TaxTMI 
TaxTMI 
2019 (11) TMI 704
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.... No.222/RPR/2014. 3. The relevant facts as culled out from the material on record are asunder :- The assessee is an individual, who is stated to be carrying on the business of mechanical contractor in the name of M/s. Basava Engineering Construction. The assessee filed his return of income for A.Y. 2010-11 on 12.09.2010 declaring total income at Rs. 92,51,140/-. The case was taken up for scrutiny. Thereafter, assessment was framed u/s 143(3) of the Act vide order dated 28.03.2013 and the total income was determined at Rs. 3,00,49,340/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before Ld.CIT(A), who vide order dated 15.07.2014 (in appeal No.171/13-14) had granted substantial relief to the assessee.Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us and has raised the following grounds : "1. Whether in law and on facts and circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 10,43,114/- made by the AO on account of suppression of gross turnover as the assessee has claimed benefit of TDS made against the said amount? 2. Whether in law and on facts and circumstances of the cas....
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....ayment or credit whichever is earlier, thus,the law itself envisages deduction of TDS from advance payments and not just at the time of crediting the account of payee against the expenses. In the case of Smt.PushpaVijoy vs. Assistant Commissioner of Income Tax (2005) 4 SOT 589 (Coch), it was held that "The TDS made in a particular assessment year should be given credit in the assessment of the respective assessment year itself. There is no provision in the IT Act to divide the TDS into different proportionate pieces and to give credit on the basis whether the entire income has been offered for assessment or not. There is also no provision in the IT Act to postpone the TDS credit to future assessment years other than the assessment year for which the TDS were made. Therefore, in substance the tax deducted at source must be attributed to the concerned assessment year and not to the particular item or source of income. If the tax deducted at source is attributed to that particular source or item of income, then the result will be perverse and chaotic. The provisions of law contained in s. 199 does not provide for any such casualty." The CIT(A) further after relying on the ....
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....he Government Exchequer. It is also an undisputed fact that the appellant had credited the amounts so deducted to a separate account, secondly,undisputedly, debit to Profit &Loss A/cis on account of Salary and not Professional Tax. Section 43Bdoes not include in its ambit expenditure in the nature of "salary‟ which is distinct from bonus and leave encashment, therefore, there is no question of disallowance of expenditure in the nature of salary debited to Profit &Loss A/c. Hence, the disallowance made by the A.O is deleted." 12. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 13. Before us, Ld. DR took us through the order of Assessing Officer and supported the order of Assessing Officer. 14. The Ld. AR on the other hand reiterated the submissions made before the authorities below and supported the order of CIT(A). 15. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to addition of Rs. 96,505/-. We find that CIT(A) after considering submissions made by the assessee have deleted the addition made by Assessing Officer. Before us, the Revenue could not point out any fallacy i....
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....Hon‟ble Calcutta High Court in CIT v.Virgin Creations ITAT No.302 of 2011 GA 3200/2011 COMMISSIONER OF INCOME-TAX, KOL-XI, KOL VsVIRGIN CREATIONS Date :23rdNovember, 2011, it has been held that amendment by Finance Act 2010 would operate retrospectively. The Calcutta High Court, has held in the context of section 40(a)(ia) that the amendment is remedial in nature and designed to eliminate unintended consequences which may cause undue hardship to the taxpayers and is of clarificatory in nature and, therefore, has to be treated as retrospective with effect from 1stApril 2005. In the memorandum explaining the provisions relating to direct taxes in the Finance Bill 2012, in respect of amendment in section 40(a)(ia), it has been stated as under:- "RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS) AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS I........ II............" Further, the CIT(A) also relying on the following decisions, deleted the addition made by the Assessing Officer. a) Rajeev Kumar Agarwal v. Additional Commissioner of Income-tax (2014) 45 taxmann.com 555 (Agra - Trib) b) CIT Vs. Virgin Creations (supra) and COMMISSIONER OF INCOME TAX Vs. K....
