TaxTMI 
TaxTMI 
2012 (4) TMI 349
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....pellant were advances and treated as bills for payment on the last day of the accounting year, when tax deduction has taken place and thus there was no violation of provisions of sec. 194C. (c) The learned CIT(A) failed to consider the amended provisions of sec.40(a)(ia) w.e.f. from 1.4.2005 which held that if tax deducted has been paid before the due date of return u/s. 139(1), no disallowance can be made. 4. The appellant craves leave to add, amend, alter or cancel any Ground or Grounds before or at the time of hearing of the appeal. 2. The assessee is an individual engaged in the business of building repairs, labour & construction works contracts as Prop. "Constructive Concrete Constructions". In the course of assessment proceedings for AY 05-06, the AO on going through the details filed noticed that the assessee has not paid the TDS deducted on the labour charges/ advances paid to M/s Vaibhav Enterprises within the time stipulated u/s 200(1). The assesses had made payments / advances to Vaibhav Enterprises throughout the year but has deposited the TDS only on 31.5.05 i.e., beyond the stipulated time. The assessee submitted that Vaibhav enterprises was worki....
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....o Vijay Yadav, Parshuram, Tejuali Shaik, the AO noticed that the assesee has made payments through out the year, but has credited the concerned persons only on 31/3/2005 and has deducted tax on 31/3/05 and deposited the same on 31/5/05. In terms of provisions of sec. 200(1) the assessee was required to deduct TDS from the advances / payments made on account on the dates the payments were made. However this has not been done so. Hence, in terms of provisions of sec. 40(a)(ia) the advance payments of Rs. 5,02,500/- paid to Vijay Yadav, Rs. 6,89,000 paid to Parshuram Rs. 4,80,500 paid to Tejuli Shaikh Rs. 2,50,000 paid to Khatri Rs. 2,37,000/- paid to Ganesh Singh, which though in the nature of sub-contractual payments / advances towards contract have been shown as loans and advances given by the assessee were disallowed and added back to the assessee's total income. 6. Accordingly total disallowance out of the sub-contractual payments in terms of provisions of sec. 40(a)(ia) was Rs. 1,41,40,044/- (Rs. 1,12,38,889/- + 7,42,155 + 5,02,500 + 6,89,000 + 4,80,500 + 2,50,000 + 2,37,000). 7. On appeal by the Assessee against the aforesaid disallowances, the CIT(A) confirmed the order ....
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....rvices or fees for technical services to residents, and payments to a resident contractor or sub-contractor for carrying out any work (including supply of labour for carrying out any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-section (1) of section 200 and in accordance with the other provisions of Chapter XVII-B. It is also proposed to provide that where in respect of payment of any sum, tax has been deducted under Chapter XVII-B or paid in any subsequent year, the sum of payment shall be allowed in computing the income of the previous year in which such tax has been paid. The proposed amendment will take effect from 1st day of April, 2005 and will, accordingly, apply in relation to the assessment year 2005- 2006 and subsequent years. [Clause 11]" 10. Thereafter the Finance Act, 2008 made amendment to clause (a) in subclause (ia) in section 40 with retrospective effect from 1st April, 2005. The section as amended by the Finance Act, 2008 read as under:- "(ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services ....
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....able to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or; after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid." 13. From the above provision as amended by the Finance Act, 2010 with retrospective effect from 1st April, 2010 it can be seen that the only difference which this amendment has made is dispensing with the earlier two categories of defaults as per the Finance Act, 2008, as discussed in the earlier para, causing disallowance on the basis of the period of the previous year during which tax was deductible. The first category of disallowances included the cases in which tax was deductible and was so deducted during....
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....f Virgin Creations Vs. ITO, Ward 32(4), Kolkata ITA No. 267/Kol/2009 for AY 05-06 The issue that arose for consideration was disallowance of expenses u/s.40(a)(ia)claimed as deduction while computing income from business being embroidery charges, dyeing charges, interest on loan and freight charges without deducting tax at source. The Embroidery charges were paid between 22nd may, 2004 to 30.11.2004. Tax had been deducted at source but were paid to the Government only on 28.10.2005 and not within the time contemplated by Section 200(1) of the Act. The dyeing charges were paid between 5.4.2004 to 20.8.2004. Tax was deducted at source but was paid to the Government only on 28.10.2005. Freight outward charges were paid without deduction of tax at source. Interest on loans were credited to the creditors account on 31.3.2005 to the extent they were paid after the due date for filing return of income u/s.139(1) of the Act, the disallowance was made u/s.40(a)(ia) of the Act. Before the Tribunal, the Assessee contented that the amendment by the Finance Act, 2010 with retrospective effect from 1st April, 2010 whereby amount of tax deducted at the time of making payment in respect of expendi....
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....uring the period 01/04/2005 to 28/02/2006 was paid by the Assessee in the month of July and August 2006 i.e., well before the due date of filing of its return of income for the year under consideration. This being the undisputed position, we hold that the disallowance made by the A.O. and confirmed by the learned CIT(A) on account of freight charges by invoking the provisions of Section 40(a)(ia) is not sustainable as per the amendments made in the said provisions by the Finance Act, 2010 which, being remedial/curative in nature, have retrospective application", we find no reason to deviate from the decisions of the ITAT's Mumbai Bench and Ahmedabad Bench, in the absence of a contrary view, except the other benches decisions or any other High Court. Therefore, respectfully following the decision of the Coordinate Benches (supra), we allow the ground nos. I to 3 of the assessee's appeal. 16. As against the aforesaid decision the Revenue preferred appeal before the Hon'ble Calcutta High Court. The Hon'ble Calcutta High Court in ITA No. 302 of 2011 GA 3200/2011 decided on 23.11.2011, held as follows: "We have heard Mr. Nizamuddin and gone through the impugned judgment and ....