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TMI Blog2014 (3) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction of tax from the payments made to a resident payee, it is proposed to amend section 40 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. Then there will be no disallowance under section 40(a)(ia) of the Act. Therefore, we are of the view that the payee has also paid the tax, therefore, we are of the view that there cannot be any disallowance U/s.40(a)(ia) of the Act - when the Commissioner has taken view that this amount has to be added as income U/s 40(a)(ia). As per documents filed by the assessee, it is verified and found that the payee to whom the payments is made i.e. M/s. Motibgh Industries has accounted this amount in his profit and loss account. M/s. Motibagh Industries is assessed to tax. M/s. Motibagh Industries has already accounted the amount of 3245797/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the alternative, the Learned CIT erred in not applying the principles that Sec 40a(ia) is applicable only in respect of TDS defaults, if amount is remaining payable as at 31st March of the relevant previous year as held by Hon‟ble I.T.A.T. 3.1 The Learned CIT ought to have appreciated that only a sum of ₹ 1,33,010 was outstanding as payable at the close of the relevant previous year and the balance amount of expenditure was actually paid during that year itself. 3.2 The Learned CIT ought to have appreciated that, at the highest, a sum of Rs,1,33,010 being the amount outstanding as at 31st March 2008 is covered under Sec 40a(ia) of the Act. 4. Without prejudice and in the alternative, the Learned CIT erred in not appreciating the fact that the payee viz. M/s Motibag Industries Pvt. Ltd has duly accounted and disclosed for tax purpose the entire sum of ₹ 32,45,797 paid to them towards ginning and pressing charges and has also paid tax due thereon. 4.1 The Learned CIT ought to have appreciated that the ginning and pressing charges or ₹ 32,45,797 paid by the appellant have been duly subjected to tax in the hands of payee and there is no loss of tax r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng not verified the fact, is liable to be dropped, as the same proceedings cannot be raised for the second time. Secondly, the TDS obligation u/s 194c, envisages that only when the payments are made 'in pursuance of a contract' between the two parties. As stated in the notice it is not acceptable that contract can be written or as well as oral‟. As the wordings of section 1 94C particularly states for the necessity of a contract and the payments to have been made only in pursuance of a contract, it is necessary that there should be a written contract, to make the obligation applicable. When the law making authorities have specifically mentioned the words 'in pursuance of a contract' it is quite clear that TDS is applicable only when the payments are made in compliance the terms of the written contract, If it would have been that all payments are liable for TDS, then there was‟nt any necessity to incorporate the words 'in pursuance of a contract'. Accordingly, in absence of a written contract by either of the parties, the TDS obligation u/s 194C does not attract. In support of the fact, the decisions rendered by the respective courts were also fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of tax revenue. For which sake I do not happen to be a defaulter under section 194C. The relevant copies in its support are herewith enclosed. I also crave for your goodself‟s permission to submit any other contentions or objections in the course of time before conclusion of the proposition. In the light and support of the above mentioned grounds specifically, that the question of TDS was once already raised by the AO, and that there is no written contract for the payments made, and for the strict interpretation of section 40(a)(ia) as above mentioned, I humbly request your good honor to drop the proposition initiated u/s 263, and oblige, for which act of kindness, I would ever remain grateful." After considering the reply, the Commissioner was of the view that the order passed by the Assessing Officer was not as per law and the Commissioner was of the view that M/s. Motibagh Industries (P) Ltd. has carried out the work of ginning and pressing for the assessee. The Motibagh Industries (P) Ltd. had been doing the work for the assessee since last 8 to 10 years and M/s. Motibah Industries (P) Ltd. is the only concern which does the work of ginning and pressing for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicial to the interest of the revenue. The assessment order u/s 143(3) passed for the A.Y. 2008-09 on 29.11.2010 by the ITO, Ward 1(3), Bélgaum is enhanced u/s 263 of the I.T. Act, 1961 as discussed above with a direction to the Assessing Officer to recompute the total income and determine the tax and interest payable as per law and issue demand notice accordingly. 4. The learned AR submitted before us that the Commissioner of Income Tax has verified the vouchers and records of Expenditure on ginning & pressing charges for ₹ 32,45,797/- debited to profit and loss account of assessee for the A.Y. 2008-09 and the corresponding receipt is reflected in the income of M/s Motibagh Industries (P) Ltd. The said recipient company is regular income tax assessee and accounted the entire Ginning & Pressing Receipts Rs.. 32,45,797/- in their books of accounts for the year ending 31st march 2008. The company has filed the return of Income within the due date of filing and paid the tax. The intention of TDS provisions are to prevent evasion and loss of Revenue. In the present case, the payee has already paid the tax and furnished the return of income before due date. The payee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on such sum on the date of furnishing of return of income by the resident payee." Then there will be no disallowance under section 40(a)(ia) of the Act. We find Section 201(1) which read as under: "Section 201(1) defines the term - 'assessee in default' as a person who is required to deduct tax but does not deduct tax or after deducting fails to pay the whole or any part of the tax, as required by or under the Act A proviso has now been inserted to this section to make exception to the above definition of 'assessee in default'. The Proviso provides that where any such default occurs and if payee. (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 furnishes a certificate to this effect from an accountant in such form as may be prescribed then assessee will not be regarded as assessee-in-default." From this above section, we are of the view that during the course of hearing learned AR has drawn our attention on page-8 of the paper book and he has submitted that total receipt by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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