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TMI Blog2013 (9) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA No.1114,1122/Hyd/2012 - - - Dated:- 31-12-2012 - Chandra Poojari and Asha Vijayaraghavan, JJ. For the Appellant : Sri S Rama Rao For the Respondent : Sri M Ravinder Sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts during the year as under: S. No. Name of the Project Contract Amount (Rs.) 1 Karur Project 5,96,08,031 2 Wajah Road Project 3,79,41,387 3 Namakkal Project 58,75,328 Total 10,34,24,746 5. It was further noted that out of the above gross receipts, the following sub contract expenses had been debited in the P L account for arriving at the net income. S. No. Sub contract expenses Contract Amount (Rs.) 1 Karur Project 5,93,09,992 2 Wajah Road Project 3,77,45,972 3 Namakkal Project 58,45,951 Total 10,29,01,915 6. During the course of assessment proceedings the assessee was required to furnish the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tractor. He observed that the nature of expenditure had been shown as sub contract expenses in the P L account, and therefore, the TDS provisions were indeed applicable. He also observed that the payments to sub contractors were in the nature of sub contract payments and not capital repayment , or remuneration/ interest to partners, etc. Therefore, the provisions of TDS were indeed applicable. 8. The Assessing Officer further noted that in the quarterly returns, the assessee had stated the date of deduction of TDS. Besides, in clause 27(b) of the Form No. 3CD, the auditors had also certified that the TDS was deducted but remitted after 31.3.2009. Therefore, the Assessing Officer concluded that the claim of the assessee that the TDS was not deducted during the year was not correct. With regard to the claim of the assessee that the entries for sub contract works were made by way of journal entry on 31st of March, which included TDS deducted also, and therefore, the time allowed for remittance was till the date of filing of return of income, the Assessing Officer opined that since substantial amounts were being paid to the sub contractors during the year, the assessee was requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had separately entered contract with them. He also noted that the assessee entity and the sub contractors were separate, and those were filing their return separately, admitting the work received by them in their respective returns. In view of the above, the Assessing Officer concluded that the expenditure of ₹ 6,96,32,308 attracted the provisions of TDS as those related to transactions between the assessee and the sub contractors. He noted that even though the TDS was deducted, the same was not remitted to the Government account within the specified time. Accordingly, the entire expenditure of ₹ 6,96,32,308 was disallowed u/s. 40(a)(ia) of the Act. 10. The CIT(A) observed it cannot be disputed that the assessee by making TDS on the payments made to the constituents of the JV, has itself acknowledged that the relationship between the assessee and the two constituents was such as would have warranted deduction of TDS. It was only under this understanding that the agreement had been entered into in the instant case. As a consequence, the assessee had shown the gross contract receipts on the income side of its P L account, while the payments made to the constituents we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is the claim of the assessee that all of the payment of ₹ 6,96,32,308/- stood already 'paid' as on 31.3.2009 and was not 'payable'. The Hon'ble Special Bench of the ITAT Visakhapatnam in the case of Merilyn Shipping and Transport in ITA No. 477/VIZ/2008 have, by a majority view, .opined that when section 40(a)(ia) was proposed to be inserted by the Finance Bill, 2004, it applied to any amount credited or paid . However, when enacted by the Finance Act, 2004, it applied only to amount payable . The Hon'ble Special Bench has opined that the words 'credited/ paid' and 'payable' have different connotations and the latter refers to an amount which is unpaid. They held that the change in language between the Bill and the Act is conscious and with a purpose, and that the legislative intent is clear that only the outstanding amount or the provision for expense (and not the amount already paid) is liable for disallowance if TDS is not deducted. It also observed that section 40(a)(ia) creates a legal fiction by virtue of which even genuine and inadmissible expenses can be disallowed for want of TDS, but a legal fiction has to be limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,29,01,915 15. Further, the assessee deducted the TDS on the amount of ₹ 6,96,32,308 before 18.2.2009 and that also was not deposited before 31st March, 2009. Being so, the expenditure claimed by the assessee was not allowed by the Assessing Officer. Before us the assessee made a claim that the it is not liable to deduct TDS u/s. 194C of the Act. As seen from the above table, the assessee credited the contract receipt to the Profit and Loss A/c. and also shown the subcontract expenses in the Profit and Loss A/c. and deducted TDS also. This shows that the assessee has not entrusted the work to the other parties on back to back basis. Though the assessee claimed before that it had only carried on the work on Joint Venture basis and the contract was executed by the constituents of the Joint Venture in their individual capacity, it is not on record. But the facts are that the main contract was given to the assessee only, but in turn, the assessee treated the constituents as sub-contractors in its books of account and made necessary deduction of TDS on the payment made to them. Being so, once the assessee received the payment and credited the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and against the assessee. The order of the CIT(A) on this issue is reversed. 17. Coming to Ground No. 3 in Revenue appeal, the CIT(A) placed reliance on the order of the Tribunal Special Bench, Visakhapatnam in the case of M/s. Merilyn Shipping Transports vs. ACIT, in I.T.A. No. 477/Viz/2008 order dated 29th March, 2012. This order of the Special Bench was suspended by the jurisdictional High Court for the time being. Being so, we remit this issue to the file of the Assessing Officer to decide the same on outcome of the judgement in that case from the jurisdictional High Court. 18. The next issue (ground No. 4) in assessee s appeal is with regard to confirmation of the addition made by the Assessing Officer at ₹ 11,40,865 on the ground that there is price variation. Brief facts of the issue are that the Assessing Officer noted that the gross receipts as per 26AS were ₹ 10,45,65,611/- whereas those admitted in the P L account stood at ₹ 10,34,24,746/-. It was claimed that the difference of ₹ 11,40,865/- was on account of price variation. However, the Assessing Officer noted that the assessee had deducted TDS on the gross receipts of ₹ 10,45,65,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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