TaxTMI 
TaxTMI 
2017 (11) TMI 1827
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.... :- Assessee is a company stated to be engaged in the business of construction and execution of Works Contracts. Assessee filed its return of income for A.Y. 2009-10 on 27.09.2009 declaring total income at Rs. 2,38,02,310/-. A search action u/s 132 of the Act was conducted on 24.11.2011 at the business and residential premises of M.B. Patil group at Aurangabad / Pune. During the course of search, various registered documents belonging to the assessee were seized. Consequently, a notice u/s 153C of the Act was issued on 27.09.2013 requiring the assessee to file the return of income. In response to notice, assessee inter-alia submitted that the return of income originally filed u/s 139 of the Act be treated as return in response to notice u/s 153C of the Act. Thereafter, assessment was framed u/s 143(3) r.w.s. 153(C) of the Act and the total income was determined at Rs. 2,41,70,876/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.14.09.2015 (in appeal No.PN/CIT(A)- 12/DCIT Cen. Cir. Aurangabad/1130/2014-15) granted partial relief to the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised t....
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....3 granted partial relief to the assessee. Aggrieved by the orders of Ld.CIT(A), assessee is now in appeal before us. For A.Y. 2010-11 assessee in appeal No.22/PUN/2016 has raised the following grounds : "1. The asst. completed u/s 143(3) r.w.s. 153C be declared null and void since the notice issued u/s 153C was bad in law. 2. The learned CIT(A) erred in confirming the disallowance u/s 40(a)(ia) of Rs. 7,68,310/- without appreciating that no incriminating evidence was found as a result of search in respect of the said issue and therefore, no disallowance u/s 40(a)(ia) was warranted. 2.1. The learned CIT(A) erred in confirming the disallowance u/s 40(a)(ia) on account of the interest paid of Rs. 7,68,310/- on the ground that the assessee had failed to deduct TDS in respect of the interest paid on the funds borrowed from NBFCs. 2.2. The learned CIT(A) failed to appreciate that no disallowance could be made u/s 40(a)(ia) in respect of the interest paid of Rs. 7,68,310/- to the NBFCs in view of the second proviso to u/s 40(a)(ia)." 7. For A.Y. 2011-12 in appeal No.ITA No.23/PUN/2016 the grounds raised by the assessee reads as under : "1. The asst. completed u/s 143(3) r....
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....rounds of appeal." 8. Before us, at the outset, Ld.A.R. submitted that he does not wish to press ground No.1 in A.Y. 2010-11 and 2011-12 and ground Nos.1 and 2 in A.Y. 2012-13. Ld.A.R. submitted that the remaining grounds in all the appeals are identical except for the amounts. Ld.D.R. did not object to the aforesaid submission and therefore, ground No.1 in A.Y. 2010-11 and 2011-12 and ground Nos.1 and 2 in A.Y. 2012-13 are dismissed as not pressed. 9. We now take up the other ground which is with respect to disallowance u/s 40(a)(ia) of the Act. 9.1. During the course of assessment, AO on perusing the Profit and Loss account of assessee noticed that assessee has borrowed loans from Non-Banking Financial Corporations (NBFCs). In A.Y. 2010-11, assessee had borrowed loans from Srei Equipment Finance Ltd and Tata Motors Finance Limited and during the assessment year, assessee has paid interest of Rs. 5,76,066/- and Rs. 1,92,244/- interest aggregating to Rs. 7,68,310/- to the aforesaid NBFCs but had not deducted TDS u/s 194A of the Act. The assessee was asked to explain as to why the disallowance not be made u/s 40(a)(ia) of the Act, to which assessee inter-alia submitted that bo....
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....nies. During the course of appellate proceedings, it was noted that as per certificate of chartered accountant, all the interest payment made by the appellant was not offered to tax by the NBFC namely Tata Motor Finance. Appellant further contended that benefit of second proviso to Section 40(a)(ia) inserted w.e.f. 1.4.14 was to be allowed as same being curative amendment. It is also a settled legal position that wherever Legislature intends retrospective operation of the particular provision, the same is specifically given in statute itself. It is only clarificatory or declaratory provision which applies with effect from date from which provision was inserted. In line of this legal position, the claim of the appellant that benefit of the second proviso to section 40(a)(ia) would apply retrospectively is not acceptable and same has been held by the Hon'ble High Court of Kerala in the case of Prudential Logistics And Transports (2014) Taxman .com 426 ( Kerala) - "benefit of second proviso to section 40(a)(ia) giving concession to assessee from deducting TDS in case recipient of amount in question had of already paid taxes on such amount would be available with effect from 1.4....
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.... income by the payee but the same were ignored by Ld.CIT(A). He also pointed to the statement of reconciliation placed at page 7 of the Paper Book and pointed to the reconciliation of interest paid by the assessee and offered to tax by NBFC in their respective return of income. From the aforesaid reconciliation statement, he pointed out for A.Y. 2010-11 that in case of Srei Equipment Finance Ltd, there is no difference and in the case of Tata Motors Finance Limited, there is a difference of Rs. 84,299/-. He fairly submitted that since the assessee could not reconcile the difference of Rs. 84,299/-, therefore to the extent the amount which has been reconciled and the amount offered by Tata Motors Finance Limited as their income, no disallowance u/s 40(a)(ia) be made in the hands of the assessee. He pointed to the similar reconciliation statement for other assessment years placed in paper book and from the reconciliation statement submitted that to the extent, assessee has been able to reconcile the amount of interest paid with those offered by the respective recipients of interest, the expense be allowed the assessee. He as an alternative contention submitted that the matter may be ....