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TMI Blog2014 (11) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the law - assessee has not placed any material on record to demonstrate that the payee has offered the amounts received from Assessee as its income and has paid taxes on the same – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee. - I.T.A. No. 907/AHD/2011 - - - Dated:- 7-11-2014 - Shri Shailendra Kr. Yadav And Shri Anil Chaturvedi, A.M.,JJ. For the Appellant : Shri Tej Shah, A.R. For the Respondent : Shri B.L. Yadav, Sr. D.R. ORDER Per Shri Anil Chaturvedi,A.M. 1. This appeal is filed by the Revenue against the order of CIT(A)-I, Ahmedabad dated 19.01.2011 for A.Y. 2007-08. 2. The facts as culled out from the material on record are as under. 3. Assessee is a partnership firm stated to be engaged in the business of civil construction activity. Assessee electronically filed its return of income for A.Y. 07-08 on 12.10.2007 declaring total income of ₹ 8,51,200/-. The case was selected for scrutiny and thereafter the assessment was framed u/s. 143(3) vide order dated 23.11.2009 and total income was determined at ₹ 32,72,390/-. Aggrieved by the order of A.O, Assessee carried the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was deposited late in government account: New Varinath Transport Service 89,829 Rameshbhai G. Vanjara 45,000 Mukthar Foundation 9,60,140 Dwarkesh Infrstructure Pvt. Ltd. 8,32,709 The dates of credit / payment in the case of the above parties are all before 1.3.2007 and TDS should have been deposited in government account by 31.3.2007 as per the provisions of section 40(a)(ia) but it was deposited late on 23.4.2007. The addition of the above amounts u/s.40(a)(ia) is thus upheld. From submission dated 16.10.2010 of the appellant it is seen that TDS was not deposited at all by the appellant with repect to payments made to following 2 parties: Amrishbhai G. Pancholi ₹ 50,000 Geo Dynamic ₹ 31,427 The addition of the above two amounts made by the A.O u/s. 40(a)(ia) is therefore confirmed. 5. Aggrieved by the order of CIT(A), Assessee is now in appeal before us. 6. Before us ld. A.R. with respect to late dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Geo Dynamic (Rs. 31,427), we find that CIT(A) has noted that TDS was not deposited by the Assessee. We find that the Co-ordinate Bench in the case of Rajiv Kr. Agarwal vs. ACIT (supra) has held as under:- Section 40(a)(ia) of the Income-tax Act, 1961 - Business disallowance - Interest, etc., paid to resident without deduction of tax at source (Second proviso) - Assessment year 2006-07 - Whether insertion of second proviso to section 40(a)(ia) with effect from 1-4-2013 is declaratory and curative in nature and it has retrospective effect from 1-4-2005, being date from which sub-clause (ia) of section 40(a) was inserted by Finance (No. 2) Act, 2004 - Held, yes [Para 9] [In favour of assessee] It further at para 8 has held as under:- we are of the considered view that section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non deduction of tax at source from payments for expenditure- particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the law. As a corollary to this proposition, in our considered view, declining deduction in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,516. During the course of appellate proceedings detailed ledger account of Shree Akshar Earth Movers enclosed as Annexure-1 of this order was submitted. This ledger account shows total payment of ₹ 4,34,719 to this concern and the entries are mentioned as JCB labour charges. It was stated during appellate proceedings that JCB machine is utilized in construction work and the payments made for it are actually labour payments instead of that of rent payments. This contention of the appellant is not correct because the observation of the AO that payment in earlier years was put under the head 'JCB rent' but as it was below ₹ 1,20, 000 the assessee was not required to deduct IDS but this year the payments exceeded ₹ 1,20,000 and warranted TDS and just for the sake of availing itself of the lower rate of 1% u/s.194 C, instead of 10% u/s.194 I the payment was treated as labour payment. In my opinion the payments made for hiring JCB machine would come under the head of rent payments only which include labour and carting involved in taking this machinery on rent which the provider of the machine gives along with the machine. I am therefore of the view that paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l provision to punish the lapses of non deduction of tax at source from payments for expenditure- particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the law. As a corollary to this proposition, in our considered view, declining deduction in respect of expenditure relating to lie/payments of this nature cannot be treated as an intended consequence of Section 40(a)(ia). 13.In the present case, Assessee has not placed any material on record to demonstrate that the payee has offered the amounts received from Assessee as its income and has paid taxes on the same. We are of the view that the issue needs to be re-examined in the light of the aforesaid decision of the Co-ordinate Bench of Agra Tribunal. We therefore restore the matter to the file of A.O to decide the issue de novo in the light of the aforesaid decision of Agra Tribunal. Needless to state that A.O shall grant adequate opportunity of hearing to the Assessee. Thus this ground of Assessee is allowed for statistical purposes. Ground no. 5 6 as not pressed and therefore not adjudicated and therefore dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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