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TMI Blog2015 (12) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... AO) to verify whether the TDS was deducted and deposited within the due date of filing of return and if found so, then the AO to allow the claim of the assessee accordingly. - Decided in favour of assessee for statistical purposes. Disallowance of salary paid to Mr. Hardik Kothari, son of the partner of the assessee firm - Held that:- justification has been given regarding payment of commission to Mr. Hardik Kothari and it has been explained that Mr. Hardik Kothari was son of the partner of the firm namely Mr. Viren Kothari that to encourage him for hard work, efficiency and sincerity the firm decided to offer him salary of ₹ 12,500/- and commission on sale of products. It has been explained that he has been looking after production quality and customer relationship. The Ld. A.R. has further invited our attention to the written submissions dated 29.08.11 submitted by the assessee to the Ld. CIT(A) wherein it has been explained that the amount of salary paid to Mr. Hardik Kothari was reasonable. The Ld. A.R. has further explained that the payment of salary was routed through salary account. He has further submitted that the payment of salary to Mr. Hardik Kothari has been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom M/s M.R. Enterprises of ₹ 13,51,484 u/s 40(a)(ia) on account of non-deduction of TDS on payments made to it ignoring the fact that M/s. M.R. Enterprises has already discharged the tax liability by duly filing the return of income the due date of filing of the return of income by the appellant. The disallowance being bad in law the same needs to be deleted. 2. On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming disallowance of rent of ₹ 2,40,000/- u/s.4O(a)(ia) without appreciating the fact that the TDS of ₹ 36,720 on the above amount had been deducted and deposited on 15.05.2008 i.e. within due date stipulated u/s 200(1). The addition being bad in law the same needs to be deleted. 3. a) On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming disallowance of commission of ₹ 2,00,000/- u/s 4O(a)(ia) without appreciating the fact that the TDS was deducted on 31.03.2008 and deposited on 15.05.2008 i.e. within the due date stipulated under section 200(1). b) Also, without prejudice to the above, the learned CIT(A) erred in ignoring the fact that the commission wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income. He has contended that as per the new proviso inserted in section 40(a)(ia) vide Finance Act, 2012 w.e.f. 01.04.13 wherein it has been provided that if the assessee fails to deduct TDS in respect of any payment to which the TDS provisions apply but he is not deemed to be an assessee in default under section 201 of the Act, which provides that if the payee of the such amount computed the same into his income tax return and has paid the due taxes, then such an assessee will not be deemed to be an assessee in default and then no disallowance is attracted under section 40(a)(ia). He has further submitted that the said newly inserted proviso to section 40(a)(ia) is in fact clarificatory in nature and should be applied/retrospectively for the year under consideration and as such no disallowance is attracted on this issue. 4. On the other hand, the Ld. D.R. has contended that it has been specifically provided in the Act that the said proviso comes into operation w.e.f. 01.04.13 and that where the language of the section as well as the date of operation of such provisions has been mentioned specifically the courts cannot supply words to the provisions or amend the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the assessee to Sri G.Shankar of ₹ 2,69,21,500 and to Sri Ramesh Kotian of ₹ 1,54,75,000 since the object of introduction of section 40(a)(ia) of the Act is achieved for the reason that the payees / recipients have declared and offered to tax the payments received from the assessee in their respective hands. 3.4.2 As regards the issue of non-furnishing of Form No.26A, we are of the view that since the second proviso to section 40(a)(ia) of the Act is held to be retrospective in operation w.e.f. 1.4.2005, similarly, Form 26A was to be filed for an assessee not to be held as an assessees in default as per proviso to section 201 of the Act. In all fairness, the assessee in the period under consideration i.e. Assessment Year 205-06 could not have contemplated that such a compliance was to be made and therefore in the interest of equity and justice we set aside the order of the learned CIT (Appeals) and remit the matter to the file of the Assessing Officer directing the Assessing Officer to consider the allowance or otherwise of the expenditure claimed amounting to ₹ 4,23,96,500; being the payments made by the assessee to Sri G. Shankar of ₹ 2,69,21,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited within the due date of filing of return and if found so, then the AO to allow the claim of the assessee accordingly. Ground No.4 8. Vide ground No.4, the assessee has agitated the confirmation of disallowance of ₹ 1,50,000/- towards salary paid to Mr. Hardik Kothari, son of the partner of the assessee firm. The AO disallowed the 1/3rd of the amount of salary paid to Mr. Hardik Kothari on the ground that the above payment was nothing but method adopted by the assessee for diversion of taxable profits. The Ld. CIT(A), however, observed that the ledger account of Mr. Hardik Kothari showed a commission of ₹ 1,79,400/- only and there was no further credit for the salary shown in his name of ₹ 1,50,000/-. He, therefore, observed that no salary had been paid to Mr. Hardik Kothari of an amount of ₹ 1,50,000/-. He, therefore, disallowed the entire amount of ₹ 1,50,000/- as the same was not reflected in the ledger account. The Ld. A.R. of the assessee, before us, has invited our attention to page 15 of the paper book which is a letter dated 18.08.10 addressed to Commissioner of Income Tax wherein a justification has been given regarding payment of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Vinit Kothari was doing engineering and that the software was developed by him. It is not disputed that Mr. Vinit Kothari is working for the firm. The Ld. CIT(A) has overlooked the contentions raised by the assessee and has disallowed the claim. It is not disputed that the services were provided by Mr. Vinit Kothari to the firm. It has also been explained that the software developed by him was very important to the business of the assessee firm. Considering the above facts and circumstances, in our view, the disallowance is not justified on this issue also and the same is accordingly ordered to be deleted. Ground No.6 11. The Ld. CIT(A) has confirmed the addition of unsecured loans of ₹ 1,79,400/- under section 68. At the outset, the Ld. A.R. of the assessee has explained that the said amount pertained to the commission of ₹ 1,79,400/- (net of TDS) that was already disallowed by the AO and confirmed by the Ld. CIT(A). He has explained that this amount was in respect of commission paid and not the loan received. Considering the above submissions of the assessee, we feel that the issue requires reexamination at the hands of AO. The AO is directed to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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