TaxTMI 
TaxTMI 
2020 (8) TMI 23
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....t to deduct the requisite tax at source. 2. We may take note of the relevant factual and background aspects of the case while keeping in view the root point calling for determination in this appeal, that is, as to whether the payments in question have rightly been disallowed from deduction in computation of total income of the appellant? Relevant factual and background aspects; the impugned order of assessment 3. In a brief outline of the relevant factual aspects, it could be noticed that the assessee-appellant, a partnership firm, had entered into contract with M/s Aditya Cement Limited, Shambupura, District Chittorgarh for transporting cement to various places in India. As the appellant was not having the transport vehicles of its own, it had engaged the services of other transporters for the purpose. The cement marketing division of M/s Aditya Cement Limited, namely, M/s Grasim Industries Limited, effected payments towards transportation charges to the appellant after due deduction of TDS, as shown in Form No. 16A issued by the company. 4. On 28.10.2005, the assessee-appellant filed its return for the assessment year 2005-2006, showing total income at Rs. 2,89,633/- ....
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....as commission. Looking to the nature of dealings of the parties, the AO observed that there existed a contract between the appellant and the truck operators/owners in respect of each challan/bilty for transportation. The AO also referred to the Circular bearing No. 715 dated 08.08.1995 issued by the Central Board of Direct Taxes (CBDT), to observe that each goods receipt could be considered a separate contract. While further observing that a contract may be written or oral, the AO held that when the truck operators/owners in the case at hand were not to be considered as contractors, they were undoubtedly the subcontractors of the appellant. The AO also pointed out that despite sufficient opportunity being given, a copy of the agreement of the appellant firm with the company for providing transportation services was not furnished. 5.3. Having perused the material placed before him, the AO held on the appellant's responsibility for deducting tax at source while making payment to the truck operators/owners where such payment exceeded Rs. 20,000/- on a single bilty/challan or goods receipt in the following words:- "The dispatch register of the assessee firm as well as the c....
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....hich indicate that each payment exceeding Rs. 20,000/- was shown in the cash book in two parts though paid on the same date and the assessee made two separate vouchers for such payment just to give an impression that payment to truck owners/ operators was not exceeding Rs. 20,000/-. In this regard it is pertinent to mention that merely by showing payment of one challan/ bilty in two pieces the assessee cannot absolve itself of the provisions of the Section 40(a)(ia) inasmuch as Section 194C(3)(i) clearly speaks of - "the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the Contractor or sub-contractor, if such sum does not exceed twenty thousand rupees". The learned counsel further submitted that the receipts of the assessee firm are full vouched and verifiable and subject to TDS and the payments to truck owners/ operators are made by the assessee firm from such receipts and as such there as no need for further TDS. He further stated that the assessee firm prepares bills for claiming payments from the company on the basis of freight charges payable to various truck owners/ operators and when the payment is received on the basis of such b....
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....or Cycle Repairs etc. where involvement of personal element cannot be ruled out, a lump sum disallowance of Rs. 20,000/- is made to the declared income." Before the Commissioner of Income Tax (Appeals), Jodhpur 6. Aggrieved by the order so passed by the Assessing Officer, the assessee-appellant preferred an appeal before the Commissioner of Income Tax (Appeals) , being Appeal No. 183 of 2007-08, that was considered and dismissed on 15.01.2008. 6.1. The CIT(A) re-examined the record and rejected the contentions of the appellant that it had only received commission income and was not liable to deduct tax at source on payments made to the truck owners while observing as under:- "On careful consideration of the material facts, it is observed that the appellant entered into a contract for transportation of goods (cement) with M/s Aditiya Cement Limited in order to honour the contract, the appellant hired various trucks all through out the year for the purpose of transportation of cement. The appellant received freight charges from M/s Aditiya Cement Limited on which tax was deducted. The appellant paid freight charges to individual truck owners, after transportation of....
