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TMI Blog2015 (11) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... urns or not and pass the order according to Law. - Decided in favour of Revenue for the statistical purpose. TDS u/s 194C - disallowance u/s 40(a)(ia) - non deduction of TDS on Clearing & Forwarding Charges - CIT(A) deleted the addition - Held that:- In case of M/s Mithla Shipping Agency the TDS has been deducted and deposited. So the TDS provisions have been complied with. The necessary documents such as TDS certificate TDS paid challan and TDS return had been submitted.For the rest of the parties, the major payment was the reimbursement of the expenses and the services charges of the parties were below the limit as specified under the provisions of TDS. The bill for the service charge and reimbursement of expenses are placed Hence the ground of appeal of the Revenue is dismissed. TDS u/s 194I - disallowance u/s 40(a)(ia) - non deduction of TDS on rent charges - CIT(A) deleted the addition - Held that:- CIT(A) has given relief in respect of rent payment to certain parties on the basis of documents produced by the assessee. However the CIT(A) did not mention merit for the allowance of the rent. Further the disallowance of the rent payment due to violation of the provision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yee cheques only and thereby deleting the addition of ₹ 7,64,717/- u/s. 40(a)(ia) for non deduction of TDs on payment of Transportation charges. (ii) On the facts and in the circumstances of the case, Ld. CIT(A) was not justified in observing that TDS was deducted on payment to Mithila Shipping Agency on ₹ 2,69,870/- without mentioning by him the particulars of such deductions and particulars of tax deposits into the government account contrary to the facts on record; and regarding payment to Simla Clearing Services amounting to ₹ 1,06,000/- that the payment is on account of Customs and Port Expenses without there mentioning any materials in support of his such observation regarding the fact; and accordingly, he was not justified in deleting the addition of ₹ 4,00,870/- u/s. 40(a)(a) for non deduction of TDS on payment of on cleaning and Forwarding charges, and as such his order is suffering from perversity without being supported by any materials. (iii) On the facts and in the circumstances of the case ld. CIT(A) is not justified in deleting the addition of 3,29,900/- u/s 40(a)(ia) out of total addition of ₹ 6,29,940/- on account of rent wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and Transporter, the assessee was not liable to deduct tax at source on Freight Charges paid to truck owners/operators. The submissions of appellant are accepted on this point and it is held that provisions of Section 194C are not applicable on the payments made by the appellant. The disallowance made u/s. 40(a)(ia) is therefore deleted. (Relief ₹ 7,64,714/-) . Aggrieved, Revenue is in appeal before us. Shri Pinaki Mukherjee, Ld Departmental Representative appearing on behalf of Department and Shri V.N. Purohit, Ld Authorized Representative appearing on behalf of assessee. 3. We have heard the rival contentions of the parties and perused the material available on record. The Ld DR vehemently supported the order of AO. The Ld. AR supported the order of the CIT(A). The Ld. AR submitted that there was no contract between the assessee and the transporters. So the provision of deducting the tax does not arise. In support of his claim, the Ld. AR submitted the various case laws as enumerated below:- 1) CIT Vs M/s Stumm India, ITA No. 127 of 2009 in the Hon'ble High Court at Calcutta. 2) CIT Vs M/s S.S. Impex, ITA No. 977/kol/2011 in the ITAT at Kolkata. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 224 ITR 677 (SC) and in the case of Alom Extrusions Ltd. 319 ITR 306 (SC) wherein the Hon'ble Supreme Court in the context of amendments to the provisions of section 43B of the Act took the view that the amendment were intended to remove hardship and though they were not stated to be retrospective in operation, will apply retrospectively. The question for our consideration is as to whether section 40(a)(ia) amended by the Finance Act, 2012 with effect from 01.04.2013 is retrospective from 01.04.2005 or prospective from the date specified. In order to find answer to this question, it would be relevant to note down the legislative history of the provision. Section 40 has certain clauses providing for the amounts which are not deductible. Sub-clause (ia) of clause (a) of section 40 was inserted by the Finance (No.2) Act, 2004 with effect from 1st April, 2005 reading as under:- 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computed the income chargeable under the head 'Profits and gains of business or profession'-. .... (ia) any interest, commission or brokerage, fees for professional serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 2005- 2006 and subsequent years. [Clause 11] Thereafter the Finance Act, 2008 made amendment to clause (a) in subclause (ia) in section 40 with retrospective effect from 1st April, 2005. The section as amended by the Finance Act, 2008 read as under:- (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been paid,- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139 ; or (B) in any other case, on or before the last day of the previous year. Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted- (A) during the last month of the previous year but paid after the said due date ; or (B) during any other month of the previous year but pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch this amendment has made is dispensing with the earlier two categories of defaults as per the Finance Act, 2008, as discussed in the earlier para, causing disallowance on the basis of the period of the previous year during which tax was deductible. The first category of disallowances included the cases in which tax was deductible and was so deducted during the last month of the previous year but there was failure to pay such tax on or before the due date specified in sub-section (1) of section 139. The Finance Act, 2010 has not tinkered with this position. The second category of the Finance Act, 2008 which required the deposit of tax before the close of the previous year in case of deduction during the first eleven months, as a pre-condition for the grant of deduction in the year of incurring expenditure, has been altered. The hitherto requirement of the assessee deducting tax at source during the first eleven months of the previous year and paying it before the close of the previous year up to 3 1st March of the previous year as a requirement for grant of deduction in the year of incurring such expenditure, has been eased to extend such time for payment of tax up to due date u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were paid after the due date for filing return of income u/s.139(1) of the Act, the disallowance was made u/s.40(a)(ia) of the Act. Before