TaxTMI 
TaxTMI 
2012 (7) TMI 304
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....on of its capital asset more so when the same has been adjusted within 3 months and tax has been deducted and deposited before the filing of the return is bad in law and needs to be set-aside. 3. The only issue raised in the present appeal is against the disallowance made by the Assessing Officer by invoking provisions of section 40(a)(ia) of the Act for non-deduction of tax at source under section 194C of the Act. 4. The brief facts of the case are that the assessee is a cooperative society and is providing credit facility to its member cooperative societies within the State of Punjab. The assessee is also engaged in the activity of constructing residential houses in the State of Punjab which are allotted in favour of primary cooperative housing societies under the scheme of Government of Punjab from time to time. The lands for the said project are allotted by the Government of Punjab and the plans are also approved by them. During the year under consideration the assessee had made payment of Rs. 1,21,75,828/- on 22.2.2008 to M/s Deepak Builders. As per the contract between the parties, the assessee had to pay 75% of the estimated value of any material that had to be procured an....
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....f secured advances at the time of extending the advance however the same was adjusted while deducting the tax at source at the time of making the payment of the bill." 5. The TDS deducted on the said payment was deposited on or before 8.7.2008 i.e. before the date of filing the return of income which in the present case was 30.9.2008. 6. The Assessing Officer while completing the assessment had allowed the benefit of adjustment made at Rs. 20,41,875/- on 18.3.2010 and made disallowance of Rs. 1,01,33,953/- for non deduction of tax at source in line with the provisions of section 40a(ia) of the Act. 7. The CIT (Appeals) upheld the order of the Assessing Officer for non deduction of tax at source and consequent disallowance under section 40a(ia) of the Act. 8. The learned A.R. for the assessee pointed out that the issue in the present case stands covered by the order of the Special Bench of Vishakhapatnam reported in Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23/20 taxmann.com 244. 9. The learned D.R. for the Revenue placed reliance on the orders of the authorities below. 10. We have heard the rival contentions and perused the record. The issue arising in the pre....
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....ble to a contractor or sub-contactors, being resident, on which tax was deductible at source under Chapter XVII-B and where such tax has not been deducted or after deduction has not been paid, then such amount would not be deducted while computing income under the head 'income from profits and gains of business or profession'. 14. We find that the issue of deductibility of expenditure where the payment has been made during the year and nothing is outstanding at the close of the year, was considered and the Special Bench of Vishakhapatnam Tribunal in Merilyn Shipping & Transports (supra) have laid down the principle that in cases where the expenditure has been paid, then even where no tax has been deducted at source or after deduction has not been paid, the provisions of section 40(a)(ia) of the Act are not applicable. The majority view of the Bench as per para 12 of the order dated 14.3.2012 is as under: "12. In view of the above judicial pronouncements of Hon'ble Supreme Court and Hon'ble High Courts, materials placed before us, arguments made by both the sides and in view of the provisions of section 40(a)(ia) of the Act, on comparison between the proposed and enacted provision....
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....erilyn Shipping & Transports (supra) to the facts of the present case, where the amount totaling Rs. 1,21,75,828/- has been paid to M/s Deepak Builders, contractor during the year under consideration itself, mere non-deposit of TDS deducted thereon does not merit any disallowance in the hands of the assessee. 16. Further the provisions of section 40(a)(ia) of the Act have been amended by the Finance Act, 2010 wherein the proviso has been substituted. Earlier proviso substituted by the Finance Act, 2008 with retrospective effect from 1.4.2005 provided that where in respect of any sum, tax had been deducted in any subsequent year or has been deducted during the last month of the previous year, but paid after the said due date or deducted during any other month of the previous year but paid after the end of the previous year, the deduction of said sum shall be allowed in computing the income of the previous year in which such tax had been paid. The proviso as substituted by Finance Act, 2010 provides that in respect of any sum, where tax has been deducted in any subsequent year or deducted during the previous year but paid after the due date specified in section 139(1) of the Act, su....