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TMI Blog2021 (12) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... ] held that amendment in section 40(a)(ia) of the Act is prospective in nature - Issue clearly in the affirmative i.e., against the assessee and in favour of the revenue that the payments in question have rightly been disallowed from deduction while computing the total income of the assessee-assessee. Disallowance of interest expenditure u/s 36(1)(iii) - HELD THAT:- As considering all these facts it is crystal clear that assessee has given interest free loan to Mr. Ajay Shah of ₹ 3,00,000/-, out of its interest free funds, therefore addition should not be made. Accordingly, the addition made by A.O. to the tune of ₹ 36,000/- is deleted. Addition u/s 68 - HELD THAT:- We note that assessee had furnished the details which would discharge the onus which lay on the assessee. It is not the case of the revenue that the partners of the assessee firm are fictitious. Therefore, addition sustained by ld CIT(A) is hereby deleted. - ITA No.779/SRT/2018 - - - Dated:- 29-11-2021 - Shri Pawan Singh, Jm And Dr. A. L. Saini, Am For the Assessee : Shri Urvashi Shodhan, AR For the Revenue : Ms Anupama Singhla, Sr. DR ORDER PER DR. A. L. SAINI, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessing officer that payments towards Employees Provident Fund amounting to ₹ 67,111/- was paid beyond the due date prescribed under the relevant PF Act. The Statement of PF as on 31st March, 2010 is as below: Month Employee's Contribution (Rs.) Due Date Date of payment Apr- 09 21931 15/05/2009 13/05/2009 May-09 19771 15/06/2009 15/06/2009 JUN-09 19381 15/07/2009 21/07/2009 Jul-09 18385 15/08/2009 13/08/2009 Aug-09 15919 15/09/2009 19/09/2009 Sep-09 1 3683 15/ 10/2009 12/10/2009 Oct-09 14983 15/J I/ 2009 13/11/2009 Nov- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to ₹ 31,615/- ( ₹ 15,919 + ₹ 15,696) which are paid by the assessee within the grace period, therefore, addition to the extent of ₹ 31,615/- is hereby deleted and we direct the assessing officer to make the disallowance of the balance amount of ₹ 35,496/- (₹ 67,111- ₹ 31,615). Thus, ground no.1 raised by the assessee is partly allowed. 8. Ground no.2 raised by the assessee relates to disallowance of ₹ 7,93,836/- on account of non-deduction of TDS from payment of labour charges under section 194C of the Act. 9. Succinct facts are that during assessment proceeding, on perusal of labour charges it was noticed by the assessing officer that assessee has made payment to the following persons on account of labour charges: Sr. No. Name of the persons Date of payment Amount paid 01 Sureshsingh M Rajput ₹ 99,070/- 06/05/2009 02 Jay Ambe Co. ₹ 40.000/- 06/06/2009 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions of the assessee. The A.O. has disallowed the claim of Labour expenses of ₹ 9,52,564/- u/s 40(a)(ia), as the assessee fails to deduct and paid the TDS u/s 194C of the Income-tax Act, 1961. The Ld. A.R. of the assessee argued that, as per the provisions of section 194C, if the single payment does not exceeds ₹ 20,000/- and total payment for the year does not exceeds ₹ 50,000/- to a contractor, the tax is not required to be deducted at source and accordingly the assessee is not liable to deduct and pay the TDS on total amount of ₹ 1,58,728/- out of the total payment of ₹ 9,52,564/-. I find the force in the argument of the Ld. A.R. and addition of ₹ 1,58,728/- is deleted and the balance amount of ₹ 7,93,836/- confirmed. 11. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 12. Learned Counsel for the assessee submits before the Bench that entire amount of ₹ 7,93,836/- should not be disallowed and only 30% of payment to be disallowed as per the amended provisions of the Finance Act, 2014. Learned Counsel also stated that the amendment under section 40(a)(ia) of the Act is retrospective in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Civil Appeal No.7865 of 2009 order dated 29.07.2020, the Hon'ble Supreme Court held that amendment in section 40(a)(ia) of the Act is prospective in nature. The findings of the Hon'ble Supreme Court is reproduced below: 19.1. By the amendment brought about in the year 2014, the legislature reduced the extent of disallowance under Section 40(a)(ia) of the Act and limited it to 30% of the sum payable. On the other hand, by the Finance Act of 2010, which was considered in the case of Calcutta Export Company (supra), the proviso to Section 40(a)(ia) of the Act was amended so as to provide relief to a bonafide assessee who could not make deposit of deducted tax within prescribed time. In fact, even before the year 2010, the said proviso was amended by the Finance Act 2008 and that amendment of the year 2008 was provided retrospective operation by the legislature itself. For ready reference, we may reproduce in juxtaposition the main part of Section 40(a) (ia) of the Act as it would read after the amendments of 2008, 2010 and 2014 respectively, as under:- (i) After the amendment by Finance Act, 2008 40. Amounts not deductible. - Notwithstanding anyth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid: *** *** *** (iii) After the amendment by Finance (No.2) Act, 2014 40 Amounts not deductible. