TaxTMI 
TaxTMI 
2010 (3) TMI 762
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.... the assessee having exceeding the total turn over specified under section 44AB shall be liable to deduct income-tax under section 194C. 3.1 The ld. CIT(A) failed to note that w.e.f. 1-10-2004 where the aggregate of amounts credited or paid exceeds Rs. 50,000 the assessee shall effect TDS as per first proviso of sub-section (3) of section 194C. The aggregate amount paid to all 16 sub-contractors have exceeded Rs. 50,000 in each case. 3.2 The ld. CIT(A) has failed to note that the assessee did not file form No. 15J and the corresponding exemption from effecting TDS is not applicable to assessment year 2005 06. 3.3 The ld. CIT(A) failed to appreciate that the deduction under section 194C is mandatory once the qualified the condition prescribed. Therefore the findings of the CIT(A) the failure to deduct tax in these cases may not affect revenue, is not acceptable. 3.4 The ld. CIT(A) has erred by holding that the second proviso of sub-section (3) of section 194C is applicable for assessment year 2005-06. The above proviso was inserted by the Finance Act, 2005 with effect from 1-6-2005." 2. Short issue arising out of the above ground is whether the amendment to sub-section (3) of s....
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.... the Act could not be applied. Ld. CIT(A) relying on certain comments of ld. writer Sampath Iyengar's "Law of Income-tax", Volume 6, 10th Edition, was of the opinion that such proviso had retrospective applicability. According to him, the truck operators who were owning two or lesser number of trucks were earning income of Rs. 84,000 only as per section 44AE of the Act and such amount being below the exempt limit, there was no justification for deducting any tax on payments effected to such persons. In this view of the matter, he deleted the disallowance. 5. Now, before us ld. DR submits that second and third provisos to clause (i) of sub-section (3) of section 194C introduced by the Finance Act, 2005 was specifically made effective from 1-6-2005. According to the ld. DR admittedly, assessee had made freight payments prior to such date, the relevant previous year being 2004-05. Therefore, as per the ld. DR, assessee was bound under the Act to effect necessary tax deduction at source, since its turnover exceeded Rs. 40 lakhs. Having not done so, in her opinion the Assessing Officer was justified in disallowing the claim under section 40(a)(ia) of the Act. 6. Per contra, ld. AR sub....
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....an two trucks. Therefore, if the provisos mentioned above had retrospective effect, no doubt, assessee would not be liable to deduct tax at source. On the other hand, if it had no retrospective effect, then the assessee was liable to deduct tax at source, which assessee had not done and therefore, Assessing Officer justified in invoking section 40(a)(ia) of the Act for making the disallowance. The argument taken by the assessee before the Ld. CIT(A) that payments for freight were part of trading account and therefore, would not fall within the allowances specified under sections 30 to 38 of the Act, has been impliedly given a go by, in its submission before us. In para -12 of its written submission, its argument is that such expenses were wholly, necessarily and exclusively incurred in the course of business and therefore allowable as per section 37 of the Act. Assessing Officer had made the disallowance not on account of reason that it was not allowable under section 37 of the Act, but by invoking section 40(a)(ia), which mandated that once tax which was deductible at source under Chapter XVII was not deducted, then the amount involved shall not be allowed as a deduction in comput....
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.... who has not owned more than two goods carriages at any time during the previous year : Provided also that the person responsible for paying any sum as aforesaid to the sub-contractor referred to in the second proviso shall furnish to the prescribed Income-tax authority or the person authorized by it such particulars as may be prescribed in such form and within such time as may be prescribed: or (ii) any sum credited or paid before the 1st day of June, 1972; [or] (iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contract in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society.]" Second and third provisos have been introduced by Finance Act, 2005 and specifically given effect from 1-6-2005. Can we say that such provisos were inserted to remedy unintended consequences and the provision was not workable without the provisos in our opinion the provision was definitely workable. Deduction of tax at source was mandatory under section 194C in ev....
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....anation 2 being retrospective, first proviso also had put so construed. This was on account of reason that the proviso supplied an obvious omission; section 43B was inserted so that assessees who had regularly adopted mercantile system of accounting could claim deduction of amount on taxes paid by it only in the year in which such sum was actually paid and not in the year in which it was incurred. Thereby, an assessee who had collected sales tax in the month of March and remitted it to treasury within the statutory period allowed, which fell in the next accounting year, was not entitled to claim deduction. It was to obviate this kind of unexpected outcome that first proviso to clause (a) was added to section 43B by Finance Act, 2005. It was on account of this reason that Hon'ble Apex Court held such proviso to be having retrospective effect. On the other hand, here the provisos have not been added for removing any unintended hardships to an assessee, who was obliged to deduct tax at source. The provisos were intended to help the recipients of freight charges, who were owning not more than two trucks. In the second decision relied on by the Ld. AR, viz., Bharat Hari Singhania's case....