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TMI Blog2015 (4) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 20-12-2013 - Shri Chandra Poojari And Smt. Asha Vijayaraghavan JJ. For the Appellant: Sri P. Soma Sekhar Reddy For the Respondent : Sri V. Raghavendra Rao ORDER Per Chandra Poojari, AM: This appeal by the Revenue is directed against the order of the CIT(A)-I, Hyderabad dated 31.5.2013 for A.Y. 2005-06. 2. The Revenue raised the following ground of appeal: Whether the Hon'ble CIT(A) was justified in coming to a conclusion that the amendment brought in section 40(a)(ia) has retrospective operation and consequently no disallowance under section 40(a)(ia) required to be made. 3. Brief facts of the issue are that in this case, an action u/s. 132 of the Act had been carried out in connection with the Madhu Koda group of cases at Ranchi. Subsequently, a notice u/s. 153A was issued on 17.1.2011, in response to which the assessee filed a return on 22.3.2011, declaring income of ₹ 6,34,88,450. Prior to the above said search seizure action, a survey u/s. 133A had also been conducted in the assessee's premises on 21.8.2006, wherein the assessee had admitted an additional income of ₹ 6 crores for the A.Y. 2005-06. Later, an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above, the AO disallowed the proportionate expenditure @ 1.045%, amounting to ₹ 101,19,00,000, there being a violation of the provisions of sec. 40(a)(ia). It was argued before him that the payments to sub-contractors were business exigencies and were on running account. It was also pleaded that the said contractors were on the rolls of the assessee for assignment of various works and since their accounts were settled at the end of each accounting year, i.e., on 31-3-2005 for the relevant financial year, the TDS so made thereon was paid on or before 31-5-2005 as per sec. 200(1) read with Rule 30. Against this, the assessee went in appeal before the CIT(A). 6. The CIT(A) observed that the contention of the assessee was not accepted by the AO. The AO noticed that during the year under consideration, the assessee company had given some of its works to sub contractors and in terms of sec. 194C, it was required to make TDS at the time of credit or payment, whichever was earlier. Referring to the provisions of Sec. 40(a)(ia), he noted that such TDS was to be deducted either at the time of credit to such contractor's account or at the time of payment thereof and the TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May, 2005, though the same was recovered before March, 2005. He opined that under the provisions of Sec. 40(a)(ia), the amount so deducted should have been remitted before 31-3-2005. 9. The CIT(A) observed that the primary contention of the AR of the assessee is that the assessee is a contractor and was maintaining running accounts of the respective sub-contractors, which were made up only at the end of the financial year by taking into account various debits and credits. Accordingly, it is argued that the assessee became liable to remit the TDS within two months only after finalisation of the respective accounts at the yearend i.e., 31.03.2005. The AR has claimed that since the payment was made before 31.03.2005, it was very much within the due date prescribed u/s. 200 read with Rule 30 of the IT Rules, 1962. However, it is clear that as per the provisions contained in Chapter XVII-B, the deductor is required to deduct the TDS at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or a draft or any other mode, whichever is earlier. Accordingly, even if the assessee was having running accounts of respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the change of law, when the effect of the amendment was to give benefit to the assessee, the appellate authority and the Tribunal were justified in extending the said benefit. 12. The CIT(A) observed that though the Special Bench of Mumbai ITAT in the case of Bharati Shipyard Ltd. (132 ITD 53) had taken a contrary view in the matter, it is also an established position of law that the decision of a non-jurisdictional High Court prevails over the decision of the Special Bench. This position has been clearly pronounced by the ITAT, Visakhapatnam in the case of Rajamahendri Shipping and Oil Field Services Ltd. vs. AddI.CIT (51 SOT 242) also. Accordingly, he was of the considered view that following the view taken by the Hon'ble High Courts of Calcutta and Karnataka in the aforesaid cases, the amendment to the provisions of Sec. 40(a)(ia) has to be considered as applicable retrospectively, and consequently, no disallowance under the said section can be made if TDS is made from the amounts paid/ credited to the payees during the relevant previous year and the amounts so deducted as TDS are paid to the Government account on or before the due date of filing of return of income for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d DR submitted that the issue is covered against the assessee by the order of the Tribunal in the case of Bharthi Shipyard Ltd. vs. DCIT (132 ITD 53) (SB) (Mum). 