TaxTMI 
TaxTMI 
2019 (5) TMI 616
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....thout considering the existence of sufficient and reasonable cause Ld. CIT(A) has upheld the disallowance. Therefore, the order passed by Ld. CIT(A) suffers from illegality. b. That even if the relief is allowed to the appellant in accordance with first proviso to section 40(a)(i)(a) then the assessee will not get effective relief as against the tax liability for the present year of a sum of Rs. 2.66 crores, the relief which will be allowable to the appellant will be only a meager sum of Rs. 10,17,338/-. Thus, it was demonstrated that the grant of relief under first proviso in the year in which TDS was paid will not be an effective remedy to the appellant and, therefore, the disallowance in the year under consideration has brought unintended hardship to the appellant as has been recognized by Hon'ble Jurisdictional High Court in the case of CIT vs Naresh Kumar 362 ITR 256 (Del). c. That the disallowance u/s 40(a)(ia), as held by the courts, is not penal in nature and is harsh, therefore, any amendment brought in section 40(a)(ia), which is intended to reduce the harshness of the provision, has to be liberally interpreted in favor of defaulters, more particularly w....
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....of income tax return was filed) in its entirety as disallowance only to the extent of 30% of Rs. 54,07,248/- was required to be made by granting the benefits of amendments brought in section 40(a)(ia) by Finance (No 2) Act 2014 w.e.f 01.04.2015 as the said amendments has been considered to have retrospective applicability by the several decisions rendered by ITAT which were also relied upon in the written submission filed before Ld.CIT(A). 4. Without prejudice to the above, under the facts and circumstance of the case even if it is held that assessee is not entitled to get benefit of second proviso even to the extent of Rs. 4,92,46,824/-( in respect of 7 dedcutees for which the evidence was filed before CIT(A) and which was also confronted to AO and is also subject to remand report), the Appellant is entitled to get benefit of reduced disallowance of 30% on the entire disallowance of Rs. 5,72,34,330/- on ground of retrospective applicability of amendments brought in section 40(a)(ia) by Finance (No 2) Act, w.e.f 01-04-2015 whereby the disallowance is reduced to 30% from 100%. Thus, the appellant is entitled to get relief of 70% of entire disallowance and thus the disallowa....
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....business activities. After the death of deceased Director on 13.02.2015, assessee recovered from mental stress and deposited the TDS on 26.03.2015 and 01.02.2016. It was submitted that TDS payable was of Rs. 17,16,461/-, but, the addition is made of Rs. 5.72 crores. The assessee relied upon Judgments of Hon'ble Delhi High Court in the case of CIT vs. Naresh Kumar (2014) 362 ITR 256 (Del.) on the proposition that the provisions of Section 40(a)(ia) can be and should be interpreted in a liberal and equitable manner so that the assessee should not suffer any unintended and deleterious consequences beyond what the object and purpose of the provision mandates. The assessee filed certificate of illness of the Director. It was also submitted that since the amount is paid by the deductee, therefore, assessee should not be held to be in default of TDS. The assessee filed copies of the acknowledgment of income tax return filed by the deductees to whom these payments have been paid and they have declared such amount as income in their return and paid the taxes thereon. Several decisions in support of the contention were also relied upon. The Ld. CIT(A) considering the circumstances explained ....
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....vide Finance Act, 2014 whereby disallowance in respect of default in payment of TDS in case of payments to residents is restricted to 30% instead of 100%, and since the amendment is curative in nature and have been made to remove the undue hardships to the assessee and accordingly should be applied retrospectively. • In the present case, Ld. AO has erred in disallowing that 100% of the expenditure incurred of Rs. 5,72,34,330/- u/s 40(a)(ia) of the Act despite the fact that it could be disallowed only @ 30%. • Further, the Ld. CIT(A) has also erred in confirming the disallowance, without appreciating the fact that in view of the amendment and disallowance cannot exceed 30%. • The contention of the assessee gains strength by the judgment of Hon'ble Jaipur ITAT in the case of Shri Rajendra Yadav Vs The Income Tax Officer, Ward 1(3), Ajmer (ITA No.895/JP/2012) wherein, while deciding the issue of AY 2007-08, Hon'ble ITAT has held that the maximum disallowance for default in depositing TDS if any should be restricted to 30%. The relevant extract of the judgment is as below : "in our view the benefit of the amendment should be given to the ....
