TaxTMI 
TaxTMI 
2015 (6) TMI 170
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....ee and the transporters". 3. Both the parties agreed that the issue involved in both the appeals is common and, therefore, both the appeals should be decided on the basis of the facts relevant to the assessment year 2006-07. 4. Brief facts relating to the ground involved are that the Assessing Officer noted that the assessee had paid transportation hire charges amounting to Rs. 1,07,21,525/- on which no tax has been deducted at source. It was al so noted that these charges were paid as under to the following parties:- Sl. No. Name of the person/concerns to whom hire charges paid Amount (Rs.) TDS 1. Sea Queen Construction 14,37,200/- NIL 2. New Bargabhim Transport 14,39,975/- NIL 3. United Construction 13,57,200/- NIL 4. M/s. Tahi r Khan 14,23,650/- NIL 5. United Trading Corporation 10,77,025/- NIL 6. A.S.M. Enterprise 13,80,075/- NIL 7. Md. Sahabuddin 13,68,475/- NIL 8. S.A. Enterprise 12,37,925/- NIL TOTAL 1,07,21,525/- The Assessing officer, therefore, invoked the provisions of section 40(a)(ia) and disallowed the same.....
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....y such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed 17[thirty] thousand rupees : Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financia....
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....r paid to the account of the contractor; (ii)"goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii)"contract" shall include sub-contract; (iv)"work" shall include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer."] 7. A plain reading of this Section makes it clear that "any person responsible for paying any sum to any resident (hereafter in this sect ion referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person" is req....
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....versed. But before us, the ld. A.R. has taken a submission that the 2nd proviso to section 40(a)(ia) as inserted by Finance Act, 2012 would apply in the case of the assessee. According to him, 2nd proviso is curat ive in nature intended to supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax, and, therefore, he took the plea that the second proviso although inserted w.e.f. 1s t April, 2013 but being curative in nature has ret rospective effect and accordingly contended that the issue be restored to the file of the Assessing Officer so that the assessee can provide all the detail s in terms of the second proviso to section 40(a)(ia). We find force in the said submission of the ld. A.R. We noted that the submissions of the ld. A.R. are duly covered by the decision of this Tribunal ('SMC' Bench) in ITA No. 1905/Kol/2014 for the assessment year 2007-08, in which this Tribunal vide order dated 04.03.2015 has held as under:- "5. I ....
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....e from the person responsible for paying of income from which he failed to deduct tax at source. In a case where the deductee/payee has paid the tax on such income, the person responsible for paying the income is no longer required to deduct or deposit any tax at source. In the similar circumstances, I find that the first proviso to section 40(a)(ia) inserted by the Finance Act, 2010, which has been held to be curative and therefore, retrospective in its operation by the Hon'ble Calcutta High Court in ITAT No. 302 of 2011, GA 3200/2011, CIT v Virgin Creations decided on November 23, 2011 provides for allowance of the expenditure in any subsequent year in which tax has been deducted and deposited. The intention of the legislature clearly is not to disallow legitimate business expenditure. The allowance of such expenditure is sought to be made subject to deduction and payment of tax at source. However, in a case where the deductee/payee has paid tax and as such the person responsible for paying is no longer required to deduct or pay any tax, legitimate business expenditure would stand disallowed since the situation contemplated by the first proviso viz. deduction and payment of t....
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....tax if such resident payeeI. (i) Has furnished his return of income under section 139 ; (ii) Has taken into account such sum for computing income in such return of income ; and (iii) Has paid the tax due on the income declared by him in such return of income, and the payer furnishes a certificate to this effect from an accountant in such form as may e prescribed. The date of payment of taxes by the resident payee shall be deemed to be the date on which return has been furnished by the payer. It is also proposed to provide that where the payer fails to deduct the whole or any part of the tax on the payment made to a resident and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the such resident, the interest under section 201(1A)(i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident payee. Amendments on similar lines are also proposed to be made in the provisions of section 206C relating to TCS for clarifying the deemed date of discharge of tax liability by the buyer or licensee or lessee. These am....