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TMI Blog2011 (12) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... or proceeding for disallowance under section 40(a)(ia). The disallowance under section 40(a)(ia) in the present case, is not justified and as such we direct the deletion of the said disallowance by allowing the appeal of the assessee. - - - - - Dated:- 16-12-2011 - K. K. GUPTA (Accountant Member) and K. S. S. PRASAD RAO (Judicial Member) Order K. K. Gupta (Accountant Member).- The assessee has filed this appeal against the order of the Commissioner of Income-tax (Appeals) dated September 23, 2011 raising the issue pertaining to the confirmation of the disallowance of ₹ 24,60,844 made by the Assessing Officer under section 40(a)(ia) of the Income-tax Act, 1961 for the assessment year 2008-09. The relevant facts as brought on record by the authorities below are that the assessee carries on business in raising iron ore. During the course of assessment, the Assessing Officer noted that the assessee made sub contract payments of ₹ 53,83,035 during the months from April, 2007 to February, 2008 on which TDS had been deducted amounting to ₹ 67,345 and deposited the same on March 27, 2008 and May 12, 2008. The Assessing Officer was of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment to sub-contractor does not arise at all. The disallowance has been made by the learned Assessing Officer on mere suspicion, surmises and assumption of wrong facts. Therefore, the assessment made by the learned Assessing Officer is illegal, arbitrary, and against the facts on record. Reliance is placed on the following judgments. In support of his submissions, he placed reliance on the decisions rendered in the case of: (1) ITO v. Rama Nand and Co. [1987] 163 ITR 702 (HP) wherein definition of sub-contracts held as means for carrying out whole or any part of the work undertaken by the contractor in pursuance of a contract. (2) Mythri Transport Corporation v. Asst. CIT [2010] 1 ITR (Trib) 290 (Vishakapatnam) paragraph 5.5 at pages 974 to 975 and paragraph 8.1 at page 978, 124 TTJ (Visakha) 970, wherein it is held that section 194C(2) is attracted if all the following conditions are satisfied. (a) The assessee should be a contractor. (b) The assessee, in his capacity as a contractor, should enter into a contract with a sub-contractor for carrying out the whole or any part of the work undertaken by the contractor. (c) The sub-cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (6) Nabin Kumar Sahoo, I. T. A. No. 143/CTK/2009, order dated April 21, 2011. However, inadvertently the assessee deducted tax out of payments made, which is admitted as a mistake on the part of the assessee, on account of wrongful deductions of tax from April 7, 2007 to February 29, 2008 (details in the assessment order). But, the entire TDS has been deposited with the Central Government, on May 12, 2008, i.e., before the due date of filing of return. Relying on the decision of the Income-tax Appellate Tribunal, Ahmedabad B Bench in the case of Kanubhai Ramjibhai v. ITO [2011] 135 TTJ (Ahd) 364 (copy submitted), it was submitted before the Commissioner of Income-tax (Appeals) that the assessee's case is fully covered by the said decision as tax deducted at source has been deposited with the Government exchequer before the due date of filing the return under section 139(1). The amendment to the provision of section 40(a)(ia) is remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the taxpayers and which made the provision unworkable or unjust in specific situation, and is clarificatory in nature. The amendment has ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Special Bench has not properly appreciated the law laid down by the Supreme Court in the case of Allied Motors P. Ltd. [1997] 224 ITR 677 (SC) and CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) and also that in the case of Bharati Shipyard Ltd. v. Deputy CIT is distinguishable on facts. The Income-tax Appellate Tribunal, Mumbai B Special Bench is of the view that unless it is expressly or by necessary implication made to have retrospective operation. Retrospective effect cannot be ordinarily given to a provision by judicial or quasijudicial authorities unless it is expressly given by the Legislature. The power of the courts to validly give retrospective effect to a provision only extends to cases where the legislative intent has later been made explicit which was earlier implicit in the provision or the existing provision has led to un-intended consequences and made the intention of the Legislature unworkable. But in the instant case, for a small default of delay in payment of TDS amounting to ₹ 31,876 which was only a small percentage of ₹ 24,60,844 the assessee has been made to suffer additional tax of liability of about ₹ 12 lakhs which is certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court