TaxTMI 
TaxTMI 
2016 (8) TMI 52
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....ase discount without any basis. 3. On the facts and in the circumstances of the case the Ld.C.I.T (A) is not justified in confirming the disallowance of 20% of Motor Car Expenses and Telephone Expenses i. e .. 20% of( Rs. 3,18,848/- + Rs. 76,211 ) = Rs. 79,011/- and 100% of Mobile Expenses Rs. 43,910, thus aggregating to Rs. 1,22,921. 4. On the facts and in the circumstances of the case the C.I.T (A) is not justified in confirming the disallowance U/s 24 of the Act of interest of Rs. 52,771/- on the Housing Loan with total disregard to the provisions of Sec 26. 2. Ground no. 1 relates to confirmation of addition made u/s. 40(a)(ia) of the Act. In the course of assessment proceedings for the A.Y. 2009-10, the Assessing Officer noticed that assessee had made payments of labour charges of Rs. 13,99,171. The assessee was liable to deduct tax at source on such payments u/s. 194C of the Act. The assessee deducted tax at source on the payments made to sub-contractors and payment of the tax so deducted was paid to the credit of the Government only on 22.7.2009. As per the provisions of section 40(a)(ia) of the Act, any payments made to a contractor or a subcontractor w....
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....ying out any work), on or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 : Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Explanation. - For the purposes of this sub-clause, - (i)"commission or brokerage" shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii)"fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (iii)"professional services" shall have the same meaning as in clause (a) of the Explanation to section 194J; (iv)"work" shall have the same meaning as in Explanation III to section 194C; " 5. The Memorandum explaining the provisions in the Finance Bill explained the rationale of the inse....
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....ch such tax has been paid." ; 7. The Finance Act, 2008 brought out amendment to section 40(a)(ia) w.r.e.f. 1.4.2005 by relaxing earlier position to some extent. It made two categories of defaults causing disallowance 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 sub-section (1) of section 139 of the Act. In other words, if any amount on which tax was deductible during last month of the previous year, that is March 2005, but was paid before 31st October, 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 31st March, 2005. 8. Then came the amendment to section 40(a)(ia) by the Finance Act, 2010 with retrosp....
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.... the assessee fails to pay the amount of tax on or before the due date specified in sub-section (1) of section 139 of the Act. The effect of this amendment is that now the assessee deducting tax either in the last month of the previous year or first eleven months of the previous year shall be entitled to deduction of the expenditure in the year of incurring it, if the tax so deducted at source is paid on or before the due date u/s 139(1). This is the only difference which has been made by the Finance Act, 2010. 10. The question as to whether the Amendment by the Finance Act, 2010 as aforesaid is prospective or retrospective from 1.4.2005 came up for consideration before the Mumbai Special Bench ITAT in the case of Bharati Shipyard Ltd. Before the Special Bench it was argued that the amendment was made with a view to remove the unnecessary hardship caused to the assessee by the earlier provision. The Special Bench by its order dated 9.9.2011 however held that the amendment carried out by the Finance Act, 2010 with retrospective effect from assessment year 2010- 2011 cannot be held to be retrospective from assessment year 2005-2006. The Special Bench held that the amendment brough....
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....he Hon'ble Finance Minister and by applying the decision of the Hon'ble Apex Court in the case of Alom Extrusions Ltd., has observed that "The provisions of Section 40(a)(ia) as stood prior to the amendments made by the Finance Act 2010 thus were resulting into unintended consequences and causing grave and genuine hardships to the assesses who had substantially complied with the relevant TDS provisions by deducting the taxes at source and by paying the same to the credit of the Government before the due date of filing of their returns u/s.139(1). In order to remedy this position and to remove the hardships which was being caused to the assessee belonging to such category, amendments have been made in the provisions of Section 40(a)(ia) by the Finance Act, 2010. The said amendments, in our opinion, thus are clearly remedial/curative in nature as held by the Hon'ble Supreme Court in the case of Allied Motors Pvt.Ltd. (supra) and Mom Extrusions Ltd. (supra) and the same therefore would apply retrospectively w.e.f. 1st April, 2005. In the case of R.B.Jodha Mal Kuthiala 82 ITR 570, it was held by the Hon'ble Supreme Court that a proviso which is inserted to remedy unintended consequence....
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....nserted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well. In view of the authoritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence we dismiss the appeal without any order as to costs." 13. It can be seen from the above decision of the Hon'ble Calcutta High Court that Amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 as aforesaid was held to be retrospective from 1.4.2005. If the amendment is considered as retrospective from 1.4.2005, the effect will be that payments of TDS to the credit of the Government on or before the last date for filing return of income u/s.139(1) of the Act for the relevant AY have to be allowed as deduction. Admittedly in the case of the Assessee payments were so made before the said due date and in terms of the decision of the Hon'ble Calcutta High Court no disallowance could be made by the AO u/s. 40(a)(ia) of the Act. 14. In view of the above, we hold following the decision of the Hon'ble Calcutta High Court, that Amendment to the provisions of Sec.40(a)(ia) of the Act, by th....
