TaxTMI 
TaxTMI 
2016 (8) TMI 1291
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....nt 1 India Bulls Credit Service Ltd. 4,66,125/- 2. Tata Capital Ltd. 2,48,538/- 3. Bajaj Finserve 39,586/- 4. Magma Fincorp Ltd. 84,127/- Total 8,38,376/- From the above details, it is seen that the assessee was liable to deduct the TDS and deposit the same into Govt. account on the above payments in terms of provisions of Section 194A. However, the assessee failed to comply with the respective provisions of the Act. Therefore, in terms of section 40(a)(ia), the expenses of Rs. 8,38,376/- are not liable to be allowed. Considering the same, the assessee was asked to show cause vide letter dated 30/10/2013, as to why the provisions of section 40(a)(ia) should not be invoked which would result in disallowance of above mentioned interest expenses." 3. The ld CIT(A) has upheld the order passed by the ld Assessing Officer by giving the following findings: "3.3.1 I have perused the facts of the case, the assessment order and the submissions of the appellant. Section 40(a)(ia) of the Act reads as under: "...any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a reside....
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...., Hon'ble ITAT, Mumbai in its order dated 2-8-2013 has examined the decision of the Hon'ble Allahabad High Court (supra) as regards to section 40(a)(ia) of the Act and concluded that the same was an 'orbiter dicta' while the decisions of the Hon'ble Gujarat and Calcutta High Court (supra) were 'ratio decidendi. The ITAT accordingly applied the view taken by the Hon'ble Gujarat and Calcutta High Court as ratio decidendi prevails over an orbiter dicta. 3.3.7 Circular No.10/DV/2013, dated, 16-12-2013, issued by the CBDT, states that- "4. After careful examination of the issue, the Board is of the considered view that the provision of section 40(a)(ia) of the Act would cover not only the amounts which are payable as on 31st March of a previous year but also amounts which are payable at any time during the year. The statutory provisions are amply clear and in the context of section 40(a)(ia) of the Act the term "payable" would include "amounts which are paid during the previous year". 4. Now the assessee is in appeal before us. It was submitted by the ld AR of the assessee that the issue is covered by the judgment of the Hon'ble Special Bench of Vishakha....
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....e entire accrued liability. If assessee was following mercantile system of accounting, then the moment amount was credited to the account of payee on accrual of liability, TDS was required to be made but if assessee was following cash system of accounting, then on making payment TDS was to be made as the liability was discharged by making payment. The TDS provisions are applicable both in the situation of actual payment as well of the credit of the amount. It becomes very clear from the fact that the phrase, 'on which tax is deductible at source under chapter 15B, was not there in the Bill but incorporated in the Act. This was not without any purpose. The Hon'ble High court of Himachal Pradesh in the case of Plam Gas Service Vs CIT, (2014) 83 CCH 0123 HPHCI (2015) 370 ITR 0740 (HP) held that: Lastly, insofar as the plea taken by the appellant that no disallowance can be made under section 40(a)(ia), as the freight charges had been paid and were not payable. Suffice it to state that the provisions of Section 40 (a)(ia) of the Act were applicable not only to the amount which were shown as outstanding on the closing of the relevant previous year, but to the entire expenditure whic....
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.... further been held that the fact that the recipient has subsequently paid tax will not absolve payee from consequence of disallowance u/s 40(a)(ia). Based on the facts as discussed above and in view of the decisions discussed as above, additions made by the Assessing Officer u/s. 40(a)(ia), on account of payment of interest to NBFCs and confirmed by Ld. CIT(A) are sustainable. 6. We have heard the rival contentions of both the parties and perused the material available on the record. Without adjudicating the issue of paid and payable, as much water has flown after the judgment in the case of Merilyn Shipping & Transports Vs Addl. CIT (Supra) was passed by the Special Bench of Vishakhapatnam ITAT, in as much as the Hon'ble Punjab & Haryana High Court in the case of PMS Diesels Vs CIT (2015) 277 CTR 0491 (P&H) has elaborately discussed the issue of paid and payable. The Hon'ble Punjab & Haryana High Court has held that the deduction of TDS tax is mandatory and non-deduction of tax leads to the consequences as provided under the Act. However, as present appeal can be decided on the basis of the finding of the Hon'ble Delhi High Court in the case of CIT Vs Ansal Plaza Mark Towns....
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....x withholding lapse per se is separately provided for in section 271C, and, section 40(a)(ia) does not add to the same. The provisions of section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee's tax withholding lapses did not result in any loss to the exchequer. Now, that the Legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well-settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an 'intended consequence' to punish the assessees for non- deduction of tax at source by declining the deduction in respect of rela....