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession ,- (a) in the case of any assessee- *** *** *** (ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, thirty per cent of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court, of the reasons for the amendments of 2008 and 2010, makes it clear as to why this Court held that the amendment of the year 2010 would be retrospective in operation. We may usefully reproduce the relevant discussion and exposition of this Court in Calcutta Export Company as under:- (at pp. 663-666 of ITR):- 19. The above amendments made by the Finance Act, 2008 thus provided that no disallowance under section 40(a)(ia) of the Income-tax Act shall be made in respect of the expenditure incurred in the month of March if the tax deducted at source on such expenditure has been paid before the due date of filing of the return. It is important to mention here that the amendment was given retrospective operation from the date of April 1, 2005, i.e., from the very date of substitution of the provision. 20. Therefore, the assesses were, after the said amendment in 2008, classified in two categories namely: one, those who have deducted that tax during the last month of the previous year and two, those who have deducted the tax in the remaining eleven months of the previous year. It was provided that in the case of assessees falling under the first category, no disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2010-11 and subsequent years. 25. The controversy surrounding the above amendment was whether the amendment being curative in nature should be applied retrospectively, i.e., from the date of insertion of the provisions of section 40(a)(ia) or to be applicable from the date of enforcement. *** *** *** 27. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section, is required to be read into the section to give the section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. 28. The purpose of the amendment made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and med ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 4 20. Before finally answering the root question in the matter as to whether the payments in question have rightly been disallowed from deduction, we may usefully summarise the answers to Question Nos. 1 to 3 that the provisions of Section 194C were indeed applicable and the assessee was under obligation to deduct the tax at source in relation to the payments made by it for hiring the vehicles for the purpose of its business of transportation of goods; that disallowance under Section 40(a)(ia) of the Act is not limited only to the amount outstanding and this provision equally applies in relation to the expenses that had already been incurred and paid by the assessee; that disallowance under Section 40(a)(ia) of the Act of 1961 as introduced by the Finance (No.2) Act, 2004 with effect from 01.04.2005 is applicable to the case at hand relating to the assessment year 2005-2006; and that the benefit of amendment made in the year 2014 to the provision in question is not available to the assessee in the present case. These answers practically conclude the matter but we have formulated Question No. 4 essentially to deal with the last limb of submissions regarding the prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. 16. Ground no.3 raised by the assessee relates to disallowance of interest expenditure of ₹ 36,000/-, under section 36(1)(iii) of the Act. 17. We have heard both the parties and considered the facts of the case, order of the Assessing Officer and the submissions of the assessee. Learned Counsel for the assessee submits that interest of ₹ 36,000/- is computed by the assessing officer on opening balance amount, as on 01.04.2009. This addition is based on opening balance of ₹ 3,00,000/- and assessee has not given any loan during the year under consideration. However, Learned DR for the Revenue relied on the order of assessing officer. Learned Counsel also submits that assessee has given advance of ₹ 3,00,000/- to Mr. Ajay Shah which is out of assessee`s interest free funds therefore addition should not be made. Thus, considering all these facts it is crystal clear that assessee has given interest free loan to Mr. Ajay Shah of ₹ 3,00,000/-, out of its interest free funds, therefore addition should not be made. Accordingly, the addition made by A.O. to the tune of ₹ 36,000/- is deleted. 18. Ground no.4 raised by the assessee re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconciled all the debits and credits in the ledger account of Mr. Vinayak R. Mehta i.e. Prop. of R.R. Construction with its bank statements. Further, the books of assessee are audited by Chartered Accountant who has also submitted his Report in Form 3CB and 3CD. The A.O. while finalizing the assessment considered ₹ 1,59,89,020/- as unexplained which is credited to R.R. Construction in its books. In appellate proceedings, the assessee has submitted the bank statement of R R Construction of his current account with ICICI Bank Ltd, Bank of India and Prime Co-op Bank Ltd, along with the detailed explanation for each debit and credit entry in accounts. The submission of assessee and all bank/financial statements have verified by the A.O. and he has not taken any adverse view in his remand except credit through journal entries of ₹ 76,09,595/- is to be added u/s 41(1), considering the same as cessation of liabilities. The A.O. has not objected any source / explanation/ details submitted by the assessee during the remand. Further, the assessee has disclosed in its return of income that income of ₹ 53,63,318/- is paid to Mr Vinayak R. Mehta, who is proprietor of R.R. Con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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