TaxTMI 
TaxTMI 
2015 (11) TMI 744
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....on to the payments made by the appellant to its constituents and, therefore, no TDS need be made. 4. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the amounts were paid during the previous year under consideration and, therefore, the provisions of Sec. 40(a)(ia) of the I.T. Act are not applicable. 5. The learned Commissioner of Income-Tax (Appeals) ought to have seen that the appellant paid amounts to the partners of the JV and such amounts are not sub contract payments and hence the provisions of Sec.194C have no application. 6. Any other ground that may be urged at the time of hearing." 2. Briefly stated, assessee is a Joint Venture incorporated by two constituents namely M/s. PVR Projects Limited ("PVRPL") and M/s. APR Constructions Ltd., ("APRCL") for the purpose of obtaining contracts from the Government. It filed its return of income on 26.11.2012 admitting total income of Rs. 82,800. A.O. noticed that assessee has deducted the tax on payments made to sub-contractors but the same were paid belatedly in later years. Therefore, as per provisions of section 40(a)(ia) the payments to an extent of Rs. 29,07,34....
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....uction Due date as stipulated u/s.40(a)(ia) Actual date of remittance into Central Government Account. 1. 53,31,687 2010-2011 30.09.2011 01.11.2011 2. 15,64,893 2010-2011 30.09.2011 29.09.2012 Total 68,96,580 Thus, as can be seen, there is delay in payment of TDS to the Government and assessee having admitted that amounts paid are liable to be deducted under the provisions of the Act, it cannot now contend that there is no need for deducting tax. The Coordinate Bench in the case of CTR-RAILONE-JV vs. ITO, Ward 6(3), Hyderabad (supra), examined similar facts and came to the conclusion as under : "15. ... .... ...... ....Before us the assessee made a claim that the it is not liable to deduct TDS u/s. 194C of the Act. As seen from the above table, the assessee credited the contract receipt to the Profit and Loss A/c and also shown the subcontract expenses in the Profit and Loss A/c and deducted TDS also. This shows that the assessee has not entrusted the work to the other parties on back to back basis. Though the assessee claimed before that it had only carried on the work on Joint Venture basis and th....
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....ance on the basis of the period of the previous year in which tax was deductible. The first category of disallowances included the cases in which tax was deductible and was so deducted during the last month of the previous year but there was failure to pay such tax on or before the due date specified in subsection (1) of section 139 of the Act. - In otherwords, if any amount on which tax was deductible during last month of the previous year, that is March, 2005, but was paid before 31-10- 2005, being the due date U/s 139(1), the deductibility of the amount was kept intact. The second category included cases other than those given in category first. To put it simply, if tax was deductible and was so deducted during the first eleven months of the previous year, that is, up to February, 2005, the disallowance was to be made if the assessee failed to pay it before 31-3-2005. (Para 15). - Then came the amendment to section 40(a)(ia) by the Finance Act, 2010 with retrospective effect from 1-4-2010. (Para 16). - From the provision as amended by the Finance Act, 2010 with retrospective effect from 1-1-2010 it can be seen that the only difference which this amendm....
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.... achieved by those provisions are found to be achieved, it would be unjust to disallowance legitimate business expenses of an assessee. Despite due collection of taxes due, if disallowance of genuine business expenses are made than that would be unjust enrichment on the part of the Government as the payee would have also paid the taxes on such income. In order to remove this anomaly, this amendment has been introduced. In ease of payment to non-resident, the government does not have any other mechanism to recover the due taxes. Hence, no amendment was made in section 40(a)(i). The legislature has not given blanket deduction under section 40(a)(ia). The deduction as per amended section will be allowed only if the - (i) Payee has furnished his return of income under section 139; (ii) Payee has taken into account such sum for computing income in such return of income; and (iii) Payee 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 be prescribed. (Para 24). - The question is as to whether the amendment made as above is pro....
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....ct law is that section 40(a)(ia) covers not only to the amounts which are payable as on 31st March, of a particular year but also which are payable at any time during the year. The Hon'ble Kolkatta High Court in CIT v. Md. Jakir Hossai Mondal (2013) 33 taxman.com 123 did not agree with the view of the Special Bench in the case of Merilyn Shipping following its judgment on 3rd April, 2013 in ITAT No. 20 of 2013, G.A. No. 190 of 2013 (CIT, Kolkata-XI, vs. Crescent Export Syndicates (2013) 216 Taxman 258/33 taxmann.com 250 (Cal.) holding that the views expressed in the case of Merilyn Shipping & Transports [supra) were not acceptable. (Para 28). - However, the Allahabad High Court has however upheld the view taken by the Special Bench ITAT in the case of Merilyn Shipping & Transports (supra) in the case of CIT v. Vector Shipping Services (P.) Ltd., (2013) 357 ITR 642/218 Taxman 93/38 taxmann.com 77 (All.) (Para 29). - Thus there are two views on the issue, one in favour of the assessee expressed by the Hon'ble Allahabad High Court and the other against the assessee expressed by the Gujarat & Calcutta High Courts. Admittedly, there is no decision rendered by the j....
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....in loss of revenue and may deprive the Government of the tax due and payable" (emphasis' supplied)'. Having noted the underlying objectives, their Lordships also put in a word of caution by observing that, 'the provision should be interpreted in a fair, just and equitable manner'. Their Lordships thus recognised the bigger picture of realisation of legitimate tax dues, as object of section 40(a)(ia), and the need of its fair, just and equitable interpretation. This approach is qualitatively different from perceiving the object of section 40 (a) (ia) as awarding of costs on the 'assessees who fail to comply with the relevant provisions by considering overall objective of boosting TDS compliance'. Not only the conclusions arrived at by the Special Bench were disapproved but the very fundamental assumption underlying its approach, i.e., on the issue of the object of section 40(a)(ia), was rejected too. In any event, even going by Bharati Shipyard Ltd. v. Deputy CIT (2011) 11 ITR (Trib.) 599 (Mum) (SB) decision, what we have to really examine is whether 2012 amendment, inserting second proviso to section 40(a)(ia), deals with an 'intended consequenc....