TaxTMI 
TaxTMI 
2026 (9) TMI 231
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....ppreciating the merit of the submissions made by the assessee. 3. The appellant reserves its right to advance such other grounds before or at the hearing, which it may consider fit and appropriate, for which it craves leave to amend, alter or otherwise modify the grounds appearing hereinbefore with the kind permission of the Hon'ble Bench." 2. The facts of the case are that during the course of assessment, the ld. Assessing Officer observed that in the auditor's report, particulars of amount inadmissible under section 40(a) as pointed out in Column No. 17(F) of Form 3CD for the year 2011-12 mentioned that the assessee had paid Rs. 19,80,000/- to supervisor fund and Rs. 88,461/- as professional charges without deducting any tax at source. The assessee was asked to explain the same. It was submitted that payment of Rs. 19,80,000/- were made to persons who were deputed to the assessee bank from Uttar Pradesh Cooperative Union. These employees were not on the rolls of the assessee bank. They were employees of UPCU and responsibility for deduction of TDS vested on UPCU. The assessee was not required to make payment of salary to these people but to submit contribution for....
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....Thus, the assessee bank did not make any payments towards the salaries of the supervisory staff as they were not under the employment of the bank but only made contribution to UPCU and because of this reason, no tax was deducted at source on the contribution made by the bank to the UPCU. In support of these submissions, the assessee enclosed a copy of office order dated 29.04.2011 and the Form 16 of the respective staff and prayed that the addition of Rs. 19,80,000/- made in the hands of the assessee for failure to deduct tax at source was bad in law and deserve to be deleted. As an alternative argument, the assessee submitted that in view of the amendment by the Finance Act w.e.f. 1.04.2015, in cases of non-deduction of tax at source, the disallowance of expenses would be restricted to 30% of the sum paid. It also argued that the Hon'ble Cuttack Bench of ITAT, in its order dated 26.11.2019 in the case of M/s Om Shri Nilamadhab Builders (P) Limited vs. Income Tax Officer (2020) 203 TTJ 229, had held that the amendment brought to section 40(a)(ia) has retrospective operation. In view of the same, it was submitted that in case the plea of the assessee was not accepted, the allowance ....
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....ssing Officer's case and no material had been brought on record to suggest any markup being paid to M/s U.P. Cooperative Union that would require the assessee to deduct tax at source. The ld. AR drew our attention to the judgment of the ITAT Hyderabad 'B' Bench in the case of Bhagyanagar Gas Limited vs. ACIT in ITA Nos. 588 and 589/HYD/2012 cited as (2013) 140 ITD 591 (Hyd) and pointed that the facts of the said case were similar to that of the assessee. In the said case, the ITAT had held that merely because that company had an agreement with GAIL and HPCL, who had agreed to depute their employees for work under the control and management of the assessee company, would not mean that it was a work's contract. Furthermore, it had held that the assessee instead of paying the amounts to the employees directly had reimbursed the amount to GAIL and HPCL, who had paid the amounts to the employees. This could be viewed as a financial arrangement under which GAIL and HPCL paid to the deputed employees on behalf of the assessee and the assessee reimburses the same. Accordingly, the expenditure was in the nature of reimbursement of the amounts spend by GAIL and HPCL for payment of persons in....
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....ducted at source while making the payments to UPCU. Since these had not been done, the disallowance under section 40(a)(ia) was disallowable. He further pointed out that following the decision of the Hon'ble Supreme Court in the case of Shree Choudhary Transport Co. vs Income Tax Officer, (2020) 426 ITR 289 (SC), it was clear that the amendment to section 40(a)(ia) was not retrospective in nature and therefore, the entire amount that was paid without deducting TDS was liable to be disallowed. He further pointed out that the ld. CIT(A) had given a detailed reasoning as to why he was rejecting the claim of interest paid on TDS being a compensatory payment and cited the decision of the Bangalore Bench of the Tribunal in this regard. Accordingly, he argued that the same did not call for any interference. 6. We have duly considered the facts and circumstances of the case and the arguments advanced by both the parties. On perusal of the office order dated 29.04.2011, it is fairly clear that the payment towards the salaries and other allowances including gratuity, GPF etc., of the supervisory staff that were deputed by the UPCU to the assessee bank, were not made to these persons direc....