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....ansport of cement. It is the argument that since the individual payment did not exceed Rs. 20,000/-, the provisions of Section 194C are not applicable. On careful consideration of the material facts, it is observed that both the entries are consecutive in the cashbook and, therefore, it is observed that the appellant, for its convenience and to avoid rigors of the provisions of Section 40A(3), splitted the payments into two parts. Had the payments been really made in two parts, both the entries should not have been consecutive. It is also not understood as to why the truck owners after completing the contract, would accept the amount in two parts and why they would come to the office of the appellant twice for seeking payments. The theory of making payments in two parts is merely a story, which is capable neither on facts nor on practicability. It is also surprising to note that in none of the case the appellant made fully payment to any truck owner all through out the year exceeding Rs. 20,000/." (emphasis in bold supplied) 6.3. The CIT(A) also examined in detail the question as to whether transport contracts were subject to deduction of tax at source and, with reference to ....
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....The ITAT pointed out that by an application dated 16.07.2008, the appellant sought permission to produce additional evidence i.e., the agreement dated 01.04.2003 executed between itself and M/s Grasim Industries Limited, and as the Department had no-objection, the same was admitted as additional evidence by the order dated 17.07.2008 but, another application for admission of evidence in shape of affidavit of partner of the appellant firm, was objected to by the Department and was rejected. 7.2. The ITAT found that the agreement in question was on principal to principal basis whereby, the appellant was awarded the work of transporting cement from Shambupura but, as the appellant did not own any trucks, it had engaged the services of other truck operators/owners for transporting the cement; and such a transaction was a separate contract between the appellant and the truck operator/owner. The ITAT, therefore, endorsed the findings of AO and CIT(A) in the following words:- "13. The perusal of agreement on record reveals that the assessee was awarded a works contract by M/s. Grasim Industries Limited, a cement marketing division of M/s. Aditya Cement Ltd. This agreement was ....
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....t to payments aggregating to Rs. 57,11,625/- without deduction of tax at source." 7.3. The ITAT also negated the argument that by the time of issuance of Circular No. 5 dated 15.07.2005, the time for payment of tax at source had expired and that Section 40(a)(ia) would only be applicable from the assessment year 2006-2007 and not from the assessment year 2005-2006. The ITAT also referred to the proviso to Section 40(a)(ia) of the Act and pointed out that thereunder, the assessee was eligible to get deduction of such expenditure in a subsequent year in which TDS was actually paid to the Government. The ITAT observed in regard to these two aspects concerning applicability of the provision in question as also the effect of proviso thereto, in the following passage:- "15. The assessee's counsel also raised a plea that Circular No. 5 was issued only on 15-7-2005 by which date the time for payment of tax at source has also expired and as such it was contended that the provisions as contained in Section 40(a)(ia) of the Act would be applicable not from A.Y. 2005-06 but from 2006-07. We, however, do not subscribe to the view so canvassed by the assessee. The Finance (No.2) Act ....
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....ngs aforesaid had been that the consistent views of the AO, CIT(A) and ITAT, that deduction, of the payments made to the truck operators/owners, cannot be allowed while computing the total income of the assessee-appellant, came to be affirmed by the High Court. Rival Submissions Appellant 10. Assailing the order so passed by the High Court in summary dismissal of the appeal as also the views expressed in the assessment and appellate orders, learned counsel for the assessee-appellant has urged before us multiple contentions on the scope and applicability of Section 194C of the Act as also Section 40(a)(ia) thereof and has argued that these provisions could not have been applied to the case at hand. 10.1. Learned counsel for the appellant has strenuously argued that the provisions of Section 194C of the Act of 1961, particularly sub-section (2) thereof, were not applicable to the present case for there was no oral or written contract of the appellant with the truck operators/owners, whose vehicles were engaged to execute the work of transportation of the goods. It has been contended that the liability under Section 194C(2) would have arisen only if payments were made to "....
