AI Drafter 
TaxTMI 
TaxTMI 
2017 (7) TMI 303
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.... on facts and in law in alleging that the additions are required to be made on account of non deduction of tax at source u/s 40(a)(ia) of the Income Tax Act,1961("The Act"). 2. That the Ld. CIT(A) has erred on facts and in law in not considering that the payments have been made to a statutory body M/S H.P. Bus Stands Management and Development Authority, Shimla which is a government department. Thus, there is no question of a bogus payment, the moot point to curb bogus payments when the law was enacted. 3. That the Ld. A.O has erred on facts and law in alleging as above without appreciating that the said govt. organization has duly shown the said payments in its Return of Income. The Ld. CIT(A) was of the view that the ass....
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....the said payments in its income and had paid taxes on the same. Ld. Counsel for the assessee submitted that this pleading had been taken before the Ld. CIT(A) also but in the absence of evidence proving that the payee had paid taxes on the same, Ld. CIT(A) had not accepted the assessee's contention. Ld. Counsel for the assessee thereafter stated that it had evidence to prove and substantiate its claim which it wished to now produce before us by way of additional evidence. Ld.counsel for the assessee filed an application in this regard dated 06/09/2016. Ld. Counsel for the assessee further pleaded that since these documents were to be procured/ obtained from the payee, they could not be submitted during appellate proceedings and therefore, r....
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....d it in its Return of Income, no disallowance on account of the said payment/ expenses is to be made in the hands of the payer. The Hon'ble Delhi High Court in the case of CIT -1 vs Ansal Land Mark Township (P) Ltd in ITA No.160/2015 & 161/2015 dt.26-08-2015, has laid down the said proposition holding as under: "12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present....
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....r not, on a "fair, just and equitable" interpretation of law- as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an "intended consequence" to disallow the expenditure, due to non deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of Section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not, in our considered view, a penalty for tax withholding lapse but ....
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....of second proviso to Section 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 section 40(a) was inserted by the Finance (No. 2) Act, 2004." 14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance. 15. In that view of the matter, the Court is unable to find any legal infirmity in the impugned order of the ITAT in adopting the ratio of the decision of the Agra Bench, ITAT....