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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI JAMLAPPA D BATTULL
आदेश/ORDER PER RAVISH SOOD, J.M. : The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-2, Panaji, dated 22.12.2017, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 [in short “Act”], dated 25.03.2015 for A.Y. 2012-13. The assessee has assailed the impugned order by raising the following grounds before us :
In the facts and circumstances of the case the Commissioner of Income Tax (Appeals) Panaji Goa erred in confirming the action of the Assessing officer of disallowing the construction expenses of Rs.29,00,838/- u/s 40(a)(ia) of I.T. Act on the ground that no taxes were deducted at source from contractual payments related to said expenses despite the fact that the partnership firm M/s. Buildtech Real Estate Developers (BRED) which received the said payments (i) had furnished its return of income for the year u/s 139 (ii) had taken into account aforesaid payment in the computation of income in such return and (iii) had paid tax due on the income declared by it in the said return. 2. The Commissioner of Income Tax (Appeals) Panaji Goa has erred in law in not accepting the contention of the appellant that since the partnership firm M/s Buildtech Real Estate Developers (BRED) which received payments of Rs.29,00,838/- related to construction expenses on which no taxes were deducted at source before the end of the year under consideration had paid the entire tax on its total income of the year which included the above payment of Rs.29,00,838/- the Assessing Officer should have allowed the construction expenses related to said payments in his assessment order passed for the year in
3 ITA.No.82/PAN/2018 Smt. Alicia Ninette Fialho Gonsalves, Goa. view of retrospective applicability of second proviso to sub clause (ia) of section 40 (a) of I.T. Act inserted by the Finance Act 2012 w.e.f. 01.04.2013. 3. The Commissioner of Income Tax (Appeals) Panaji Goa while confirming the action of the Assessing Officer of disallowing construction expenses of Rs.29,00,838/- u/s 40(a)(ia) of I.T. Act has erred in not following the judgement of Delhi High Court in the matter of CIT V. Ansal Landmark Township Pvt Ltd 61 Taxman.com45 holding that the second proviso to section 40(a) (ia) is declaratory and curative and hence has retrospective effect from 01.04.2005. The Appellant craves leave to add, alter, amend or modify any of the above grounds of the appeal.
Succinctly stated, the solitary controversy involved in the present appeal hinges around the disallowance under section 40(a)(ia) of the Income-Tax Act, 1961 of the assessee’s claim for deduction of construction expenses of Rs. 29,00,838/- that were payable by the assessee to M/s. Buildtech Real Estate Developers [in short “M/s. BRED”] on 31.03.2012. As is discernible from the orders of the lower authorities, the assessee had credited contract charges of Rs. 2,23,49,460/- to M/s. BRED i.e., a firm in which it was one of the partner. Although, the assessee was obligated to deduct tax at source on the entire amount of Rs.2,23,49,460/- (supra), but, it had deducted the same only on the amount of Rs.1,94,48,622/- that was actually paid to the aforementioned concern, viz. M/s. BRED during the year under consideration. In
4 ITA.No.82/PAN/2018 Smt. Alicia Ninette Fialho Gonsalves, Goa. sum and substance, the assessee had failed to deduct tax at source on the amount of Rs. 29,00,838/- (supra) that was shown as payable to the aforementioned concern, viz. M/s. BRED on 31.03.2012. On being queried as to why the aforesaid amount of Rs.29,00,838/- (supra) may not be disallowed under section 40(a)(ia) of the Act, it was the claim of the assessee that as the payee i.e., M/s. BRED had duly included the aforesaid amount of Rs.29,00,838/- (supra) in its return of income for the year under consideration and paid the corresponding taxes on the same, therefore, no disallowance under the aforesaid statutory provision was called for in her hands. In order to buttress her claim the assessee had drawn support from the “2nd proviso” to Section 40(a)(ia) of the Act” that was made available on the statute w.e.f. 01.04.2004. It was the claim of the assessee that now when the aforesaid payee viz., M/s. BRED had before the ‘due date’ filed its return of income for the year under consideration and disclosed the aforementioned amount of Rs.29,00,838 (supra) in its income, therefore, as per the “1st proviso” to Section 201(1) of the Act it could not be held as an assessee-in-default, and as a consequence thereto the said amount could not be disallowed under Sec.
5 ITA.No.82/PAN/2018 Smt. Alicia Ninette Fialho Gonsalves, Goa. 40(a)(ia) of the Act in her hands. However, the A.O. was not persuaded to subscribe the aforesaid claim of the assessee and rejected the same. It was observed by the A.O that as the “2nd proviso” to section 40(a)(ia) was made available on the statute by the legislature vide the Finance Act, 2012 i.e, w.e.f. 01.04.2013, therefore, the same would not come to the rescue of the assessee for the year under consideration i.e., A.Y. 2012-13. Backed by his aforesaid conviction the A.O. disallowed under Section 40(a)(ia) the assessee’s claim for deduction of construction expenses of Rs.29,00,838/-.
On appeal, the CIT(A) concurred with the view taken by the A.O that as the “2nd proviso” to section 40(a)(ia) of the Act was applicable prospectively i.e., w.e.f. 01.04.2013, therefore, no infirmity did emerge from his order and the disallowanve was rightly made by him.