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....mount received from the parties. In the course of assessment the A/Rs of the assessee were failed to clarify the same by producing relevant documents, party ledger etc. So, a show cause letter was issued to the assessee requesting to clarify as to why the same would not be considered as income earned by you otherwise which was not routed through P & L A/c. In response, the assessee had submitted that in first two cases, cheques were issued in earlier year. As the said cheques were not cleared the same had been reversed during the year and in the case of Riddhi Siddhi Enterprise the amount was received on behalf of sister concern, M/s. Ayush Steel. This contention of the assessee was not acceptable on the ground that the assessee merely stated in its submission dated 29-11-11 that cheques were issued but not cleared and the same had been reversed back, but in support of his contention, the assessee did not produce any supporting evidence to prove that cheques were issued earlier and the same had been reversed back. Moreover, if the same had been reversed, then a contra entry should have been passed in the party ledger instead of amount receipt. Moreover, in the course of assessment,....
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....ubstantiate the facts. So, it is considered that the assessee had received such income in the nature of Purchase discount from the parties that had not been reflected in the P& L A/c. Considering the above, Rs. 8,76,400/- is treated as income of the assessee for the relevant assessment year and the same is added back to the total income of the assessee. " 17. Before the CIT(A), the assessee submitted as under:- "The assessee would like to humbly submit that the contention of the AO to treat the amounts credited in the ledger of creditors on account of cheque issued but not presented for payment as purchase discount and subsequently treat the same is erroneous and without application of mind. The same is nothing but result of imaginary .thinking from fertile brain. Firstly, even if the unreasonable contention of AO is accepted for a moment that the assessee had received purchase discount in that case, as per elementary accounting principles, the amounts would not have been credited in the books of sundry creditors but debited in their ledger. Thus, the contention of the AO to treat credit entries as purchase discounts is prima facie incorrect and without any log....
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....ly submits that the Hon'ble Jurisdictional Calcutta High Court in the case of Smt. Protima Roy -Vs. CIT (1982) 138 ITR 536 (Cal) has held that what is apparent has to be taken as real unless contrary is proved and the onus to prove the contrary is on the party making allegation. Similar view has also been taken in the case of CIT -vs.- Daulat Ram Rawatmull (1973) 87 ITR 349 (Se) by the Hon'ble Apex Court. In the present case, the AO is making an allegation that credit entries made in the ledger of sundry creditor accounts are purchase discounts, without any evidence of the same. Moreover, the contention of the AO is also based on illogical reasoning which are evidently incorrect. If at all, the assessee would have received any discount, it would have not been credited but debited in the edger. Hence it is pleaded before your good self to reject the false and illogical reasoning as advanced by the AO and treating contra entries in relation to cheques not presented for payment as income of the assessee and delete the additions based on them in the interest of justice. " 18. The CIT(A) considering the submissions of the assessee about the discrepancies found by the AO with ....
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....01.04.2008 to 31.03.2009 were also perused in this regard. A confirmation letter from Jai Ambe Multi Trade (P) Ltd that cheque of Rs. 1,50,000/- was reversed, as it was not cleared is also on record. Therefore the assumption that it should be income being in the nature of discount is completely baseless. 20. The perusal of record shows that the AO did not make any enquiry from the above said three parties. We are of the view that an enquiry from the aforesaid three parties ought to have been made by the AO to find out the truth of claim made by the assessee. The CIT-A also did not make such enquiries. We therefore, set aside the order of CIT-A on this issue and remanded the same to the AO to make enquiries from the aforesaid three parties and affording opportunities to the Assessee and decide the issue afresh. Ground no.2 is allowed for statistical purposes. 21. Ground no.3 relates to confirmation of disallowance on motor car and telephone expenses and other expenses. 22. The ld. CIT-A sustained the order of AO on the issue raised in ground no.3 by observing as follows:- "6.2 I have carefully examined and considered the written submission made by the A.R of the ap....
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....pellant has submitted as under: "It is humbly submitted that assessee had taken the loan and the same has been accounted in his balance sheet The entire interest is being paid by assessee only and he has not recovered any interest from Mrs. Sangeeta Tekriwal. Therefore, assessee only is eligible for -deduction under section 24. Mrs. Sangeeta Tekriwal is not incurring any interest on the housing loan for the said property and is therefore not eligible for any deduction under section 24. Section 24 of the Act nowhere states that deduction will be allowed only to an assessee who has applied loan without assigning any co-applicant. Actually Mrs. Sangeeta Tekriwal had obtained another loan from ICICI bank which was accounted in her return and she had also paid in her individual capacity Rs. 94,483/- on account of principal and Rs.l,2~641/- on account of interest separately. Certificate from ICICI Bank is enclosed and marked as Annex. 11. Without prejudice to above, if the contention of AO is accepted that Mrs.Sangeeta Tekriwal is also a co-owner of the property, in that case also assessee would be entitled to claim 100% of interest as borne by him for the purposes of section 24....