2020 (1) TMI 148 - AT - Income Tax

Tribunal rules in favor of assessee: Amendments cannot retroactively apply

Oruganti Sowbhagyam Versus DCIT, Berhampur

The Tribunal held that the amended provisions of section 194C(6) could not be retroactively applied to the assessment year 2011-12. Therefore, the ... TDS u/s 194C - non-deduction of TDS while making deposit to transporter providers on declaration of PAN Number which came into effect from 1.10.2009 - Addition u/s 40(a)(ia) - HELD THAT:- Amendment has been inserted by Finance Act, 2015 to sub-section(6) of Section 194C of the Act, which has been held as effective w.e.f. 1.6.2015, which disentitle the assessee from benefit of first limb of sub-section (6) of section 194C of the Act as the legislature in its wisdom added words “where such contractor owns ten or less goods carriage at any time during the previous year and furnishes a declaration to that effect along with”. The purpose of insertion of said provisions of sub-section(6) to section 194C was that the legislature in its wisdom wanted to give relaxation of this provision only in a case where the contractor owns ten or less goods carriage at any time during the previous year and furnishes a declaration to that effect alongwith his Permanent Account Number, to the person paying or crediting such sum” on which TDS u/s.194C was required to be made. The present case under consideration is pertaining to payment of amount to contractor by the assessee relates to assessment year 2011-12 and I am unable to agree with the contention of ld D.R. that the amended sub-section(6) of Section 194C can be placed into service against the assessee for assessment year 2012-12 as it is ample clear from the Finance Act, 2015 that said amended provisions has been given effect from 1.6.2015 which falls within the ambit of financial year 2015-16. Therefore, hold that the basis taken by the AO and conclusion drawn by the CIT(A)in his order cannot be held as sustainable and justified and thus, dismiss the same - AO is directed to delete the addition - Sole ground of the assessee is allowed. Issues:Appeal against addition u/s.40(a)(ia) - Application of amended provisions of Section 194C(6) of the Income Tax Act, 1961.Analysis:The appeal was filed against the addition of Rs. 5,00,000 made under section 40(a)(ia) of the Income Tax Act. The assessee contended that the non-deduction of TDS while making deposits to transporter providers, which led to the addition, should not be upheld as the amended provisions of section 194C(6) were not applicable retrospectively. The Assessing Officer (AO) had disallowed the amount due to non-deduction of TDS, but the assessee argued that the amended provision was effective from 1.6.2015, which was after the relevant financial year 2010-2011. The Departmental Representative (DR) supported the AO's decision, stating that the amendment was in effect at the time of assessment. However, it was noted that the amendment was applicable from 1.6.2015, which did not cover the assessment year 2011-12.The Judicial Member highlighted that the amendment to section 194C(6) was introduced by the Finance Act, 2015, making it effective from 1.6.2015. The amendment specified conditions under which TDS was required, disentitling the assessee from the benefit of the provision. It was emphasized that the legislature intended to provide relaxation only in specific cases. The Judicial Member opined that the amended provision could not be applied retrospectively to the assessment year 2011-12, as it fell within the financial year 2015-16. Consequently, the AO was directed to delete the addition of Rs. 5,00,000, and the appeal of the assessee was allowed.In conclusion, the Tribunal held that the amended provisions of section 194C(6) could not be retroactively applied to the assessment year 2011-12, as they came into effect from 1.6.2015. Therefore, the addition made by the AO under section 40(a)(ia) was not sustainable, and the appeal of the assessee was allowed, directing the deletion of the disputed amount.