TaxTMI 
TaxTMI 
2016 (3) TMI 1062
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....n of tax at source incomplete disregard to the submissions made by the Appellant Firm." 3. I heard the rival submissions and carefully considered the same. I noted that the AO found during the course of assessment proceedings that the assessee has not deducted tax at source on account of interest paid to various loan depositors amounting to Rs. 2,52,043/-. Similarly, the assessee has paid car hire charges without deduction of the tax at source amounting to Rs. 1,44,000/-. The AO, therefore, disallowed both the expenses u/s 40(a)(ia) of the Income-tax Act, 1961 (hereinafter 'the Act'). The provisions of section 40(a)(ia) are very clear if the assessee fails to deduct the tax at source or after deduction has not paid before the due date specified in sub -section (1) of section 139, the same will not be allowed in computing the income under the head "profit and gains of business or profession". Before he, 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 curative in nature intended to supply an obvious omission, take care of an unintended consequenc....
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....ain, but that does not mean that the assessee will not be liable for payment of interest or any other legal consequence for 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.275/20l/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 ....
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....m the date on which such tax was deductible to the date on which the payee has discharged his tax liability directly. As there is no one-to-one correlation between 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 a....
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....R 635 has taken the similar view. No contrary decision was brought to my knowledge by the ld. D.R. By respectfully following the said decision, I restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Officer with regard to the recipients of the income and taxes paid by them. The Assessing Office r shall carry out necessary verification in respect of the payments and taxes of such income and also 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, both the grounds no.1 & 4 are statistically allowed. 4. Ground No.2 relates to the sustenance of the addition of a sum of Rs. 3,60,540/- made by the AO on account of remuneration paid to partners of the assessee firm in excess of the limits prescribed u/s 40(b) of the Act. 5. The brief facts of the ground are that on perusal of the profit & loss account of the assessee, the AO noted that the assessee included a sum of Rs. 10,20,430/- being the profit on sale of the goddown on which it had been claimi....