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TMI Blog2018 (3) TMI 1508X X X X Extracts X X X X X X X X Extracts X X X X ..... AO's findings. The appellant has explained that out of the total addition of Rs. 27,40,977/- the details of which were submitted before the AO in the assessment proceedings, provision for deduction of TDS U/s 194C of the I.T. Act, 1961 are not applicable as the amount of individual contract was less than Rs. 30000/- & the total payment during the year does not exceeds Rs. 75000/-, hence disallowance is not proper & justified. M/s Kohinoor Publicity Rs.34117 M/s Hare Rama Advertisers Rs. 42600 M/s Rajasthan Patika Rs.61120 M/s Garima Advertising Rs.66340 M/s Bhagwati Publicity Rs.69133 M/s Yash Advertising Rs.69977 Total Rs.343287 On verification of the same with the details it is seen that the contention of the appellant in so for as M/s Kohinoor Publicity, M/s hare Rama Advertisers, M/s Rajasthan Patrika, M/s Garima Advertising, M/s Bhagwati Publicity, M/s Yash Advertising are individual payments not exceeding the permissible limits for the purposes of TDS u/s 194C. The AO made the addition on the ground that proper or satisfactory replies were not submitted before him though the specific amounts were within the overall limit of 75000/- f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2012 amendment, inserting second proviso to Section 40(a)(ia), deals with an "intended consequence" or with an "unintended consequence". 7. The ITAT stated that When we look at the overall scheme of the section as it exists now and the bigger picture as it emerges after insertion of second proviso to section 40(a)(ia), it is beyond doubt that the underlying objective of section 40(a)(ia) was to disallow deduction in respect of expenditure in a situation in which the income embedded in related payments remains untaxed due to non deduction of tax at source by the assessee. In other words, deductibility of expenditure is made contingent upon the income, if any, embedded in such expenditure being brought to tax, if applicable. In effect, thus, a deduction for expenditure is not allowed to the assessees, in cases where assessees had tax withholding obligations from the related payments, without A.Y. 2007-08 corresponding income inclusion by the recipient That is the clearly discernable bigger picture, and, unmistakably, a very pragmatic and fair policy approach to the issue - howsoever belated the realization of unintended and undue hardships to the taxpayers may have been. It seem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource, when such tax deductions are due, but, so far a s the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether 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 A.Y. 2007- 08 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted for by the payee J.C. India Ltd. in the income tax return for AY 2009-10, therefore no addition was required to be made u/s 40(a)(ia) of the Act. Ld. CIT(A) proceeded to confirm the addition with this legal proposition that section 40(a)(ia) of the Act provides that where TDS was deductible and the same has not been deducted by the payer, the amount of interest expense is to be disallowed under this provision. The CIT(A) further noted that it is not material whether the person to whom TDS has been paid accounted for it in its books of accounts or not. 14. While we consider the ratio laid down by ITAT Agra in its order dated 29.5.2014 (supra), we find ourselves in agreement with the conclusion that the provisions of section 40(a)(ia) of the Act as it existed prior to insertion of second proviso went much beyond the obvious intention of the legislature and created ITA No. 2098/D/2013 & CO No. 177/D/13 AY: 2009-10 undue hardship even in the cases in which assessee's tax withholding lapses did not result in any loss to the exchequer. Subsequently, the legislature has been compassionate enough to cure these shortcomings of provision and thus obviate the unintended hardship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties is therefore not considered for any relief. Addition of Rs. 5,58,962/- is confirmed. The balance addition of Rs. 21,82,015/- is directed to be deleted in view of the discussion made above in this order." 3. The Coordinate Bench of the ITAT, Jaipur has upheld the order of the ld. CIT(A) by holding as under: "8. We have heard the ld. Sr. DR and have perused the material available on the record. We have given our thoughtful consideration to the contention of the ld. Sr. DR. no dispute with regard to the fact that the ld. CIT(A) has concurrent jurisdiction with the A.O. The ld. CIT(A) has given a finding of fact, which is not rebutted by the revenue by placing any material on record, therefore, we do not see any reason to interfere in the order of the ld. CIT(A). Accordingly, this ground of the revenue is dismissed." 4. After going through the facts of the issue, the Bench find that the law laid down by the Hon'ble Supreme Court in the case of Palam Gas Service Vs CIT (supra) is not at all applicable to the facts of the assessee's case, therefore, the M.A. filed by the revenue has no merit and the same is dismissed. 5. In the result, this Misc. application of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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