AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 753
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....essee in the year in which the Assessee complies with the deduction obligation of deduction and payment to the Government and the learned CIT (A) has erred in law and in facts in confirming the Asstt. Orders." 4. The Assessee is a partnership firm engaged in the business of civil contractor. The AO in the course of assessment proceedings found that the assessee had claimed expenditure to the tune of Rs. 1,27,44,615/- on account of labour charges . According to the AO the aforesaid payments were payments made for carrying out work and therefore attracted the provision of section 194C of the Income Tax Act, 1961 (Act) warranting deduction of tax at source at the time of payment of labour charges. Since the tax was not deducted at source, the AO invoking the provision of section 40(a)(ia) of the Act, disallowed the claim of the assessee for deduction of the aforesaid sum and added the same to the total income of the assessee. 5. On appeal by the assessee CIT(A) confirmed the order of AO. Aggrieved by the order of CIT(A) assessee has preferred ground nos. 4 and 5 before the Tribunal. 6. The prayer of the learned counsel for the Assessee before us was to give a direction to the....
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.... 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: 8. 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 shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee." 9. The provisions of Sec.40(a)(ia) of the Act are meant to ensure that the Assessee's perform their obligation to deduct tax at source in accordance with the provisions of the Act. Such compliance will ensure revenue coll....
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....ution 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. 11. According to the Department, the omission of the second proviso giving relief to the assessee(s) [employer(s)] operated only w.e.f. 1st April, 2004, whereas, according to the assessee(s)-employer(s), the said Finance Act, 2003, to the extent indicated above, operated w.e.f. 1st April, 1988 (retrospectively). The Hon'ble Supreme Court held that the deletion of the....
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....f 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) 224 ITR 677 (SC), the scheme of s. 43B of the Act came to be examined. In that case, the question which arose for determination was, whether sales-tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant sales-tax law should be disallowed under s. 43B of the Act while computing the business in....
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....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 after 1st April, 2004, would get the benefit of deduction under s. 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1st April, 1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate ....
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....a) of the Act is retrospective and will apply from 1.4.2005. Thus the alternative prayer of the learned counsel for the Assessee to remand the issued to the AO for verification as to whether payees have included the receipts from the Assessee in their returns of income in terms of the decisions referred to above is accepted. The relevant Grounds are treated as allowed for statistical purpose. 14. Ground No.6 raised by the assessee reads as follows :- "6. That here we pray for relief for adhoc addition of Rs. 5,97,436/- without sufficient grounds arid the learned CIT (A) has error in ignoring the Judicial decision that noninclusion of amount of Rs. 5,97,436/- in Purchase Amount only fair profit rate should be taken." 15. In the course of assessment proceedings the AO noticed that the purchases as shown by the assessee in the books of accounts and the corresponding sale shown by the parties from whom the assessee made purchases contained certain variation. The AO called upon the assessee to furnish the details evidencing the purchases. On going through the bills the AO found that the assessee firm had not included the following purchase in its books of accounts. Sl.....