2019 (5) TMI 1187 - AT - Income Tax

Tribunal affirms disallowance of labor charges & Section 40(a)(ia) proviso, upholds AO jurisdiction.

The Tribunal upheld the decisions of the lower authorities regarding the disallowance of labor charges and the retrospective application of the 2nd ... Rectification u/s 154 - addition u/s. 40(a)(ia) - debatable issue - assessee firm had not deducted TDS from the labour charges paid - making addition u/s 40(a)(ia) when the payee has included the entire interest paid by the appellant in its total income and filed return of income accordingly - HELD THAT:- The Ld. AR submitted that issue in dispute is a debatable issue and cannot be dealt by the Assessing Officer vide proceedings u/s. 154. He drew our attention to the judgments in CIT vs. Ansal Landmark Townships (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] and CIT vs. Shraddha & S.S. Kale, Joint Venture [2017 (4) TMI 525 - BOMBAY HIGH COURT] This issue was considered by the Jurisdictional High Court in the case of CIT vs. Thomas George Muthoot [2015 (7) TMI 810 - KERALA HIGH COURT] . Being so, within the jurisdiction of Kerala High Court, the issue in dispute cannot be said to be a debatable issue. In our opinion, the Assessing Officer is justified in making addition u/s. 40(a)(ia) of the Act vide proceedings u/s. 154 of the Act dated 02/08/2010. Accordingly, this ground of appeal of the assessee is dismissed. Issues:Delay in filing the appeal before the Tribunal; Disallowance of labor charges under Section 40(a)(ia) of the Income Tax Act, 1961; Retrospective application of the 2nd proviso to Section 40(a)(ia); Jurisdiction to deal with debatable issues under Section 154 of the Act.Delay in Filing Appeal:The appeal was filed with a delay of 61 days before the Tribunal. The assessee explained the delay due to discontinuation of business, delay in engaging legal counsel, and the representative's reluctance. The Tribunal, after considering the reasons, condoned the delay and admitted the appeal for adjudication.Disallowance of Labor Charges:The Assessing Officer disallowed labor charges of Rs. 2434192 for AY 2006-07 under Section 40(a)(ia) for non-deduction of TDS. The CIT(A) upheld this decision, citing the introduction of the 2nd proviso to Section 40(a)(ia) with effect from 01/04/2013. The High Court of Kerala's decision in a similar case was referenced to support the non-retrospective application of the proviso. The Tribunal dismissed the appeal, affirming the Assessing Officer's decision.Retrospective Application of 2nd Proviso:The assessee argued for the retrospective application of the 2nd proviso to Section 40(a)(ia) from 01/04/2005, citing various decisions. However, the Tribunal relied on the Kerala High Court's decision and held that the proviso was not curative or remedial in nature, making it prospective from 01/04/2013. The appeal was dismissed based on this interpretation.Jurisdiction to Deal with Debatable Issues:The assessee contended that the issue was debatable and should not have been addressed under Section 154 of the Act. Referring to relevant judgments, including a Supreme Court ruling, the assessee argued that curative amendments should have retrospective effect. The Tribunal, however, held that as the issue was within the jurisdiction of the Kerala High Court, it was not debatable. Consequently, the Assessing Officer's decision under Section 154 was deemed justified, leading to the dismissal of the appeal.In conclusion, the Tribunal upheld the decisions of the lower authorities regarding the disallowance of labor charges and the retrospective application of the 2nd proviso to Section 40(a)(ia). The Tribunal also affirmed the Assessing Officer's jurisdiction to address the issue under Section 154, dismissing the appeal based on these findings.