TaxTMI 
TaxTMI 
2016 (5) TMI 1369
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....O in making addition of Rs. 57,000/- of unsecured loans from parties under section 68 of the Income Tax Act, 1961 :- S.No. Name of the Party Amount 1. Bhawana Kararia Rs. 19,000/- 2. Shri Ajay Mahawar Rs. 19,000/- 3. Shri Yogesh Sharma Rs. 19,000/- Total Rs. 57,000/- The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 57,000/-. 2. The brief facts of the case are that the assessee is engaged in the business of manufacturing and trading of iron steel furniture for office, hospital furniture and agriculture items, mainly supplied to the Government Departments. The assessee has filed the return on 29.09.2008 declaring total income of Rs. 3,50,670/-. The case of the asseessee was scrutinized under section 143(3) and assessment completed on 24.12.2010 at Rs. 10,33,830/. 2.1. During the year under consideration, the assessee has shown gross profit of Rs. 35,05,356/- on a total sales of Rs. 2,53,12,664/- giving a gross profit rate of 13.85% in comparison to immediately preceding year at 9.88% and....
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....terest of Rs. 3,34,612/- regularly. While making the interest payment which exceeds Rs. 5,000/-, the TDS should be deducted on the amount and net amount will be paid. However, the assessee has not done so far i.e. the TDS has not been deducted by the assessee. Hence, the AO disallowed Rs. 3,34,612/- on which TDS was not deducted by the assessee and added the interest income to the total income of the assessee. During the course of appeal hearing the A/R for the appellant submitted that in this regard it is submitted that section 40(a)(ia) has been amended vide Finance Act, 2012 as under - " Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provision of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub section (1) of section 201, then for the purpose of this sub clause, 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 referred to in the said proviso." As per section 201 of the It Act, 1961 the assessee shall not be deemed to be an assessee i....
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....pecial Leave Petition (SLP) in the Supreme Court which was dismissed by the Supreme Court vide its order dt.02.07.2014. Thus, there are two views on this issue, one in favour of the assessee and other against the assessee. Considering these views, the various benches of Hon'ble ITAT, after considering the various amendment made to section 40(a)(ia) from time to time to remove the undue hardship and considering the decision of Supreme Court in case of CIT Vs. Vegetable Products Ltd. 88 ITR 192 where it is held that when two views are possible on an issue, the view in favour of the assessee has to be preferred deleted the disallowance. He also relied on the following case laws: (i) DCIT Vs. Ananda Marakala (2014) 150 ITD 323 (Bang.) (Trib.) (ii) ITO Vs. M/s Theekathir Press (Chennai)(Trib.) ITA No. 2076(Mds)2012 dt. 18.09.2013 The issue of applicability of TDS on amount payable as on 31st march only is also covered by the decision of the Hon'ble ITAT Jaipur Bench in case of JVVNL V. DCIT 123 TTJ 888 wherein it was held that section 40(a)(ia) applies only when the amount is payable and not where the expenditure is paid. Therefore where the assessee has made actual....
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....unt of expenditure results into undue hardship and therefore In order to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed." The Finance Minister while introducing the amendment in para 207 of the Budget Speech has stated as under:- "207. Currently, where an assessee fails to deduct and pay tax on specified payments to residents, 100 percent of such payments are not allowed as deduction while computing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed." From the above it can be noted that the amendment made by FA (No.2) Act, 2014 w.e.f. 01.04.2015 is to remove unintended and undue hardship and therefore this amendment should be give retrospective effect as per the various decisions stated above. It is also submitted that the Supreme Court in case of CIT Vs. Vatika Township Pvt. Ltd. 109 DTR 33 has held that leg....
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....r hand, the ld. D/R has relied upon the order passed by the authorities below and supported the disallowance made by the AO. 4.3. We have heard the rival parties and perused the material available on record. Factually it is not discernable from the record that the interest payment has actually been made during the year to the extent of Rs. 3,34,612/-. The Bench has enquired from the ld. A/R whether the said amount has already been paid in the year, to which the ld. A/R has shown his inability to assist the court. In the absence of any concrete answer, the Bench has left with no other option but to hold that the said amount has not been paid during the year. Moreover, this Tribunal in the case of Shri Rajendra Yadav has held as under :- "6. We have heard rival contentions and perused the material available on record. It is an admitted fact that the appellant carried on the business of trading of marble tiles and slab. It is also an admitted fact that the marble blocks are purchased by the assessee and the same marble blocks are sent to M/s. Garvit Stonex, M/s. Chanda Marbles & M/s. Nidhi Granites for the purpose of sawing and edge cutting with a view to convert the marbl....
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....sels 2015 ] 59 taxmann.com 100 (Punjab & Haryana), Hon'ble Punjab & Haryana High Court had elaborately discussed the judgment passed by the Hon'ble Calcutta High Court and Hon'ble Gujarat High Court, Hon'ble Allahabad High Court and other judgments as available and thereafter has come to the conclusion that the provisions of section 40(a)(ia) are mandatory in nature and non compliance/non deduction of tax attracts disallowance of the entire amount. Having said so, we will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of Rs. 7,51,322/- by disallowing the whole of the amo....