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TMI Blog2016 (9) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... of the order of the CIT(A)-Central-XXXVI, Kolkata in Appeal No. 401/CIT(A)-XXXVI/Kol/Wd-3,MSD//10-11/217 dated 18-04- 2013 for the assessment year 2005-06 2. The assesse submitted that the ground no s 1 and 2 are not pressed and accordingly both ground no s 1 and 2 are dismissed. 3. The only ground in this appeal is as to whether CIT-A justified in confirming the order of AO in disallowing the amounts of ₹ 13,79,179/- U/Sec 40(a)(ia) of the Act in the circumstances of the case. 4. The appellant assessee raised the following effective ground: That the learned assessing officer has erred both in law as well as on the facts of the case in disallowing an amount of ₹ 13,79,179/-under section 40(a)(ia) on account of commission although defacto the amount paid was not in the nature of commission. 5. Brief facts of the case are that the assessee is in Firm and in the business of trading and servicing of motorcycle and filed his return of income on 27-10-2005. 6. The assessee is a dealer for sale of TVS brand motorcycle for sale in the district of Murshidabad and some areas of Bhirbhum and Nadia Districts of West Bengal. The assessee sells motorcycles in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd cannot arise as to invoke the provision of section 194H of the act. 10. The learned AR submits for the purpose of section 194H the term commission or brokerage includes any payment is received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered i.e. not being professional services or for any services in the course of laying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing not being securities. Further according to learned AR in a usual business transaction, commission is paid by principal to agent after services are rendered and in the case of the assessee the transactions are in the nature of principal to principal and no element of agency is to be found and no services are to be rendered. The learned AR prayed this Tribunal to allow the appeal by deleting the addition of ₹ 13,90,070/- made by the assessing officer. The learned DR relied on the order of CIT-A. 11. We have considered the rival submissions and perused the paper book and we find the following is the breakup of amounts paid to sub dealers and mechanics: BERHAMPORE MOTORCYCLE PANCHANANTALA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers which is brought on record by the assessee. Therefore it cannot be said that as between the assessee and the sub dealer the relationship is that of principal to principal. Therefore the conclusion drawn by the assessing officer is correct. In this regard assessing officer as observed as follows: A party-wise ledger of the alleged payments of ₹ 13.79,179/- was filed and details of payment to the mechanics of payment of ₹ 10,850/- was also filed . Now, the assessee in support of his statement that the alleged payments were in the nature of discount giving to the sub-dealers for sale of TVS brand motorcycle. The assessee submitted copies of invoice cum cash memo. All those copies of bills appears to be self- made. It is noted that, on a particular date only a single motorcycle was sold, which is very difficult to conceive in respect of transaction of a dealer and sub-dealer of goods. The transaction with a sub-dealer as far as sale to them is concerned is similar to sale of to an individual purchaser. In the trading account (motorcycle account) the d already allowed a cash discount of ₹ 4,98,645/- on sales. Had the amount of ₹ 13,90,070/- bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfillment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satory deduction restriction for an income going untaxed due to tax withholding lapse. The penalty for tax withholding lapse per se is separately provided for in Section 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40 a)(ia1 as they' existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee's tax withholding lapses did not result in any loss to the exchequer. Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an intended consequence to punish the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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