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....issions that the meaning and scope of the main provision is accentuated by the scope of proviso wherein, the expression "paid" is used while giving out the circumstances when a deduction, not allowed under the main provision, could be claimed in the subsequent year. 10.2.1. Taking this line of argument further, learned counsel would contend that the scope of Section 40(a)(ia) of the Act cannot be decided on the basis of the scope of Section 194C of the Act. Learned counsel would submit that Section 201 of the Act provides for consequence of non-deduction of TDS either at the time of payment or booking, whichever is earlier; and thus, the said provision would apply to both the situations where the expenses amount has been "paid" or is "payable". However, according to the learned counsel, the additional consequence of default as provided in Section 40(a)(ia) of the Act would come into operation only if the alleged default strictly falls within the language of this provision, which is limited to the amount "payable". Learned counsel would submit that the scope of Section 40(a)(ia) of the Act cannot be expanded beyond its language merely because as per Section 194C, the liability to....
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....ntions, the learned counsel has also argued that, in any case, the Finance (No.2) Act, 2004 received the assent of the President of India on 10.09.2004 and hence, the rigour of subclause (ia) of Section 40(a) of the Act cannot be applied in relation to the payments already made before 10.09.2004, the date of introduction of this provision. 10.3.1. In yet another alternative, learned counsel for the appellant has referred to the amendment made to Section 40(a)(ia) of the Act by the Finance (No.2) Act, 2014, restricting and limiting the extent of disallowance to 30% of the expenditure and has submitted that the said amendment, being curative in nature and having been introduced to ameliorate the hardships faced by the assessees, deserves to be applied retrospectively and from the date of introduction of sub-clause (ia) to Section 40(a) of the Act. The learned counsel has developed this argument by relying on the decision in Commissioner of Income-Tax v. Calcutta Export Company: (2018) 404 ITR 654, wherein this Court has held the remedial amendment of Section 40(a)(ia) of the Act by the Finance Act, 2010 to be retrospective in nature and applicable from the date of insertion of the....
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....listically examined the scheme of the provisions in question, there is no scope for reconsideration of the said decision; and this appeal deserves to be dismissed for the question sought to be raised as regard interpretation of Section 40(a)(ia) of the Act being no more res integra. 11.4. Learned counsel for the revenue has further contended that the amendment to Section 40(a) of the Act with insertion of sub-clause (ia) by the Finance (No. 2) Act, 2004 with effect from 01.04.2005 directly applies to the assessment year 2005-2006; and for the appellant having failed to deduct tax at source from the payment made to the sub-contractors for the work of transportation, deduction of such payment has rightly been disallowed. 11.5. The learned counsel has also argued that the proviso to Section 40(a)(ia) of the Act, as inserted by the Finance Act, 2014, does not apply to the case at hand pertaining to the assessment year 2005-2006 and hence, the argument for curative benefit with reference to the said proviso does not hold the ground. Questions for determination 12. Having regard to the submissions made by the learned counsel for the parties and the observations occurring in t....
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....(d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (j) any firm, shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to(i) one per cent in case of advertising, (ii)in any other case two per cent, of such sum as income-tax on income comprised therein. (2) Any person (being a contractor and not being a....
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....(2) from- (i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or subcontractor, if such sum does not exceed twenty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or, as the case may be, sub-section (2) shall be liable to deduct income-tax under this section; or (ii) any sum credited or paid before the 1st day of June, 1972; or (iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a cooperative society or in pursuance of a contract between such contractor and the sub-contractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society." 13.1.2. Sections 200 and 201 of the Act, respectively dealing with the duty of the person deducting tax and consequences on failure to deduct or pay, as applicable at the relevant time, could also....
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....per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. (2) Where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1)." 13.2. Chapter IV of the Act of 1961 deals with the subject "Computation of Total Income" and Section 40 occurs in Part D thereof, carrying the provisions relating to the "Profits and Gains of Business or Profession". Even when Sections 30 to 38 provide for various allowances and deductions in computation of the income from profits and gains of business or profession, Section 40 specifically ordains that certain amounts shall not be deducted, notwithstanding anything to the contrary contained in the said Sections 30 to 38 of the Act. In the present matter, we are concerned with the provisions contained in sub-clause (ia) of clause (a) of Section 40 of the Act, which was inserted by the Finance (No. 2) Act, 2004 with effect from 01.04.2005. ....
