KONARK AQUATICS & EXPORT (P) LTD,BHUBANESWAR vs. ACIT, CIRCLE-2(1), BHUBANESWAR,

It was submitted by the ld. AR that the main issue is the disallowance of the ocean freight, survey expenses, testing charges and legal charges in respect of which TDS has not been deducted. It was submitted that as TDS had not been deducted, the AO had invoked the provisions of Section 40(a)(ia) of the Act to bring to tax 100% of the said disallowance as the income of the assessee. It was the submission that the issue is now squarely covered by the decision of the coordinate bench of the Tribunal in the case of Om Sri Nilamadhab Builders (P) Ltd., in ITA No.296/CTK/2018, order dated 14.11.2022, wherein it has been held that the disallowance is to be restricted to 30% as against 100% made by the AO and as confirmed by the ld. CIT(A).

In reply, ld. Sr. DR submitted that in view of the decision of the Hon’ble Supreme Court in the case of Shree Choudhary Transport Company (2020) 426 ITR 289 (SC), the disallowance had rightly been made at 100% by the AO and confirmed by the ld. CIT(A). It was submitted that the order of the ld. CIT(A) on this issue is liable to be upheld.

We have considered the rival submissions. In the case of Om Sri Nilamadhab Builders (P) Ltd., referred to supra, the coordinate bench of the Tribunal vide order dated 14.11.2022 in paras 6 & 7, restricted the 3 disallowance to 30% as against 100%. The relevant observations of the Tribunal as under :-

We have heard the rival submissions. In respect of the amendments which have brought into by the various Finance Act, wherein the amendment is brought in to remove the hardship caused to the assessee, the same is clarificatory in nature. This principle is as per the decision of the Hon’ble Supreme Court in the case of Vatika Township (P.) Ltd. [2014] 49 taxmann.com 249 (SC). A perusal of the amendment by the Finance (No.2) Act, 2014 made to the provision of Section 40(a)(ia) of the Act clearly shows that the amendment has been brought to remove hardship caused to the assessee. It must be understood that the disallowance of 100%, by the said amendment was restricted to 30%, thus, clearly the amendment was brought in to remove the hardship caused to the assessee. In these circumstances, respectfully following the decision of the various coordinate benches of the Tribunal on this issue, referred to supra, as also the principle laid down by the Larger Bench of the Hon’ble Supreme Court (Constituted by the Five Hon’ble Judges) in the case of Vatika Township (P.) Ltd. [2014] 49 taxmann.com 249 (SC), the AO is directed to restrict the disallowance u/s.40(a)(ia) of the Act to 30%.

Though it has been argued by the ld. Sr. DR that at the time of hearing of miscellaneous application, the Bench was convinced that the said amendment was not retrospective and for that purpose only the earlier order of the Tribunal had been recalled. The said argument would not hold good insofar as when the miscellaneous application is heard, its prima facie case that is looked at. It is at the time of hearing of the appeal that a perusal of the various decisions and the amendments are looked into. In these circumstances, the appeal of the assessee is partly allowed.

As it is noticed that the facts are similar and the present case on identical findings, the disallowance u/s.40(a)(ia) of the Act as made by the AO and as confirmed by the ld. CIT(A) stands restricted to 30%.

In the result, appeal of the assessee is partly allowed. Order dictated and pronounced in the open court on 20/03/2023. (अरुण खोड़पऩया) (जाजज माथन) (ARUN KHODPIA) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 20/03/2023 Prakash Kumar Mishra, Sr.P.S.

ACIT, Circle-2(1), Bhubaneswar आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. पवभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR,

ITAT, Cuttack गार्ज पाईऱ / Guard file. 6. सत्यापऩत प्रयत ////