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TMI Blog2013 (12) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... r "Polishing charges". The assessee has sold the products after carrying out polishing works. The Assessing Officer noticed that the assessee has carried out these works through others. Hence the Assessing Officer took the view that the polishing work given by the assessee to others would fall within the definition of 'work' as given in sec. 194C of the Act. Since the assessee did not deduct tax at source on the above said payments, the Assessing Officer disallowed the same by invoking the provisions of sec. 40(a)(ia) of the Act. 4. Before the Ld. CIT(A), the assessee submitted that the payments made to certain persons were less than Rs. 20,000/- and accordingly contended that the provisions of sec. 194C of the Act were not attracted to those payments. The aggregate of the amounts so paid, on which provisions of sec. 194C were claimed to be not applicable, was Rs. 71,745/-. Accordingly, the Ld CIT(A) directed the Assessing Officer to delete the disallowance to the extent of Rs. 71,745/- and confirmed the balance amount of addition with the following observations: "8.0 Coming to the contention made by the appellant that there was no written contract with parties who did th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olishing, the assessee used to raise the bill for cost of material by including the charges for polishing. Accordingly, the Ld. Counsel submitted that the assessee stood in fiduciary capacity only in the matter of polishing and the customers only have got the polishing work done through him. However the assessee, without knowing the tax implications, has included the polishing charges also in the sale value instead of accounting the same as reimbursement of expenses from the customers. The Ld. Counsel further submitted that more than 99.9% of charges paid for polishing were less than Rs. 10,000/- and only in seven cases, it exceeded Rs. 10,000/- and further only in one case the polishing charges exceeded Rs. 20,000/-. He further submitted that the amount pertaining to each of the customer was less than Rs. 10,000/- in the above said eight cases also. 5.1 The Ld. Counsel further submitted that there is no written contract between the assessee and the persons to whom the polishing work was entrusted. Accordingly, by placing reliance on the following case laws, the Ld. AR submitted that there is no requirement of deduction of tax at source in the cases, where there is no written cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40(a)(ia) with effect from 01-04-2010. However, the Ahmedabad bench of ITAT in the case of Kanu Bhai Ramji Bhai Vs. ITO (2011)(135 TTJ 364) and the Hon'ble Calcutta High Court in the case of CIT Vs. Virgin Creations (ITA No.302 of 2011) have held that the above said amendment is retrospective in nature on the reasoning that it is clarificatory in nature, since it was introduced to eliminate unintended consequences. He further submitted the second proviso in sec. 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01-04-2013, wherein it is stated that the disallowance u/s. 40(a)(ia) of the Act need not be made, if the assessee is not deemed to be an assessee in default under the first proviso to sec. 201(1) of the Act. The Ld Counsel submitted that though the second proviso, referred above, was made effective from 1.4.2013, yet it should be applied retrospectively, since it has been introduced to eliminate unintended consequences, which may cause undue hardship to tax payers. Accordingly, the ratio laid down by Hon'ble Calcutta High Court in the case of Virgin Creations (supra) should be applied to the second proviso also. Accordingly, he submitted that the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lishing works between the customers and the person doing polishing job. Accordingly, it was submitted that there is no profit element in the said transactions. The Ld A.R further submitted that the assessee has included the cost of polishing works in the sale value of aluminium extrusions, without knowing tax implications. However, we notice that the assessee did not furnish any proof to substantiate the above said claims. The assessee, being a dealer in aluminium extrusions, has only supplied the products after carrying out the polishing works according to the taste and requirement of customers. It is only one of the many business techniques normally adopted by a business man to improve his sales, since it will be very difficult for customers to identify the polishing people and get the work done by themselves. Hence, we are of the view that it may not be correct to argue that the contract existed between the customers and the polishing people. In fact, the customer may not have any contact with the polishing people in this type of transactions. Hence, it is hard to believe the claim of the assessee that he has acted as mere conduit pipe between the customers and polishing people. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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