TaxTMI 
TaxTMI 
2016 (3) TMI 588
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....)inasmuch as the assessee is not deemed to be an assessee in default under the first proviso to sec201(1). As such, disallowance under sec.40(a)(ia) in respect of Carriage Charges is not sustainable in law. 4. That the appellant craves leave to add, alter or delete all or any of the grounds of appeal. " 3. The Assessee is an individual. He carries on the business of distribution of Kerosene Oil. In the course of assessment proceedings for AY 09-10, the AO noticed that the Assessee had claimed deduction of expenditure to the tune of Rs. 13,70,500/- on account of carriage charges. Out of the said sum a sum of Rs. 4,93,600/-, according to the AO, was made payments to contractors for carrying out work on which payment tax at source had not been deducted as required by the provisions of sec.194- C of the Income Tax Act, 1961 (Act). Invoking the provisions of Sec.40(a)(ia) of the Act, which provides that where there is a duty to deduct tax at source and tax had not been deducted, the expenditure in respect of which tax at source had not been deducted will not be allowed as deduction while computing income from business of an Assessee, the AO disallowed Rs. 4,93,650/- and adde....
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....he sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident - (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 person furnishes a certificate to this effect from an accountant in such form as may be prescribed: 6. Memorandum explaining the provisions while introducing Finance Bill, 2012 provides the justification of the amendment to section 40(a)(ia) in the following words:- "In order to rationalise the provisions of disallowance on account of nondeduction of tax from the payments made to a resident payee, it is proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it sh....
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....o to s. 43B of the IT Act, 1961 (for short, "the Act") restricted the deduction in respect of any sum payable by an employer by way of contribution to provident fund/superannuation fund or any other fund for the welfare of employees, unless it stood paid within the specified due date. According to the second proviso, the payment made by the employer towards contribution to provident fund or any other welfare fund was allowable as deduction, if paid before the date for filing the return of income and necessary evidence of such payment was enclosed with the return of income. In other words, if contribution stood paid after the date for filing of the return, it stood disallowed. This resulted in great hardship to the employers. They represented to the Government about their hardship and, consequently, pursuant to the report of the Kelkar Committee, the Government introduced Finance Act, 2003, by which the second proviso stood deleted w.e.f. 1st April, 2004, and certain changes were also made in the first proviso by which uniformity was brought about between payment of fees, taxes, cess, etc., on one hand and contribution made to Employees' Provident Fund, etc., on the other. 9.....
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.... of filing of the return under the IT Act (due date), the assessee(s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only w.e.f. 1st April, 2004, would become curative in nature, hence, it would apply retrospectively w.e.f. 1st April, 1988. Secondly, it may be noted that, in the case of Allied Motors (P) Ltd. Etc. vs. CIT (1997) 139 CTR (SC) 364 : (1997) 2....
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....ree learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003, will operate retrospectively w.e.f. 1st April, 1988 (when the first proviso stood inserted). Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example-in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March (end of accounting year) but before filing of the Returns under the IT Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under s. 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution afte....
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.... on lower income in a subsequent year. To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. 11. The Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Towship (I) Pvt.Ltd., in ITA No.160/2015 judgment dated 26.8.2015 has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. Thus the alternative prayer of the learned counsel for the Assessee in terms of Ground No.3 is accepted. Ground No.1(a) & (b) therefore does not require any adjudication. 12. Ground No. 2 raised by the Assessee reads as follows: "2(a) For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs. 6,60, 1501- made by the Ld. A.O. on the ground that the assessee failed to submit the vocuhers in support of expenditure to the tune of Rs. 6,60,1501- out of the total expenditure of Rs. 13,70,5001- claimed under the head Carriage Charges. (b) For that the Ld. CIT(A) erred in confirming the action of the Ld. A.O. by making the addition of Rs. 6,60,1501- by alternatively invoking the provisi....