of India has held in a series of cases that an amendment, made to remove hardship, unintended result should be given retrospective effect should be followed as this ratio still holds the field and it has not been reversed by the hon'ble Supreme Court by any other case till now. Learned counsel for the assessee prayed to delete the disallowance of ₹ 24,60,844 made under section 40(a)(ia) by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) by allowing the appeal of the assessee on the facts as well as on law. On the above submissions, learned counsel for the assessee contended that the authorities below misdirected themselves to consider the assessee's factual circumstances under the provisions of section 40(a)(ia) only. Having accepted the sub-contract payments amounting to ₹ 53,83,035, the Assessing Officer in his order observed that the payments made to the various individuals on the basis of contract were to be deducted tax at source which tax was deducted and deposited on May 12, 2008 without considering the issue of the assessee in the manner so as to relate to the provisions of section 194C which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never the case of the assessee in the first place as noted by the Assessing Officer also in page 2 of his order. After nothing down that the amounts paid to various persons against bills raised by the assessee cannot be denied, claim of those expenses as part of the sub-contract payments amounting to ₹ 53,83,035 in so far as no amounts were due to any of his payees as on March 31, 2008 as can be verified in the balance-sheet filed by the assessee being an individual proprietor of M/s. Mine Field. The tax deducted at source was therefore the liability in the hands of the assessee not to be given credit to the payees as proposed under the provisions of section 194C. He argued that in case the Assessing Officer who confined himself to the disallowance under section 40(a)(ia) after having verified the details of payments made as sub-contracts totalling ₹ 53,83,035 when he chose to disallow the payments amounting to ₹ 24,60,844 only under the provisions of section 40(a)(ia) without giving a finding-regarding payments disallowable under the provisions of section 40A(3). The assessee could not be subjected to professional misinterpretation of the facts incorporated in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is to circumvent the decision of the Special Bench, Income-tax Appellate Tribunal, Mumbai Benches which copy has been placed on record. The controversy with respect to the due date of payment has been set at rest by the Special Bench, Income-tax Appellate Tribunal, Mumbai Benches when learned counsel for the assessee relies on the various judicial pronouncements relating to the payment of tax deducted at source under section 194C read with section 40(a)(ia). The learned Commissioner of Income-tax (Appeals) therefore was within his jurisdiction to uphold the contention of the Assessing Officer when the payments made to sub-contractors were identified as totalling ₹ 53,83,035 wherein the TDS amounting to ₹ 31,876 was deducted and paid on May 12, 2008 resulting in disallowance of ₹ 24,60,844 under the provisions of section 40(a)(ia). He supported the orders of the authorities below for his part of submissions. We have heard the rival contentions and perused the material available on record. On our careful consideration of the facts, we are inclined to hold that the controversy has been set at rest by the decision of the Income-tax Appellate Tribunal, Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against cash memos cannot be subject to raising of a bill either as a contract or the work which the assessee was to execute on behalf of the service contract raised into between the assessee and the payers. Having paid the service tax in accordance with the provisions of the Income-tax Act, the business required the assessee to execute the contract when he identified the payments as part of the ongoing contract which resulted in assessee already undergoing receipts to tax for executing work therefore did not require further deduction of tax at source at one per cent. as the assessee was not the sub-contractor. The ore did not belong to the assessee and therefore any work conducted by the assessee was conducted through the help from similarly placed service providers cannot be said to be expenditure disallowable under section 40(a)(ia). The Assessing Officer having identified by the nomenclature of sub-contract have already allowed ₹ 29,22,191 being expenditure allowable in view of the fact that the TDS amounting to ₹ 33,898 had been paid on March 27, 2008. Learned counsel for the assessee before us indicated that both these payments were subjected to deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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