Appellate Tribunal remits cases for tax verification, stresses retrospective application of tax law. (a)(ia)

The Appellate Tribunal allowed the appeals filed by the Revenue for statistical purposes, remitting the cases to the Assessing Officer for verification of compliance by the payees regarding tax obligations. The Tribunal emphasized the retrospective application of the second proviso to Section 40(a)(ia) and directed the A.O to ensure that if the payees filed their returns and paid taxes within the specified time, no disallowance under Section 40(a)(ia) should be made.

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Issues Involved:
1. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act, 1961 due to non-compliance with Section 194J on Lab Testing Charges.
2. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act, 1961 due to non-compliance with Section 194C on printing and stationery expenses.

Detailed Analysis:

Issue 1: Deletion of Addition under Section 40(a)(ia) for Non-Compliance with Section 194J on Lab Testing Charges
Background:
The Assessing Officer (A.O) disallowed Rs. 64,55,563/- under Section 40(a)(ia) of the Income Tax Act, 1961, observing that the assessee received professional and technical services from SRL Ranbaxy Ltd., necessitating TDS under Section 194J.

CIT(A) Decision:
The CIT(A) deleted the addition, reasoning that the appellant was an agent of SRL Ranbaxy Ltd. and not liable for deduction under Section 194J. The CIT(A) supported this decision with various judicial precedents.

Appellate Tribunal's Analysis:
The Tribunal considered the second proviso to Section 40(a)(ia) inserted by the Finance Act, 2012, which states that if the payee has filed their return of income and paid taxes, the assessee is deemed to have deducted and paid the tax on such sum. The Tribunal, following the Agra Bench's decision in Rajiv Kumar Aggarwal and the Delhi High Court's ruling in CIT Vs Rajinder Kumar, held that this proviso is declaratory and curative, having retrospective effect from 1.4.2005. The Tribunal directed the A.O to verify if the payee filed their return and paid taxes within the stipulated time. If so, no disallowance under Section 40(a)(ia) is warranted.

Conclusion:
The Tribunal remitted the case back to the A.O for verification, confirming that if the payee complied with tax obligations, the disallowance should not be made.

Issue 2: Deletion of Addition under Section 40(a)(ia) for Non-Compliance with Section 194C on Printing and Stationery Expenses
Background:
The A.O disallowed Rs. 88,689/- under Section 40(a)(ia), noting that the assessee paid this amount to M/S WE ARE PRINTER for printing and stationery, which should be considered job work liable for TDS under Section 194C.

CIT(A) Decision:
The CIT(A) deleted the addition, stating that the payment was for the purchase of goods, not job work, and thus not liable for TDS under Section 194C. The CIT(A) relied on judicial rulings, including the Bang ITAT ruling in SPICE and the Delhi High Court in Dabur.

Appellate Tribunal's Analysis:
The Tribunal reiterated the second proviso to Section 40(a)(ia) and its retrospective application. The Tribunal directed the A.O to verify if the payee filed their return and paid taxes within the stipulated time. If so, the disallowance under Section 40(a)(ia) is not justified.

Conclusion:
The Tribunal remitted the case back to the A.O for verification, confirming that if the payee complied with tax obligations, the disallowance should not be made.

Final Decision:
The appeals filed by the Revenue were allowed for statistical purposes, with the cases remitted to the A.O for verification of compliance by the payees. The order was pronounced in the open Court on 25.7.2014.

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