TaxTMI 
TaxTMI 
2010 (10) TMI 516
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.... at source for the said expenditure u/s 40(a)(ia) of the I T Act. (ii) Whether the CIT(A) is justified in confirming the levy of interest u/s. 234A, 234B and 234C of the Act to the tune of Rs.35,29,873/-. 3. The brief facts of the case are as follows:- The assessee is a firm. It is engaged in the business of mining sea shells. For the concerned asst. year, return of income was filed on 30.1.2006 declaring a total income of Rs.34,92,050/-. The Assessing Officer completed scrutiny assessment u/s 143(3) on 12.12.2007, disallowing contract payment of Rs.2,40,09,915/- u/s 40a(ia) of the Act and determined the firm's total income at Rs.2,74,01,965/-. The Assessing Officer disallowed the expenditure of Rs.2,40,09,915/- on the ....
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....merits as well as on the levy of interest, against the assessee vide his order dated 26.3.2010. 4. The assessee, being aggrieved by the order of the CIT(A) dated 26.3.2010, is in appeal before us. 4.1 As regards the issue on merits, it was submitted that the wage payments to the contractors was verified by the AO as per para 2, page 2 of the assessment order dated 12.12.2007. The AO has not doubted the genuineness of the payment. It was submitted that for the default of non-payment of TDS amounting paltry sum of Rs.5,04,074/- within the stipulated time limit has resulted in huge tax liability amounting to Rs. 1,00,63,655, which is very illogical and unjustified. The learned AR has also cited the decision of the Calcutta Bench of the H....
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....e Delhi Bench of the Tribunal in the case of Royal Jordan Airlines v. Deputy DIT (3 ITR (Tribunal) 181 wherein it was held that as regards charging of interest u/s 234B, it could be seen that the assessee had all along been claiming immunity from chargeability to tax on the basis of it being sovereign. Accordingly till the date returns were filed, the assessee was under bonafide belief that its income was not chargeable to income tax in India. The assessee was therefore not required to estimate its income or pay any advance tax. In such a situation, section 234B could not be invoked. 4.5 It was further contended that the decision of the Hon'ble High Court of Karnataka in the case of Kwality Biscuits Ltd. v. CIT 243 ITR 519 is applicable ....
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....TDS obligation due to financial difficulties faced by the firm during that period. It was not the firm's contention at the time of assessment proceedings that the payments were not covered by the provisions of section 194C nor has the firm objected to the disallowance u/s 40(a)(ia) of the Act. We are of the view that the payments in question did constitute the payment to contractors within the meaning of section 194C and consequently, delay in remittance to the government TDS made on such payment did attract the provisions of section 40(a)(ia) of the Act. The provisions of section 40(a)(ia) is strict and very clear. When the tax is not deducted and paid to the government account on payment made to the sub-contractors during the relevant pre....
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.... TDS amount to the government account, as TDS amount was far lesser than the tax liability arising out of default of TDS. Moreover, we are of the view that there is no uncertainty or ambiguity about the consequence of non-remitting TDS to the government account, since the provisions of section 40(a)(ia) has been on the statute book with effect from 1/4/2005. 6.3 The decision in the case of CIT v. Anand Prakash and Kwality Biscuits Ltd. v. CIT (supra) do not apply to the facts of instant case because the issues dealt in those cases were different. In the former case, the Hon'ble Delhi High Court rendered the judgment in relation to interest received on enhanced compensation, while in the latter case, the Hon'ble High Court of Karnataka de....