AI Drafter 
TaxTMI 
TaxTMI 
2016 (8) TMI 600
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....12A nor registered u/s 10(23C)(vi) of the Income Tax Act, 1961. The assessee has filed return of income declaring income from other sources. The case has been selected for scrutiny and accordingly, notice u/s 143(2) was issued. In response to notice, the authorized representative appeared and submitted books of accounts and other information. During the course of assessment proceedings, the A.O. noticed that the assessee has filed return in the status of AOP and considered income under the head income from other sources, however, in the past, it has declared income under the head income from business. Therefore, issued a show-cause notice and asked explain why the income shall not be considered under the head income from business or profession. In response to show cause notice, the assessee stated that the Society is charitable Society solely existing for imparting education and not for the purpose of profit, therefore the income should be assessed under the head income from other sources. The assessee further submitted that the memorandum of Association or By -laws of any organization convey the objects and nature of activities that are to be carried out by the organization. The S....
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.... assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O., with regard to nature of activities and the head of income under which the income of the assessee to be assessed, however, could not offered any explanation on disallowance and additions on merits. The assessee further submitted that the A.O. was not justified in invoking the provisions of sec. 28 to 44 of the Income Tax Act, 1961 as none of the provisions are applicable to the income of a charitable organization covered under sec. 2(15) of the Income Tax Act. It was further contended that it has solely existing for imparting education and it is continued to do the activities in accordance with the objects, therefore, the A.O. was not correct in concluding that the activities are in the nature of business and as a result the A.O. was wrongly applied the provisions of sec. 40(a)(ia) and other provisions of the Act. The CIT(A), after considering the explanations of the assessee held that the A.O. has rightly assessed the income under the head income from profits and gains of business or profession. The CIT(A) further held that the activity carried out by t....
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....consideration is disallowance of advertisement and professional charges u/s 40(a)(ia) of the Act. During the course of assessment proceedings, the A.O. noticed that the assessee has incurred advertisement expenses and professional charges without deduction of tax at source under respective provisions of Chapter XVII-B of the Act, therefore, disallowed a sum of Rs. 25,12,651/- and Rs. 12,90,386/- under the provisions of sec. 40(a)(ia) of the Act. The A.O. was of the opinion that the assessee ought to have deducted TDS, however failed to deduct TDS as required under the Act, therefore, the expenditure is not allowable as deduction. It is the contention of the assessee that out of the total disallowance of Rs. 25,12,651/- and Rs. 12,90,386/- a sum of Rs. 22,56,980/- and Rs. 9,27,393/- has been paid during the financial year before 31st March, therefore, in view of ITAT, Visakhapatnam Special Bench Decision, in the case of Merlyn Shipping & Transporters vs. ACIT, (2012)136 ITD 23, no disallowance can be made for the amounts which are paid during the same financial year. The assessee also relied upon the decision of Hon'ble Allahabad High Court, in the case of Vector Shipping Services P....
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....me during the relevant previous year and was actually paid within the previous year? Consequently, special bench was constituted and the aforesaid question was answered in favour of the assessee. According to the majority view, it was held that section 40a(ia) of the Act is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which have already been paid during the year without deducting tax at source. 2. Issue involved in this appeal is with regard to the disallowance of payments of Rs. 38,75,000/- towards brokerage and Rs. 2,43,253/- towards commission on non-deduction of TDS by invoking the provisions of section 40a(ia) of the Act. The assessee's case was that the entire brokerage in commission payments were actually paid during the financial year excepting an amount of Rs. 1,78,025/- which remained payable as on 31.3.2005. The claim of the assessee was rejected by the revenue resulting in an appeal before us by the assessee. Following the majority view of the special bench, the provisions of section 40a(ia) cannot be invoked with respect to the aforesaid payments which were actually paid during the finan....
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....l be deemed that the assessee has deducted and paid the tax on such some on the date of furnishing of return of income by the resident payee referred to in the said proviso. The proviso inserted by the finance bill is to rationalize the provisions, and hence, it is clarificatory in nature, its operation should be retrospective in nature. This view was expressed by the ITAT, Agra Bench in the case of Rajeev Kumar Agarwal vs. ACIT. Therefore, no disallowance can be made under sec. 40(a)(ia), if the recipient has included the such some in the return filed for the relevant assessment year. 11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. disallowed interest paid on unsecured loan under the provisions of sec. 40(a)(ia) of the Act, for the reason that the assessee has filed to deduct TDS on interest payments. The A.O. was of the opinion that any expenditure on which TDS provisions are not complied with respective TDS provisions, then deduction cannot be allowed towards such expenditure in view of clear provisions of sec. 40(a)(ia) of the Act. It is the contention of the assessee that payee Sri ....
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....g said that let us examine, whether second proviso inserted by the Finance Act, 2012, w.e.f. 1-4-2013 is prospective or retrospective in nature. The memorandum explaining the Finance Bill 2012 states that "in order to rationalize the provisions of disallowance on account of non-deduction of tax at source from the payments made to resident payee, it is proposed to amend sec. 40(a)(ia) by inserting the proviso. Thus, as the proviso is inserted to rationalize the existing provisions, it has to be taken to be clarificatory in nature. This view was expressed by the coordinate Bench of ITAT, Agra in the case of Rajeev Kumar Agarwal vs. Addl.CIT in ITA.No. 337/Agra/2013 dated 29-05-2013, wherein the Bench held that second proviso to sec. 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April 2005, being the date from which sub clause (ia) of sec. 40(a) was inserted by the Finance (No.2) Act, 2004. Therefore, we are of the view that in view of the second proviso to sec. 40(a)(ia) of the Act, if assessee fails to deduct TDS, but is not deemed to be an assessee in default under the first proviso to sub sec. (1) of sec. 201, then, for the purpose of thi....