2020 (11) TMI 406 - AT - Income Tax

TDS u/s 194C - Addition u/s 40(a)(ia) - assessee has violated the provisions of Section 40(a)(ia) of the Act for not deducting depositing the TDS - Scope of amendment - HELD THAT - The amendment has been made in the second proviso of Section 40(a)(ia) of the Act w.e.f. 01.04.2013 and, therefore, it is applicable for the A.Y.2013-2014 onwards. We would like to rely on the decision of Shree Choudhary Transport Company 2020 (8) TMI 23 - SUPREME COURT . Receipts from the bank in his total income and it paid income tax thereon as per the provisions of Income Tax Act, we find that the assessee tried to prove that there is no loss to the Revenue and requested for sending back the matter to the file of AO for verification. On perusal of the order of the CIT(A), we noticed that this proviso i.e. furnishing of Form 26A has been inserted w.e.f.01.04.2013 and, therefore, applicable form the assessment year 2013-2014. This contention is squarely supported by the above decision of the Hon ble Supreme Court as noted supra. In this case, the assessee had not deducted TDS on the transportation payments, which were required to be deducted as per the provisions of Section 194C of the Act for the financial year 2005-06 and the section 40(a)(ia) of the Act was inserted w.e.f.01.04.2005 by the Finance Act No.2. In this case the Hon ble Apex Court decided the case against the assessee and in favour of revenue by holding this provisions is applicable for the assessment year 2005-06. Before us, the impugned case is for the assessment year 2012-2013 and the provisions has been inserted w.e.f.01.04.2013 will not apply in the ratio decidendi above. In the written submissions, the assessee has relied many judgments which have been reproduced above are not applicable considering to the latest judgment of the Hon ble Supreme Court in the case of Shree Choudhary Transport Company (supra). In the peculiar facts and circumstances of the case and the latest decision of the Hon ble Apex Court as stated supra, the case laws relied on by the ld. AR of the assessee is not applicable in the present case in hand. - Ground of appeal of the assessee is dismissed. Disallowance u/s.43B - assessee could not produce the challan copy - HELD THAT - As these payments relates to the arrears from 2007-2008 but here it is not yearwise breakup that how much amount is relating to which year along with proof of payments. Therefore, this matter is sent back to the file of AO for determination of the yearwise breakup along with the payments and decide the issue as per the provisions of Section 43B of the Act. This ground of appeal of the assessee is allowed for statistical purposes. Disallowance for gratuity to staff - Disallowance u/s 36(1)(v) of the Act and confirmed by the CIT(A) - HELD THAT - As assessee has submitted that it has been paid as per the direction of the Reserve Bank of India but before us the ld. AR of the assessee has not produce any documentary evidences, therefore, this matter is also sent back to the file of AO for verification as to whether it has been paid within the due date to the approved gratuity fund or any other fund as prescribed by the Income Tax Act. Thus, this ground of appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Legality of the CIT(A)'s order confirming additions and disallowances made by the AO.
2. Disallowance under Section 40(a)(ia) of the IT Act, 1961.
3. Applicability of the amendment to the second proviso to Section 40(a)(ia) with retrospective effect.
4. Disallowance under Section 43B for EPF.
5. Disallowance of gratuity payment to staff.

Issue-wise Detailed Analysis:

1. Legality of the CIT(A)'s Order Confirming Additions and Disallowances:
The assessee challenged the CIT(A)'s order confirming the additions and disallowances made by the AO as illegal, arbitrary, and not in accordance with law. The Tribunal noted that ground No.1 is general in nature and did not require separate adjudication.

2. Disallowance under Section 40(a)(ia) of the IT Act, 1961:
The Tribunal examined the disallowance of ?36,30,998/- under Section 40(a)(ia) for non-deduction of TDS on payments made towards commission, legal expenses, and audit fees. The assessee argued that the payments were genuine and that non-deduction of TDS is a separate issue. The Tribunal referred to the Supreme Court's decision in Shree Choudhary Transport Company Vs. ITO, which clarified that the amendment to Section 40(a)(ia) is applicable from AY 2013-2014 onwards and not retrospectively. The Tribunal upheld the disallowance, stating that the assessee failed to deduct TDS as required by law.

3. Applicability of the Amendment to the Second Proviso to Section 40(a)(ia):
The assessee contended that the amendment to the second proviso to Section 40(a)(ia) should be applied retrospectively, citing the Supreme Court's decision in CIT Vs. Doraisamy Chetty. However, the Tribunal, relying on the Supreme Court's decision in Shree Choudhary Transport Company, held that the amendment is applicable prospectively from AY 2013-2014. Therefore, the Tribunal dismissed this ground of appeal.

4. Disallowance under Section 43B for EPF:
The AO disallowed ?1,15,570/- under Section 43B for EPF payments, as the assessee could not produce challan copies for the amount, which was in arrears from 2007-2008. The Tribunal sent the matter back to the AO for a year-wise breakup and verification of payments, allowing this ground of appeal for statistical purposes.

5. Disallowance of Gratuity Payment to Staff:
The AO disallowed ?2,70,000/- for gratuity payments under Section 36(1)(v), and the CIT(A) confirmed this disallowance. The assessee argued that the payments were made as per RBI guidelines but failed to produce documentary evidence. The Tribunal remanded the matter to the AO for verification of whether the payments were made to an approved gratuity fund or any other prescribed fund, allowing this ground of appeal for statistical purposes.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, remanding the issues of disallowance under Section 43B and gratuity payment to the AO for further verification. The other grounds of appeal were dismissed based on the Supreme Court's decision in Shree Choudhary Transport Company, which clarified the applicability of amendments to Section 40(a)(ia).