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....ons 28 to 41 and in this section, unless the context otherwise requires- *** *** *** (2) "paid" means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head "Profits and gains of business or profession"; *** *** ***" 13.4. For their relevance in relation to another segment of arguments, we may also take note of the meaning assigned to the expression "assessment year" in clause (9) of Section 2; and to the expression "previous year" in Section 3 of the Act of 1961 as follows: - "2. Definitions.- In this Act, unless the context otherwise requires,- *** *** *** (9) "assessment year" means the period of twelve months commencing on the 1st day of April every year; *** *** ***" "3. "Previous year" defined.- For the purposes of this Act, "previous year" means the financial year immediately preceding the assessment year: *** *** ***" 14. We may now take up the questions involved in this matter ad seriatim. Question No.1 15. In order to maintain that the appellant was under no obligation to make any deduction of tax at....
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....engaged, there existed no contract but, when any truck got engaged for the purpose of execution of the work undertaken by the appellant and freight charges were payable to its operator/owner upon execution of the work, i.e., transportation of the goods, all the essentials of making of a contract existed; and, as aforesaid, the said truck operator/owner became a sub-contractor for the purpose of the work in question. The AO, CIT(A) and the ITAT have concurrently decided this issue against the appellant with reference to the facts of the case, particularly after appreciating the nature of contract of the appellant with the consignor company as also the nature of dealing of the appellant, while holding that the truck operators/owners were engaged by the appellant as sub-contractors. The same findings have been endorsed by the High Court in its short order dismissing the appeal of the appellant. We are unable to find anything of error or infirmity in these findings. 15.3. The decision of Delhi High Court in the case of Hardarshan Singh (supra), in our view, has no application whatsoever to the facts of the present case. The assessee therein, who was in the business of transporting g....
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....AO were concurrently upheld up to the High Court and, after interpretation of Section 40(a)(ia), this Court also approved the decision of the High Court while dismissing the appeal with costs. Learned counsel for the appellant has made an attempt to distinguish the nature of contract in Palam Gas Service by suggesting that therein, the assessee's sub-contractors were specific and identified persons with whom the assessee had entered into contract whereas the present appellant was free to hire the service of any truck operator/owner and, in fact, the appellant hired the trucks only on need basis. In our view, such an attempt of differentiation is totally baseless and futile. Whether the appellant had specific and identified trucks on its rolls or had been picking them up on freelance basis, the legal effect on the status of parties had been the same that once a particular truck was engaged by the appellant on hire charges for carrying out the part of work undertaken by it (i.e., transportation of the goods of the company), the operator/owner of that truck became the sub-contractor and all the requirements of Section 194C came into operation. 15.5. Thus, we have no hesitation in a....
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....it was provided that where in respect of the sum referable to TDS requirement, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid in any subsequent year after the expiry of the time prescribed in Section 200(1), such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. 16.3. The purpose and coverage of this provision as also protection therein have been tersely explained by this Court in the case of Calcutta Export Company (supra), which has been cited by learned counsel for the appellant in support of another limb of submissions which we shall be dealing with in the next question. For the present purpose, we may notice the relevant observations of this Court in Calcutta Export Company as regards Section 40(a)(ia) of the Act as follows (at p. 662 of ITR):- "16. The purpose is very much clear from the above referred explanation by the Memorandum that it came with a purpose to ensure tax compliance. The fact that the intention of the Legislature was not to punish the assessee is further reflected from a bare reading of the provisions of section 40(a)(ia) of the Inco....
