2013 (11) TMI 412 - AT - Income Tax

Tribunal Rules Finance Act 2010 Amendment Retrospective; Disallowance Nullified, Payment Issue Remanded for Review.

SHRI SS WARAD Versus ADDL COMMISSIONER OF INCOME TAX, BANGALORE

SHRI SS WARAD Versus ADDL COMMISSIONER OF INCOME TAX, BANGALORE - [2013] 26 ITR (Trib) 358 (ITAT [Bang]) Issues Involved:1. Retrospective application of the amendment to Section 40(a)(ia) by Finance Act, 2010.2. Applicability of Section 194C to payments made to truck owners.Issue-wise Detailed Analysis:1. Retrospective application of the amendment to Section 40(a)(ia) by Finance Act, 2010:The assessee, an individual engaged in transport contracts, filed a return of income for the assessment year 2009-2010. During scrutiny, it was found that the tax deducted at source (TDS) for January and February 2009 was remitted late, leading to a disallowance of Rs. 7,18,96,190/- under Section 40(a)(ia). The assessee contended that the amendment to Section 40(a)(ia) by Finance Act, 2010, which allowed TDS payment before the due date of filing the return, should be applied retrospectively from 1st April 2005. The Assessing Officer (AO) and CIT(A) rejected this, citing that the amendment was not retrospective and relied on the Special Bench decision in Bharati Shipyard Ltd. v. DCIT. The Tribunal, however, referred to the Calcutta High Court judgment in CIT v. Virgin Creations and the Bangalore Tribunal's decision in ACIT v. M K Gurumurthy, which held that the amendment was remedial and curative, thus retrospective. Consequently, the Tribunal allowed the assessee's appeal, stating that the disallowance under Section 40(a)(ia) was not warranted as the TDS was paid before the due date of filing the return.2. Applicability of Section 194C to payments made to truck owners:The assessee argued that payments made to truck owners were not sub-contracts and hence not subject to TDS under Section 194C. The CIT(A) rejected this, stating that the assessee had acknowledged the requirement of TDS by deducting it and that the provisions of Section 194C were applicable. The assessee relied on the Mumbai Tribunal's decision in Bhail Bulk Carriers v. ITO, where it was held that hiring trucks did not constitute sub-contracting. The Tribunal noted that there was no detailed discussion on the facts by the CIT(A) and remanded the matter to the AO for denova consideration. The AO was directed to examine if the facts of the instant case were identical to those in Bhail Bulk Carriers and to take an appropriate decision in accordance with the law.Conclusion:The Tribunal allowed the appeal partly, holding that the amendment to Section 40(a)(ia) by Finance Act, 2010, was retrospective and that the disallowance of expenditure was not justified. The issue regarding the applicability of Section 194C was remanded to the AO for fresh consideration. The order was pronounced on 03/05/2013.