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....ayment made could not have been disallowed. Reliance was placed on the decision of the Agra Bench of ITAT in ITA No. 337/Agra/2013 (Rajiv Kumar Agarwal v. ACIT) in which it was held that the second proviso to Section 40 (a) (ia) of the Act is declaratory and curative in nature and should be given retrospective effect from 1st April 2005. 9. It is seen that the second proviso to Section 40(a) (ia) was inserted by the Finance Act 2012 with effect from 1st April 2013. The effect of the said proviso is to introduce a legal fiction where an Assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such Assessee is deemed not to be an assessee in default in terms of the first proviso to subSection (1) of Section 201 of the Act, then, in such event, "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". 10. It is pointed out by learned counsel for the Revenue that the first proviso to Section 201 (1) of the Act was inserted with effect from 1st July 2012. The said proviso reads as under: "Provided that any p....
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....taken a thorough analysis of the second proviso to Section 40 (a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: "On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as o....
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....om 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 in (Rajiv Kumar Agarwal v. ACIT)." In view of the aforesaid facts, we find force in the contention of Ld. DR. We therefore, restore the issue back to the file of Assessing Officer to decide the issue afresh about the disallowance in line with the aforesaid decision of Hon'ble Delhi High Court (supra) and in accordance with law. The assessee is also directed to file the requisite details called for by the authorities. The Assessing Officer shall grant adequate opportunity of hearing to the assessee. Thus, the ground No.3 of Revenue is allowed for st....
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....On a careful consideration of the entire material on record and factual matrix and matter in dispute, I find that though invoices (including service tax element) have been raised by the appellant in respect of work executed and further the appellant, though, has accounted for such revenue as income and the attached service tax element as a liability in its financial statements so as to comply with the accounting norms, the nature of sum of Rs. 1,90,81,666/- remains the same i.e."service tax‟. The observation of the A.Oin the assessment order that Service tax is linked with revenue and taxable u/s 28 is therefore, perverse and contrary to the irrefutable material available on record and further, the tangible submissions made by the appellant during the course of assessment proceedings that the service tax though billed but has not been debited to Profit &Loss A/c nor credited to Profit Loss A/c have not been properly appreciated by him. Further, the appellant has fervently relied upon the provisions of the Finance Act 1994 governing Service Tax and Service Tax Rules 1994 to contend that service tax is not in the nature of income. Section 66 of Chapter V of the Finance Act 1994....
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.... of CIT Vs. Noble & Hewitt (India) (P) Ltd. 305 ITR 324 fortifies the said view. The case of the appellant also finds support from the following decisions: (i) Ind Global Corporate Finance Pvt. Ltd. vs. ITO (2012) 33 CCH 388 (ITAT Mumbai); (ii) DCIT vs. Ovira Logistic Pvt. Ltd. (2012) 34 CCH 310 (ITAT Mumbai); (iii) DCIT vs. Hathway Cable &Datacom (P) Ltd. I.T.A. No.5757/M/2011 dated 05.09.2012 (ITAT Mumbai); 27. In view of the above factual and legal matrix, I am of the considered opinion that the addition of Rs. 1,90,81,666/- on account of Service Tax u/s 28 and corresponding disallowance under the provisions of Section 43B of the Act is unjustified and not sustainable and hence, deleted. 25. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 26. Before us, Ld. DR supporting the order of Assessing Officer submitted that while deciding the issue Ld. CIT(A) has ignored the fact that the assessee has routed the service tax amount through the Profit & Loss Account and in support of which she pointed to the Profit & Loss Account filed by the assessee and also the return of income. 27. The Ld. AR on the other hand reiterat....
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....the assessee had not claimed any amount by way of service tax as a deduction, therefore, there was no question of disallowance of any tax or dues u/s 43B of the IT Act. Against the relief, as granted by the learned CIT (A), now, the Revenue is in appeal before us. 5. On the date of hearing, no one was present from the side of the respondent assessee. From the side of the Revenue, learned DR Smt. Shital S. Verma appeared and supported the order of the AO. 6. After considering the submissions of the learned DR, we are of the considered opinion that no interference is required in the decision given by the learned CIT (A). The issue of disallowance of unpaid statutory liability as prescribed u/s 43B of the IT ACT now stood resolved by several decisions. The impact of Circular No.372 dated 8thDecember, 1981 has also been considered. As per the said circular it is specifically mentioned that several cases have come to the notice where tax payers did not discharge their liability in respect of excise duties or other taxes although claimed, the said liability as deduction on the ground that the accounts have been maintained on mercantile basis. The CBDT has observed that ....