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....r or at the time of the payment thereof. ......'" 12. While holding the aforesaid view, the Punjab and Haryana High Court discussed the judgments of the Calcutta and Madras High Courts, which had taken the same view, and concurred with the same, which is clear from the following discussion contained in the judgment of the Punjab and Haryana High Court: "A Division Bench of the Calcutta High Court in CIT v. Crescent Export Syndicate [2013] 216 Taxman 258 (Cal) held : '13. ... 'The term "shall" used in all these sections make it clear that these are mandatory provisions and applicable to the entire sum contemplated under the respective sections. These sections do not give any leverage to the assessee to make the payment without making TDS. On the contrary, the intention of the Legislature is evident from the fact that timing of deduction of tax is earliest possible opportunity to recover tax, either at the time of credit in the account of payee or at the time of payment to payee, whichever is earlier.' Ms. Dhugga invited our attention to a judgment of the Division Bench of the Madras High Court in Tube Investments of India Ltd. v. Asst. CI....
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....mind the provisions of sections 194C and 200. Once it is found that the aforesaid sections mandate a person to deduct tax at source not only on the amounts payable but also when the sums are actually paid to the contractor, any person who does not adhere to this statutory obligation has to suffer the consequences which are stipulated in the Act itself. Certain consequences of failure to deduct tax at source from the payments made, where tax was to be deducted at source or failure to pay the same to the credit of the Central Government, are stipulated in section 201 of the Act. This section provides that in that contingency, such a person would be deemed to be an assessee in default in respect of such tax. While stipulating this consequence, section 201 categorically states that the aforesaid sections would be without prejudice to any other consequences which that defaulter may incur. Other consequences are provided under section 40(a)(ia) of the Act, namely, payments made by such a person to a contractor shall not be treated as deductible expenditure. When read in this context, it is clear that section 40(a)(ia) deals with the nature of default and the consequences thereof. Default....
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....nature of the payments by the assessees to the persons/payees referred to in section 40(a)(ia), such as, contractors. It is not in respect of every payment to a payee referred to in Chapter XVII-B that an assessee is bound to deduct tax. There may be payments to persons referred to in Chapter XVII-B, which do not attract the provisions of Chapter XVII-B. The consequences under section 40(a)(ia) would only operate on account of failure to deduct tax where the tax is liable to be deducted under the provisions of the Act and in particular Chapter XVII-B thereof. It is in that sense that the term "payable" has been used. The term "payable" is descriptive of the payments which attract the liability to deduct tax at source. It does not categorize defaults on the basis of when the payments are made to the payees of such amounts which attract the liability to deduct tax at source." (emphasis in bold supplied) 16.7. We find the above-extracted observations and reasonings, which have already been approved by this Court in Palam Gas Service (supra), to be precisely in accord with the scheme and purpose of Section 40(a)(ia) of the Act; and are in complete answer to the contentions urged ....
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....ecision, in our view, does not require any reconsideration. That being the position, the contention urged on behalf of the appellant that disallowance under Section 40(a)(ia) does not relate to the amount already paid stands rejected. 16.10. Another contention in regard to Section 40(a)(ia) of the Act, that its scope cannot be decided on the basis of Section 194C, has only been noted to be rejected. The interplay of these provisions is not far to seek where Section 40(a)(ia) is not a stand-alone provision but provides one of those additional consequences as indicated in Section 201 of the Act for default by a person in compliance of the requirements of the provisions contained in Part B of Chapter XVII of the Act. The scheme of these provisions makes it clear that the default in compliance of the requirements of the provisions contained in Part B of Chapter XVII of the Act (that carries Sections 194C, 200 and 201) leads, inter alia, to the consequence of Section 40(a)(ia) of the Act. Hence, the contours of Section 40(a)(ia) of the Act could be aptly defined only with reference to the requirements of the provisions contained in Part B of Chapter XVII of the Act, including Section....