16. On the other hand, the AR submitted that similar issue came for consideration before this Tribunal in the case of PEC Electricals Ltd. wherein the High Court confirmed the order of the Tribunal by observing as follows: With regard to the next question, the Tribunal by following the decision of the Kolkata High Court in CIT vs. Virgin Creations (GA No. 3200/2011), wherein it has been held that the amendment to the provisions of section 40(a)(ia) is retrospective in operation and consequently in respect of any payment of TDS made before the due date for the filing of the return of income, the provisions of section 40(a)(ia) cannot be invoked. Therefore, we do not find any reason to see that any further decision on this point is required by this Court. 17. Further, he also relied on the order of the Tribunal in the case of R.V. Chakrapani vs. ACIT in ITA No. 894/Hyd/2012 dated 1.10.2013 wherein the Tribunal held as follows: 5. We have heard both the parties and perused the material on record. Admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 28.8.2013 held as follows: 7. We have heard both the parties and perused the materials on record as well as gone through the orders of the authorities below. As held by the Delhi High Court in the case of CIT vs. Rajinder Kumar in Income Tax Appeal No. 65/2013 dated 1st July, 2013, the impugned amendment to section 40(a)(ia) permits remittance of TDS to the Central Government account on or before the due date of filing return of income u/s. 139(1) of the Act is retrospective in nature. Same view has been taken by the jurisdictional High Court in the case of CIT vs. PEC Electricals Pvt. Ltd., in ITA No. 263 of 2013 dated 12.7.2013. The assessee in present case paid the TDS to the Central Government account before filing the return of income and the same is to be allowed as held by the above judgements. Accordingly, we do not find any infirmity in the action of the CIT(A) in directing the Assessing Officer to delete the addition made u/s 40(a)(ia) of the Act and, therefore, the order of the CIT(A) is hereby upheld on this count. This ground raised by the Revenue in this regard is dismissed. 8. In view of the above discussion, we are inclined to hold that when the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd in ITA No. 2404/Mum/2009, (since reported in 132 ITD 53) relied on by the learned DR, that the Hon'ble Bench did refer to the Special Bench decision but did not follow it in the case of Liquidz India Private Limited (supra) by taking notice of the decision of the co- ordinate bench at Ahmedabad in the case of M/s Alpha Projects Society (P) Limited vs DCIT (ITA No. 2869/Ahd/2011 dt 23-03- 2012). There the Bench also noticed that Ahmedabad Bench referred to the Special Bench decision but not followed it. Therefore, the Department's reliance on the Special Bench decision in the case of Bharti Shipyard (supra) is no longer correct. To the same effect is the case of Madineni Mohan vs ITO, Suryapet in ITA No. 762/Hyd/2012 dt 31-05-2013 which also is a decision later than that of Bharti Shipyard (supra). 21. He submitted that the decisions of several High Courts in regard to the retrospective nature of the amendment of Sec 40(a)(ia) by the Finance Act 2010 are applicable in preference to the decision of the Special Bench. The Hyderabad Benches of the Tribunal have indeed applied the decisions of the High Courts even after noticing the decision of the Special Bench. Further t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts from the assessee based on the method of accounting of accrual of the income. This will not impinge on the claim of expenditure by the assessee who has to deduct tax as and when the payments are made, irrespective of the dates of accrual of the income in the hands of the sub-contractors. Further the sub-contractors would not and need not await the deduction of tax at source by the assessee for admitting the incomes in their own returns. In any case, the year of accrual of income and the admission thereof by the sub-contractors is not in issue. The claim of the expenditure by the assessee by way of contract payments is not in issue. This is submitted only by way of clarification and not related to any ground of appeal either before the CIT(A) or before the Tribunal. 24. We have heard both the parties and perused the material on record. In our opinion, similar issue was considered by this Tribunal in the case of ADIT vs. M/s Nippon Jogesuido Sekei Co. Ltd., in ITA No. 726/Hyd/2013. The Tribunal vide order dated 6.12.2013 held as follows: We have heard both the parties and perused the materials on record as well as gone through the orders of the authorities below. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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