TaxTMI 
TaxTMI 
2015 (6) TMI 172
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....under section 40(a)(ia) of the Income tax Act, 1961. (4) Ld. CIT(A) has erred in facts as well as in law in deleting the addition of Rs. 20,39,240/- on account of capital gain. (5) Ld. CIT(A) has erred in facts as well as in law in deleting the addition of Rs. 15,56,051/- on account of petrol and diesel expenses. (6) Ld. CIT(A) has erred in facts as well as in law in deleting the addition of Rs. 1,04,800/- being investment in "Kotak Mahindra". (7) Ld. CIT(A) has erred in facts as well as in law in deleting the addition of Rs. 3,088/- on account of motor car depreciation. 2. Ground No. 1 relates to the deletion of the addition of Rs. 3,29,05,000/- made by the Assessing Officer under section 40(a) (ia) of the Income Tax Act, 1961. 3. Brief facts relating to this ground are that the Assessing Officer noted that the assessee had transferred a sum of Rs. 3,29,05,000/- to the account of Shri Dilip Kumar Paul to whom the Assessing Officer treated to be a sub-contractor and, therefore, took the view that the assessee was liable to deduct tax at source on such amount as per the provisions of sect ion 194C(2) of the Act. Since no tax was deducted at source, therefore, the Assessing Off....
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..... Paul) is the person through whom a substantial amount of labour payments were made by the assessee". (Emphasis supplied). 2.9. This observation of the A.O. that from the circumstantial evidence it is proved beyond doubt that Sh. Dilip Kr. Paul was the person through whom labour payment s were made by the assessee, establishes that Sh. Dilip Kumar Paul was only making payments to labourers on behalf of the assessee and was not a labour sub-contractor. If Shri Dilip Kr. Paul was a subcontractor then he would have received the payment for himself and assessee would not have made payments to labour through him. The facts as discussed above do not support the A.O.'s view that Sh. Dilip Kr. Paul was a sub-contractor, rather they prove that Sh. Dilip Kr. Paul was only an employee of the assessee. Since Sh. Dilip Kr. Paul was not a sub-contractor and was only an employee of the assessee, there was no liability on the assessee to deduct tax at source u/s.194C of the Act from the funds transferred to Sh. Dilip Kr. Paul. 2.10. Also, for the provision of section 194C to be applicable the payments should be in pursuance of a contract between the payer and the payee. Existence of contr....
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....the admission of the fresh evidences on the basis that the assessee has not submitted the complete set of books. Ld. CIT(Appeals) noted that even he has sent before the Assessing Officer the affidavit submitted by Shri Dilip Kumar Paul along with the evidences to prove that Shri Dilip Kumar Paul was the employee of the assessee, but the Assessing Officer did not contradict the same. Before us also, the ld. D.R. simply relied on the order of the Assessing Officer but no cogent evidences or material were brought to our knowledge which may compel us to take a different view from the ld. CIT(Appeals). Since the assessee has made the payment to the labourers through the employee Shri Dilip Kumar Paul, therefore, we do agree with the ld. CIT(Appeal s) that it is not a case where the provisions of section 194C can be applied. We accordingly confirm the order of the ld. CIT(Appeals) deleting the addition of Rs. 3,29,05,000/-. 6. Ground No. 2 relates to the deletion of the addition of Rs. 30,98,000/- made by the Assessing Officer under section 40(a)(ia) of the Act. 7. The Assessing Officer noted that the assessee has made payment for vehicle charges as well as water charges and, therefore....
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....f such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i)one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii)two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay 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 no....
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....ny Government of a foreign State or a foreign enterprise or any association or body established outside India; or (k) any firm; or (l) any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,- (A) does not fall under any of the preceding subclauses; and (B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or 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 req....
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....pported by the decision of ITAT, 'A' Bench, Kolkata in the case of DCIT -vs.- Kamal Kr. Mukherjee & Co. in ITA No. 199/Kol/2010. We also noted that under section 194C, sub-section (5) proviso thereto, the aggregate amount of all the payments or credited should e xceed only Rs. 50,000/-, then the assessee shall be liable to deduct income-tax at source. 8. In view of our above discussion, the order of the ld. CIT(Appeals) has to be reversed. 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, 2n d proviso is curative 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 retrospective effect and accordingly contended that the issue be restored to the file ....
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.... their failure to deduct or to pay tax in accordance with law to the revenue." (emphasis supplied) That such was the legal position was accepted by the Central Board of Direct Taxes in its Circular No.275/201/95-IT(B) dated January 29, 1997. Reference in this behalf may also be made to the judgment of the Hon'ble Supreme Court in Hindustan Coca Cola Beverage P. Ltd. v CIT, (2007) 293 ITR 226 (SC) where the same view was taken. I find that the aforesaid settled position in law has also been legislatively recognized by insertion of a proviso in sub-section (1) of section 201 of the Act by the Finance Act, 2012. Thus, the settled position in law is that if the deductee/payee has paid the tax, no recovery can be made 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 th....
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.... the tax to be deducted by the payer and the tax paid by the payee, there is lack of clarity as to when it can be said that payer has paid the taxes directly. Also, there is no clarity on the issue of the cut-off date, i.e., the date on which it can be said that the payee has discharged his tax liability. In order to provide clarity regarding discharge of tax liability by the resident payee on payment of any sum received by him without deduction of tax, it proposed to amend section 201 to provide that the payer who fails to deduct the whole or any part of the tax on the payment made to a resident payee shall not be deemed to be an assessee in dealt in respect of such tax if such resident payee- (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....
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....ry verification in respect of the payment s and taxes of such income and al so filing the return by the recipient. In case, the Assessing Officer finds that the recipient has duly paid the taxes on the income, the addition made by the Assessing Officer shall stand deleted. Thus this ground is allowed for statistical purposes. 12. Ground No. 3 relates to the disallowance of Rs. 1,08,55,000/- on account of transport charges made by the Assessing Officer under section 40(a)(ia) of the I.T. Act. 13. The Assessing Officer noted that the assessee has debited a sum of Rs. 1,08,55,000/- in the Profit & Loss A/c. under the head 'transport charges'. But the assessee has not deducted any TDS as per the provisions of Chapter XVII-B and, therefore, he added the same in the income of the assessee under section 40(a)(ia) of the Act. 14. When the matter went in appeal before the ld. CIT(Appeal s), ld. CIT(Appeals) deleted the disallowance by observing as under:- "5.1. During the appellate proceedings the assessee has assailed the impugned disallowance by the AO contending that the tax was deducted at source from the....
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....which were not recorded in the books of account and the assessee offers no explanation about the nature and source of the investment or the explanation offered by him is not in the opinion of Assessing Officer satisfactory. The decrease in the value of assets by no stretch of imagination can be regarded to be an investment. We accordingly confirm the order of the ld. CIT(Appeals) in deleting the addition of Rs. 20,39,240/-. 18. Ground No. 5 relates to the deletion of addition of Rs. 15,56,051/-. In fact, we noted that the Assessing Officer had made a disallowance of Rs. 15,56,051/- but the ld. CIT(Appeals) reduced it to Rs. 3,89,013/-. The assessee got relief of Rs. 11,67,038/-. The ground taken by the Revenue, therefore, should be only Rs. 11,67,038/-. The Assessing Officer disallowed 20% of diesel and petrol expenses for verification but when the matter went in appeal, ld. CIT(Appeal s) reduced the disallowance to Rs. 3,89,013/-. 19. We have heard the rival submission and carefully considered the same along with the order of tax authorities below. We noted that the assessee has incurred total expenditure on account of diesel and pet rol expenses at Rs. 77,88,254/-. The Assessi....