The assessee being aggrieved by the order of the CIT(A) has carried the matter in appeal before us.
After having given a thoughtful consideration to the issue in hand, we are unable to persuade ourselves to subscribe to the
6 ITA.No.82/PAN/2018 Smt. Alicia Ninette Fialho Gonsalves, Goa. view taken by the lower authorities. As observed by us hereinabove, the controversy involved in the present appeal finds its genesis in the issue i.e, as to whether or not the “2nd proviso” to Section 40(a)(ia) of the Act is to be given a retrospective effect? Shorn of unnecessary details, we find that the issue is settled by the Judgment of the Hon’ble jurisdictional High Court in the case of Pr. CIT vs. Perfect Circle India Pvt. Ltd., ITA.No.707/2016, dated 07.01.2019. Indulgence of the Hon’ble jurisdictional High Court was sought by the revenue for adjudicating the following issue :
"Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in rejecting the disallowance of Rs.1,44,78,000/-- made by the AO u/s.40(a)(ia) of the Act by holding that the amendment to the proviso of the said section was retrospective in nature without appreciating that the Act specifically provides that the said proviso comes into operation w.e.f. 1.4.2013 and is prospective in nature and cannot be applied retrospectively?"
Answering the aforesaid question of law, the Hon’ble jurisdictional High Court had after drawing support from the judgment of the Hon’ble High Court of Delhi in the case of CIT vs. Ansal Landmark Township (P) Ltd., 61 taxmann.com 45 (Del.) observed, that as the insertion of the “2nd proviso” to section 40(a)(ia) of the Act
7 ITA.No.82/PAN/2018 Smt. Alicia Ninette Fialho Gonsalves, Goa. was declaratory and curative in nature, therefore, the same would have a retrospective effect from 01.04.2005 i.e., the date of insertion of Section 40(a)(ia) of the Act. Apart from that, it was observed by the Hon’ble High Court that the Hon’ble Apex Court had way back in the case of Hindustan Coca Cola Beverage P. Ltd. vs. CIT, 293 ITR 226 (SC) even in absence of the “2nd proviso” to Section 40(a)(ia) of the Act, had held, that where a payee had already paid the tax, then, in such circumstances, the payer/deductor can only be asked to pay the interest qua the delay in depositing of the tax. Backed by the aforesaid position of law, we are of the considered view, that now when in the present case before us, the payee, viz. M/s. BRED had duly included the aforementioned amount of Rs.29,00,838/- (supra) in its return of income that was filed within the stipulated time period and had paid the taxes on the same, therefore, the said amount could not have been disallowed under section 40(a)(ia) of the Act in the hands of the assessee. In order to support her claim that having cumulatively satisfied the conditions contemplated in the “1st proviso” to Section 201(1) of the Act, she could not be held as an assessee-in-default, the assessee had placed on our record a
8 ITA.No.82/PAN/2018 Smt. Alicia Ninette Fialho Gonsalves, Goa. certificate dated 29.11.2017 in “Form No.26A” from a Chartered Accountant, evidencing the fact that the payee, viz. M/s. BRED had included the aforementioned amount of Rs.29,00,838/- (supra) in its return of income for the year under consideration that was e-filed on 15.09.2012 and had paid the corresponding taxes on the same.
In the backdrop of the aforesaid facts r.w the settled position of law, we are of the considered view, that the assessee having cumulatively satisfied the conditions contemplate in the “1st proviso” to Section 201(1) of the Act, thus, could not have been held as an assessee-in-default, and resultantly, the aforesaid amount in question i.e., Rs.29,00,838/- (supra), could not have been disallowed under Section 40(a)(ia) of the Act. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(A) and vacate the disallowance of Rs. 29,00,838/- made by the A.O under section 40(a)(ia) of the Act. Resultantly, the appeal filed by the assessee is allowed.
9 ITA.No.82/PAN/2018 Smt. Alicia Ninette Fialho Gonsalves, Goa. 7. In the result, appeal of the assessee is allowed in terms of our aforesaid observations.
Order pronounced in the open court on 05th day of April, 2022.
Sd/- Sd/- JAMLAPPA D BATTULL RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 05th April, 2022 VBP/-/SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The CIT(Appeals)-II, Panaji, Goa 4. The CCIT, Panaji, Goa. 5.�वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,रायपुरब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.
10 ITA.No.82/PAN/2018 Smt. Alicia Ninette Fialho Gonsalves, Goa.
Date 1. Draft dictated on 22.03.2022 Sr.PS 2. Draft placed before author 23.03.2022 Sr.PS 3. Draft proposed and placed before the .03.2022 JM second Member 4. Draft discussed/approved by second .03.2022 AM Member 5. Approved draft comes to the Sr. PS/PS .03.2022 Sr.PS 6. Kept for pronouncement on .03.2022 Sr.PS 7. Date of uploading of order .03.2022 Sr.PS 8. File sent to Bench Clerk .03.2022 Sr.PS 9. Date on which the file goes to the Head Clerk 10. Date on which file goes to the A.R 11. Date of dispatch of order