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....was made applicable with effect from 01.04.2005 and not 01.04.2004, as appearing the copy of the order of ITAT. However, this error is not of material bearing because the amendment in question was applicable from and for the assessment year 2005-2006, for the reasons occurring infra. 17.2. Reverting to the contentions urged in this case, there is no doubt that in PIU Ghosh (supra), the Calcutta High Court, indeed, took the view which the learned counsel for the appellant has canvassed before us. The Calcutta High Court observed that the said Finance (No.2) Act, 2004 got presidential assent on 10.09.2004 and it was provided that the provision in question shall stand inserted with effect from 01.04.2005. According to the Calcutta High Court, the assessee could not have foreseen prior to 10.09.2004 that any amount paid to a contractor without deducting tax at source was likely to become not deductible in computation of income under Section 40 and that the legislature, being conscious of the likely predicament, provided that the provision shall become operative from 01.04.2005. The High Court further proceeded to observe that any other interpretation would amount to punishing the as....
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....the High Court seems to have not noticed the proviso to clause (ia) of Section 40(a) of the Act forming the part of the amendment in question. 17.4. It needs hardly any detailed discussion that in income tax matters, the law to be applied is that in force in the assessment year in question, unless stated otherwise by express intendment or by necessary implication. As per Section 4 of the Act of 1961, the charge of income tax is with reference to any assessment year, at such rate or rates as provided in any central enactment for the purpose, in respect of the total income of the previous year of any person. The expression "previous year" is defined in Section 3 of the Act to mean 'the financial year immediately preceding the assessment year'; and the expression "assessment year" is defined in clause (9) of Section 2 of the Act to mean 'the period of twelve months commencing on the 1st day of April every year'. 17.5. In the case of Commissioner of Income-Tax, West Bengal v. Isthmian Steamship Lines: (1951) 20 ITR 572, a 3-Judge Bench of this Court exposited on the fundamental principle that 'in income-tax matters the law to be applied is the law in force in the assessment year ....
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....ment year 2005-2006 and would be applicable for the assessment in question. Putting it differently, the legislature consciously made the said sub-clause (ia) of Section 40(a) of the Act effective from 01.04.2005, meaning thereby that the same was to be applicable from and for the assessment year 2005-2006; and neither there had been express intendment nor any implication that it would apply only from the financial year 2005-2006. 17.7. The observations of Calcutta High Court in the case of PIU Ghosh (supra) as regards the likely prejudice to an assessee in relation to the financial year 2004-2005, in our view, do not relate to any legal grievance or legal prejudice. The requirement of deducting tax at source was already existing as per Section 194C of the Act and it was the bounden duty of the appellant to make such deduction of TDS and to make over the same to the revenue. Section 201 was also in existence which made it clear that default in making deduction in accordance with the provisions of the Act would make the appellant "an assessee in default". The appellant cannot suggest that even if the obligation of TDS on the payments made by him was existing by virtue of Section 1....
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....ecific date having been provided as 01.04.2005. Of course, the said date relates to the assessment year commencing from 01.04.2005 (i.e., assessment year 2005-2006). 18.1. Even if it be assumed, going by the suggestions of the appellant, that the requirements of Section 40(a)(ia) became known on 10.09.2004, the appellant could have taken all the requisite steps to make deductions or, in any case, to make payment of the TDS amount to the revenue during the same financial year or even in the subsequent year, as per the relaxation available in the proviso to Section 40(a)(ia) of the Act but, the appellant simply avoided his obligation and attempted to suggest that it had no liability to deduct the tax at source at all. Such an approach of the appellant, when standing at conflict with law, the consequence of disallowance under Section 40(a)(ia) of the Act remains inevitable. 19. In yet another alternative attempt, learned counsel for the appellant has argued that by way of Finance (No.2) Act, 2014, disallowance under Section 40(a)(ia) has been limited to 30% of the sum payable and the said amendment deserves to be held retrospective in operation. This line of argument has been gr....
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.... sub-section (1) of section 139; or (B) in any other case, on or before the last day of the previous year: Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted - (A) during the last month of the previous year but paid after the said due date; or (B) during any other month of the previous year but paid after the end of the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. *** *** ***" (ii) After the amendment by Finance Act, 2010 "40. Amounts not deductible. - 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- *** *** *** (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (incl....