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....nt extract of the judgment is as below: "23. A point has been made by the assessee that as a result of this deduction the department is realizing the tax twice on the same income. It does not appear that this point was agitated before the Tribunal. We, however, make it clear that if the amount of tax has already been realized from the employees concerned directly, there cannot be any question of further realization of tax as the same income cannot be taxed twice. If the tax has been realised once, it cannot be realised once again, but that does not mean that the assessee will not be liable for payment of interest or any other legal consequence for their failure to deduct or to pay tax in accordance with law to the revenue. " IV. On applicability of second proviso to section 40(a)(ia) : • The Ld. AO/CIT(A) has held that the second proviso to section 40(a)(ia) is not applicable to the assessee as in the present case assessee has correctly deducted TDS and the proviso will be applicable in the case of non-deduction of TDS. • In this regard it is respectfully submitted that according to the rules of interpretation entire section has to be rea....
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....is paid, the assessee will not be able to get the benefit of the adjustment to the extent the assessee has suffered tax liability due to disallowance made u/s 40(a)(ia). • It may be seen from the facts of the case that the total amount of TDS was only of Rs. 17,06,370/- and the amount added to the income of the assessee was Rs. 5,72,34,330/- on which the tax including interest has been raised has been raised at Rs. 2.66 crores. The returned income of the assessee has been in the range of Rs. 13 lakhs to 32 lakhs (PB pg. 159-160] • Therefore, it can be seen that even if the rebate, as per first proviso is allowed in the year of payment, then, also it would not match with the burden of tax levied upon the assessee in the year under consideration. • Reliance is placed on the jurisprudence laid down by the Hon'ble Delhi High Court in the case of CIT vs Naresh Kumar (2014) 362 ITR 256, their Lordships while explaining the principle of matching have recognized the situation which is being faced by marginal and medium tax payers and observed that provisions of section 40(a)(ia) should be interpreted in a liberal and equitable manner so that the asses....
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....Tax Act, 1961, as is applicable to A.Y. under appeal reads as under : 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- (i) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable,- (A) outside India; or (B) in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or in the subsequent year before the expiry of the time prescribed under subsection (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 y....
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....s in Explanation 2 to clause (vi) of sub-section (1) of section 9;]" 7.1. The A.O. in the assessment order noted that as regards Section 192B of the I.T. Act, the amount on which TDS is to be deducted comes to Rs. 29,01,190/- on which, TDS of Rs. 2,90,119/- have been deducted but was not paid by assessee. Learned Counsel for the Assessee rightly contended that the amount in question relates to payment of salary and according to Section 40(a)(ia) of the I.T. Act, the word "Salary" have not been incorporated in the Act. Therefore, assessee would not be in default of TDS under section 40(a)(ia) of the I.T. Act because such provision is not attracted in this Section. Therefore, Section 40(a)(ia) of the I.T. Act is not application on such transaction. This addition is, therefore, liable to be deleted. We, accordingly, set aside the Orders of the authorities below and delete the addition of Rs. 29,01,190/-. This ground of appeal of assessee is allowed. 8. Learned Counsel for the Assessee submitted that assessee is eligible for relief of 70% out of disallowances, in accordance with the Amendments brought to the Statute by the Finance Act, 2014, w.e.f. 01.04.2015, whereby disallow....
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....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 amount. Though the substitution in section 40 has been made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors, namely, M/s. Garvit Stonex M/s. Chanda Marbles and M/s. Nidhi Granites as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of Rs. 7,51,322/-. In our view, it will be tied of justice if the disallowance is only restricted to 30% of Rs. 7,51,322/-. Accordingly, the appeal of the assessee....