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TMI Blog2016 (9) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... sue in the present case is with respect to disallowance of expenses u/s.40(a)(ia) of the Act on account of non-deduction of TDS. Before us also, apart from the oral submissions, assessee has also not placed any material on record to demonstrate that the recipients of the amounts have considered the amounts received from the assessee as their income. We find that there is no finding of the lower authorities to the effect that the payment made by the assessee have been considered by the respective payees as their income. Second proviso to section 40(a)(ia) has retrospective effect from 1st April-2005 and in the absence of any material on record which could show that the payees have already offered the amounts received from assessee as their income, we are of the view that the issue needs to be restored back to the file of ld.CIT(A) to decide the issue afresh in the light of our aforesaid discussion and decide the issue afresh in accordance with law. - I.T.A. No. 136/Ahd/2016 - - - Dated:- 9-6-2016 - Shri Rajpal Yadav, Judicial Member And Shri Anil Chaturvedi, Accountant Member Appellant by : Shri N.C. Amin, AR Respondent by : Shri B.P.K. Panda, Sr.DR ORDER Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory of the assessee is located. The submission of the assessee was not found acceptable to the AO, in view of the fact that the assessee had not placed any material on record to demonstrate that there was no facility in the village to accept the cheques, assessee had not made out case of unavoidable circumstances so as to claim the benefit Rule 6DD of the Act. He accordingly disallowed the payments in excess of ₹ 20,000/- which aggregated to ₹ 2,49,497/- u/s.40A(3) of the Act. Aggrieved by the order of the AO, the assessee carried the matter before ld.CIT(A) who upheld the order of the AO by holding as under:- 5.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made disallowance under section 40A(3) of the Act, as the appellant has made payment of part of the electricity expenses in cash. As per AO, the appellant had made the payment of ₹ 2,49,497/- to UGVCL / GEB for electric expenses in cash which includes the payment of ₹ 33,595/- to M/s.Tanveer Enterprises for purchase of the old use cables. The AO concluded that the appellant s plea that there was no f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.M. Abdul Razak, wherein the payments to the small cultivators were made in cash who refused to get payments by cross cheques. The facts and circumstances under which payment made in the aforesaid cases are totally different from the facts of the case, and hence, reliance is misplaced and accordingly the decision of the honourable ITAT would not be applicable. It is also mentioned that the aforesaid disallowance includes the cash payment to M/s.Tanveer Enterprises of ₹ 33,595/- which is also exceeding to ₹ 20,000/- and hence the same also attracts the disallowance. Further, two bills of UGVCL amounting to ₹ 17,975/- and ₹ 2,077/- were paid by the appellant on the same date i.e. 20/06/2009 to the UGVCL which is the same party, hence, disallowance of two bills at a time to the same party also attracts the provisions of section 40(a)(3) of the I.T. Act. Accordingly, the case of the appellant is not covered by any of the exceptions provided in Rule 6DD. The disallowance made by the AO is accordingly upheld. 2.3. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us. 3. Before us, ld.AR reiterated the submissions made before the AO an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the aforesaid decision of Hon ble Gujarat High Court, we are of the view that in the present case the expenditure cannot be disallowed. Thus, this ground of assessee is allowed. 5. Second ground is in respect of disallowance made u/s.40(a)(ia) of the Act. 5.1. During the course of assessment proceedings, the AO noticed that the assessee made payment of interest to four parties listed at page Nos.2 and 3 of the assessment order, the aggregate interest payment being of ₹ 4,45,625/- on which the assessee had not deducted TDS. AO was of the view that the expenditure is not allowable u/s.40(a)(ia) of the Act on account of non-deduction of TDS. He accordingly disallowed the aggregate payment of ₹ 4,45,625/-. Aggrieved by the order of the AO, assessee carried the matter before the ld.CIT(A), who upheld the order of the AO by holding as under:- 3.6. Decision: I have carefully considered the facts and submission of the appellant. The AO has made the disallowance of the claim of interest expenses of ₹ 4,45,625/- being in the nature of interest on loans taken from different parties of which details are as under:- (i) Bajaj Finance ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that is why the P L Account has been debited for the interest amount. So, the AOs observation for not making the IDS on the interest payment to NBFC is correct and justified. 3.9. Now, with regard to the appellant's contention vide its letter enclosing therewith the copies of certain letters from the respective NBFCs, the same is dealt hereunder. 3.9.1. Along with the written submission, the appellant has submitted copies of the letters issued by the aforesaid parties and their ledger account in appellant's books of accounts. The copies of these letters were submitted first time before this office as additional evidences for which the appellant has not completed the procedure laid down by way of making a written request specifying the reasons of non - submission of them before the AO in the assessment proceedings. So there was nothing on record to see about furnishing of these additional evidences due to good and sufficient reasons for admission as per the Rule 46A. In absence of the same, these additional evidences are not admitted, and hence, the same are not considered while taking the decision over the issue. 3.9.2. Without prejudice to non - admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in the case of M/s. Merilyn Shipping Transports vs. ACIT (supra), does not lay down correct law. 39. We answer the question as under:- Question (1) in the negative i.e. in favour of the Revenue and against the assessees. Question (2) also in the negative i.e. in favour of the Revenue and against the assessees. 3.11. The ground of appeal is accordingly dismissed. 5.2. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us. 5.3. Before us, ld.AR reiterated the submissions made before the AO and ld.CIT(A) and further submitted that the parties to whom the assessee made the payment of interest have already considered the payments received from the assessee as their income and in such a situation, the assessee cannot be considered to be an assessee in default and, therefore, no disallowance can be made. He further relying on the decision of Hon ble Agra Tribunal in the case of Rajeev Kumar Agarwal vs. Addl.CIT reported in (2014) 149 ITD 363 (Agra) submitted that the assessee could not be punished for non-deduction of Tax at source when the corresponding income was duly brought to tax. He also pointed out to the table plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether or not, on a fair, just and equitable interpretation of law- as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an intended consequence to disallow the expenditure, due to non deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of Section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not, in our considered view, a penalty for tax withholding lapse but it is a sort of compensatory 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. . . Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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