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....ular eventuality, from the assessment year 2015-2016. 19.3. On the other hand, in the case of Calcutta Export Company (supra), this Court noticed the aforesaid two amendments to Section 40(a)(ia) of the Act by the Finance Act, 2008 and by the Finance Act, 2010, which were intended to deal with procedural hardship likely to be faced by the bonafide tax payer, who had deducted tax at source but could not make deposit within the prescribed time so as to claim deduction. In paragraph 17 of judgment in Calcutta Export Company, this Court took note of the case of genuine hardship, particularly of the assessees who had deducted tax at source in the last month of previous year; and observed in paragraph 18 that the said amendment of the year 2008 was brought about with a view to mitigate such hardship. After reproducing the said amendment of the year 2008 and after noticing its retrospective operation, this Court delved into the position obtaining after 2008, where still remained one class of assessees who could not claim deduction for the TDS amount in the previous year in which the tax was deducted and who could claim benefit of such deduction in the next year only; and, after finding....
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....he amendment though has addressed the concerns ofthe assesses falling in the first category but with regard to the case falling in the second category, it was still resulting into unintended consequences and causing grave and genuine hardships to the assesses who had substantially complied with the relevant TDS provisions by deducting the tax at source and by paying the same to the credit of the Government before the due date of filing of their returns under section 139(1) of the Income-tax Act. The disability to claim deductions on account of such lately credited sum of TDS in assessment of the previous year in which it was deducted, was detrimental to the small traders who may not be in a position to bear the burden of such disallowance in the present assessment year. 22. In order to remedy this position and to remove hardshipswhich were being caused to the assessees belonging to such second category, amendments have been made in the provisions of section 40(a) (ia) by the Finance Act, 2010. *** *** *** 24. Thus, the Finance Act, 2010 further relaxed the rigors of section 40(a)(ia) of the Income-tax Act to provide that all TDS made during the previous y....
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.... regards "retrospective operation" is that the amendment of the year 2010, being curative in nature, would be applicable from the date of insertion of the provision in question i.e., sub-clause (ia) of Section 40(a) of the Act. This being the position, it is difficult to find any substance in the argument that the principles adopted by this Court in the case of Calcutta Export Company (supra) dealing with curative amendment, relating more to the procedural aspects concerning deposit of the deducted TDS, be applied to the amendment of the substantive provision by the Finance (No.2) Act, 2014. 19.6. We may in the passing observe that the assessee-appellant was either labouring under the mistaken impression that he was not required to deduct TDS or under the mistaken belief that the methodology of splitting a single payment into parts below Rs. 20,000/- would provide him escape from the rigour of the provisions of the Act providing for disallowance. In either event, the appellant had not been a bonafide assessee who had made the deduction and deposited it subsequently. Obviously, the appellant could not have derived the benefits that were otherwise available by the curative amendme....
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....t prejudice or hardship carry no meaning at all. Secondly, as noticed, by way of the proviso as originally inserted and its amendments in the years 2008 and 2010, requisite relief to a bonafide tax payer who had collected TDS but could not deposit within time before submission of the return was also provided; and as regards the amendment of 2010, this Court ruled it to be retrospective in operation. The proviso so amended, obviously, safeguarded the interest of a bonafide assessee who had made the deduction as required and had paid the same to the revenue. The appellant having failed to avail the benefit of such relaxation too, cannot now raise a grievance of alleged hardship. Thirdly, as noticed, the appellant had shown total payments in Truck Freight Account at Rs. 1,37,71,206/- and total receipts from the company at Rs. 1,43,90,632/-. What has been disallowed is that amount of Rs. 57,11,625/- on which the appellant failed to deduct the tax at source and not the entire amount received from the company or paid to the truck operators/owners. Viewed from any angle, we do not find any case of prejudice or legal grievance with the appellant. 21.1. Hence, answer to Question No. 4 is....