2013 (11) TMI 412 - AT - Income Tax

Retrospective operation of section 40(a)(ia) tax deducted at source and paid before the due date of filing of the return of income - Held that - Supreme Court in case of Allied Motors Pvt. Ltd. Vs CIT(1997 (3) TMI 9 - SUPREME Court) and in case of CIT vs Alom Extrusions Ltd.(2009 (11) TMI 27 - SUPREME COURT) has already decided that the aforesaid provision has retrospective application - Decided in favour of assessee. Disallowance u/s 194C - Trucks taken on hire - Work u/s 194C - Held that - Mumbai Tribunal in the case of Bhail Bulk Carriers v ITO 2012 (4) TMI 230 - ITAT MUMBAI has held that, Once the Commissioner (Appeals) has accepted the fact that the outside tank owners do not had any responsibility or liability towards the principal, then it cannot be held that these outside parties were privity to the contract between the appellant and its principal. Thus, the payment made to the outside parties do not come or fall within the purview of section 194C, as the carrying out any work indicates doing something to conduct the work in pursuance of contract and in instant case, it was solely between appellant and its principal. - There is nothing on record to suggest that the above order of the Mumbai Tribunal is brought to the notice of the learned CIT(A) - matter remanded back for reconsideration.

Summary

Issues Involved:
1. Retrospective application of the amendment to Section 40(a)(ia) by Finance Act, 2010.
2. Applicability of Section 194C to payments made to truck owners.

Issue-wise Detailed Analysis:

1. Retrospective application of the amendment to Section 40(a)(ia) by Finance Act, 2010:

The assessee, an individual engaged in transport contracts, filed a return of income for the assessment year 2009-2010. During scrutiny, it was found that the tax deducted at source (TDS) for January and February 2009 was remitted late, leading to a disallowance of Rs. 7,18,96,190/- under Section 40(a)(ia). The assessee contended that the amendment to Section 40(a)(ia) by Finance Act, 2010, which allowed TDS payment before the due date of filing the return, should be applied retrospectively from 1st April 2005. The Assessing Officer (AO) and CIT(A) rejected this, citing that the amendment was not retrospective and relied on the Special Bench decision in Bharati Shipyard Ltd. v. DCIT. The Tribunal, however, referred to the Calcutta High Court judgment in CIT v. Virgin Creations and the Bangalore Tribunal's decision in ACIT v. M K Gurumurthy, which held that the amendment was remedial and curative, thus retrospective. Consequently, the Tribunal allowed the assessee's appeal, stating that the disallowance under Section 40(a)(ia) was not warranted as the TDS was paid before the due date of filing the return.

2. Applicability of Section 194C to payments made to truck owners:

The assessee argued that payments made to truck owners were not sub-contracts and hence not subject to TDS under Section 194C. The CIT(A) rejected this, stating that the assessee had acknowledged the requirement of TDS by deducting it and that the provisions of Section 194C were applicable. The assessee relied on the Mumbai Tribunal's decision in Bhail Bulk Carriers v. ITO, where it was held that hiring trucks did not constitute sub-contracting. The Tribunal noted that there was no detailed discussion on the facts by the CIT(A) and remanded the matter to the AO for denova consideration. The AO was directed to examine if the facts of the instant case were identical to those in Bhail Bulk Carriers and to take an appropriate decision in accordance with the law.

Conclusion:

The Tribunal allowed the appeal partly, holding that the amendment to Section 40(a)(ia) by Finance Act, 2010, was retrospective and that the disallowance of expenditure was not justified. The issue regarding the applicability of Section 194C was remanded to the AO for fresh consideration. The order was pronounced on 03/05/2013.