the Tribunal, the Assessee contented that the amendment by the Finance Act, 2010 with retrospective effect from 1st April, 2010 whereby amount of tax deducted at the time of making payment in respect of expenditure referred to in Sec.40(a)(ia) of the Act, if paid to the Government on or before the due date for filing the return of income due date u/s 139(1) of the Act should be allowed as a deduction. In other words it was argued that the amendment by the Finance Act, 2010 to the provisions of Sec.40(a)(ia) has to be held to be retrospective w.e.f. 1-4-2005. The ITAT Kolkata Bench by its order dated 15.12.2010, held as follows: 8. After hearing the rival submissions and on careful perusal of the materials available on record, keeping in view of the fact that though the Ld.D.R. submitted that the decisions of the Coordinate Benches are not binding and the Kolkata benches may take a different view, since Mumbai Bench after analyzing the provisions of Sec.40(a)9ia) since its inception and various amendments made to the same including the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), we allow the ground nos. 1 to 3 of the assessee's appeal. 6. As against the aforesaid decision, the Revenue preferred appeal before the Hon'ble Calcutta High Court. The Hon'ble Calcutta High Court in ITA No. 302 of 2011, GA 3200/2011 decided on 23.11.2011, held as follows: We have heard Mr. Nizamuddin and gone through the impugned judgment and order. We have also examined the point formulated for which the present appeal is sought to be admitted. It is argued by Mr. Nizamuddin that this court needs to take decision as to whether section 40(A)(ia) is having retrospective operation or not. The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April 1, 2005 and April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e. well before the due date of filing of the return of income for the year under consideration. This factual position was undisputed. Moreover, the Supreme Court, as has been recorded by the learned Tribunal, in the case of Allied Motors Pvt. Ltd. and also in the case of Alom Extrusions Ltd., has already decided that the aforesaid provision has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of such tax if such resident - (i) has furnished his return of income under Section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: Memorandum explaining the provisions while introducing Finance Bill, 2012 provides the justification of the amendment to section 40(a)(ia) in the following words:- In order to rationalise the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, it is proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t fund/superannuation fund or any other fund for the welfare of employees, unless it stood paid within the specified due date. According to the second proviso, the payment made by the employer towards contribution to provident fund or any other welfare fund was allowable as deduction, if paid before the date for filing the return of income and necessary evidence of such payment was enclosed with the return of income. In other words, if contribution stood paid after the date for filing of the return, it stood disallowed. This resulted in great hardship to the employers. They represented to the Government about their hardship and, consequently, pursuant to the report of the Kelkar Committee, the Government introduced Finance Act, 2003, by which the second proviso stood deleted w.e.f. 1st April, 2004, and certain changes were also made in the first proviso by which uniformity was brought about between payment of fees, taxes, cess, etc., on one hand and contribution made to Employees' Provident Fund, etc., on the other. According to the Department, the omission of the second proviso giving relief to the assessee(s) [employer(s)] operated only w.e.f. 1st April, 2004, whereas, accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only w.e.f. 1st April, 2004, would become curative in nature, hence, it would apply retrospectively w.e.f. 1st April, 1988. Secondly, it may be noted that, in the case of Allied Motors (P) Ltd. Etc. vs. CIT (1997) 139 CTR (SC) 364 : (1997) 224 ITR 677 (SC), the scheme of s. 43B of the Act came to be examined. In that case, the question which arose for determination was, whether sales-tax collected by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood inserted). Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example-in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March (end of accounting year) but before filing of the Returns under the IT Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under s. 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under s. 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een adjudicated by the CIT(A), we are of the view to restore the file to CIT(A) for verifying that whether the parties to whom the transport charges have been paid, have shown in their income tax returns or not and pass the order according to Law. Hence this ground of Revenue's appeal is allowed for the statistical purpose. 8. Coming to second issue of Revenue's appeal. During the year under consideration the assessee claimed an expenditure of ₹ 4,00,870/- towards the Clearing Forwarding Charges. On scrutiny by the AO, it was found that the assessee failed to deduct TDS on the expense of said charges in terms of section 194C read with section 40(a)(ia). The details of the expenses can be summarized in the following manner : Sl. No. Name of party Amount paid 1 M/s Mithila Shipping Agency Rs.2,69,870/- 2 M/s Sima Clearing Services Rs.1,06,000/- 3 M/s Samanwaya ₹ 25,000/- So the above expenses has been disallowed and added to the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,00,040/- from where the confirmation was not received. However the addition for a sum of ₹ 3,29,900/- has been deleted. 11. We have heard the rival parties and perused the material available on record. The Ld. DR supported the view of the AO. The Ld. AR supported the order of CIT(A). It was observed that the CIT(A) has given relief in respect of rent payment to certain parties on the basis of documents produced by the assessee. However the CIT(A) did not mention merit for the allowance of the rent. Further the disallowance of the rent payment due to violation of the provision of section 194C read with section 40(a)(ia) does not hold good as the rent payment to each party does not exceed ₹ 1.20 lakh. The Ld. AR drew our attention on page No. 21 of the paper book, where the details of the rent paid to the parties has been mentioned. The rent paid to the different parties is below the taxable limit specified u/s 194I of the Act. In view of the non- speaking order of the CIT(A) , we are of the opinion in the interest of justice and fair play to give one more opportunity to the assessee to produce the necessary documents for the verification. Hence we restore the file t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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