e., 2009-10 - Because of difference in judicial opinion, the case was referred to the Special Bench and the Tribunal Special Bench, Mumbai after considering the entire issue in the case of Bharati Shipyard Ltd. vs. DCIT 2011 (9) TMI 258 - ITAT MUMBAI - amendment to section 40(a)(ia) made by Finance Act, 2010 was with retrospective effect from 1st April 2010 extending the time limit for depositing of tax deducted at source in the case of one category of cases was neither aimed at removing any unintended hardship to the assessees nor it was curative or declaratory of the provisions of law and, therefore, it cannot be given retrospective effect - the issue raised in the Revenue appeal in was decided in favour of the Revenue and against the assessee. Expenditure u/s 40(a)(ia) - Disallowance due to non deduction of TDS - whether the provisions of section 40(a)(ia) applied only to that expenditure which is payable as of 31st March and not to the expenditure which had already been paid during the year itself - Held that - The order of M/s. Merilyn Shipping & Transports vs. ACIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM was suspended by the High Court for the time being - Matter remitted back to AO Decided in favour of Revenue. Difference in TDS as per Form no. 26AS and as claimed in the return - Confirmation of Addition on the Ground Of Price Variation - Held that - The assessee failed to reconcile the figures mentioned in Form No. 26AS and Profit & Loss Account - The assessee had not been able to file any confirmation from the contractors regarding the price variation claimed - it cannot be denied that as per Form No. 26AS, the assessee had itself shown the gross receipts.

Summary

Issues Involved:
1. Applicability of Section 194C to payments made to constituents of a JV.
2. Disallowance under Section 40(a)(ia) for late remittance of TDS.
3. Difference between reported gross receipts and Form 26AS leading to addition.

Issue-wise Detailed Analysis:

1. Applicability of Section 194C to Payments Made to Constituents of a JV:

The assessee argued that payments to JV constituents were not sub-contracts and hence, Section 194C was not applicable. The CIT(A) held that the relationship between the assessee and its constituents warranted TDS deduction, as the main contract was with the JV, and the JV treated its constituents as sub-contractors in its books. This was evidenced by the gross receipts shown on the income side and sub-contract expenses on the expenditure side of the P&L account. The CIT(A) decided against the assessee, affirming that Section 194C applied. The tribunal upheld this view, noting that the assessee deducted TDS and recorded sub-contract expenses, indicating that the provisions of Section 194C were indeed applicable.

2. Disallowance under Section 40(a)(ia) for Late Remittance of TDS:

The Revenue contended that the amendment to Section 40(a)(ia) by the Finance Act, 2010, was not retrospective. The CIT(A) directed the Assessing Officer to verify if TDS was paid before the due date of filing the return, in light of the Calcutta High Court decision in CIT vs. Virgin Creations, which held the amendment retrospective. The tribunal, however, referred to the Special Bench decision in Bharati Shipyard Ltd. vs. DCIT, which held the amendment was prospective from April 1, 2010. Consequently, the tribunal reversed the CIT(A)'s order, deciding in favor of the Revenue that the amendment could not be applied retrospectively to the assessment year 2009-10.

3. Difference Between Reported Gross Receipts and Form 26AS Leading to Addition:

The Assessing Officer noted a discrepancy between the gross receipts reported in the P&L account (Rs. 10,34,24,746) and those in Form 26AS (Rs. 10,45,65,611), leading to an addition of Rs. 11,40,865. The assessee claimed this was due to price variation but failed to provide confirmation from the contractor. The CIT(A) upheld the addition, noting the assessee's inability to reconcile the figures. The tribunal agreed with the CIT(A), affirming the addition due to the lack of reconciliation and supporting evidence from the assessee.

Conclusion:

The tribunal dismissed the assessee's appeal and partly allowed the Revenue's appeal for statistical purposes. The order emphasized the importance of timely TDS remittance and accurate reconciliation of reported income with Form 26AS. The tribunal's decision was pronounced in the open court on December 31, 2012.