M/S. JAGANNATH CONSTRUCTION,RAYAGADA vs. ITO, RAYAGADA WARD, RAYAGADA
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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: MANISH AGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE BEFORE SHRI GEORGE MATHAN, JUDICIAL JUDICIAL MEMBER AND MANISH AGARWAL MANISH AGARWAL, ACCOUNTANT MEMBER , ACCOUNTANT MEMBER ITA No.147/CTK/2016 Assessment Year : 2012-13 M/s.Jagannath Construction, M/s.Jagannath Construction, Vs. ITO, ITO, Rayagada Rayagada Ward, Ward, At/PO: Tikini, Rayagada At/PO: Tikini, Rayagada Rayagada PAN/GIR No. No.AAIFJ 0479 L (Appellant (Appellant) .. ( Respondent Respondent) Assessee by : Shri J.M.Pattnaik asnd Subit Sahu, Advs J.M.Pattnaik asnd Subit Sahu, Advs Revenue by : Shri S.C.Mohanty S.C.Mohanty, Sr DR Date of Hearing : 13/8 8/2024 Date of Pronouncement : 13/8 /8/2024 O R D E R Per Bench
This is an appeal filed by the assessee against the ord This is an appeal filed by the assessee against the ord This is an appeal filed by the assessee against the order of the ld CIT(A)-1, Bhubaneswar 1, Bhubaneswar dated 11.1.2016 in Appeal No. in Appeal No.0689/14-15 for the assessment year assessment year 2012-13.
Shri J.M.Pattnaik and Subit Sahu, J.M.Pattnaik and Subit Sahu, ld ARs appeared for appeared for the assessee and Shri S.C.Mohanty, Sr. S.C.Mohanty, Sr. DR appeared for the revenue. DR appeared for the revenue.
It was submitted by ld AR that the only issue in the assessee’s It was submitted by ld AR that the only issue in the assessee’s It was submitted by ld AR that the only issue in the assessee’s appeal was against the disallowance of 100% under section 40(a)(ia) of appeal was against the disallowance of 100% under section 40(a)(ia) of appeal was against the disallowance of 100% under section 40(a)(ia) of
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the Act in respect of payment to sub-contractors to an extent of Rs.76,19,465/-. It was the submission that originally, the Co-ordinate Bench of this Tribunal had held the issue in favour of the assessee and the Revenue had filed a miscellaneous application and the same came to be disposed off vide an order in M.A.No.34/CTK/2017 dated 24.6.2022. It was the submission that originally, the Co-ordinate Bench of this Tribunal had followed the decision in the case of Victor Shipping Services Pvt Ltd., (2013) 357 ITR 642 (All) and subsequently on the reversal of the same by the decision of the Hon’ble Supreme Court in the case of Palam Gas vs CIT,(2017) 81 taxmann.com 43(SC) order dated 9th May, 2017, the revenue had filed M.A. and the order of the Tribunal had been recalled. It was the submission that now the issue was squarely covered by the decision of the Co-ordinate bench of this Tribunal in the case of Om Sri Nilamadhab Builders (P) Ltd in ITA No.296/CTK/2018 order dated 14.11.2022, wherein, in para 6, following the decision of the Hon’ble Supreme Court in the case of Vatika Township (P) Ltd., (2014) 49 taxmann.com 249(SC), it was held that the disallowance under section 40(a)(ia) is to be restricted to 30%.
In reply, ld Sr DR relied upon the decision of the Hon’ble Supreme Court in the case of Shree Choudhary Transport Company (2020) 426 ITR 289 (SC). Ld Sr DR drew our attention to paras 19 to 19.6 of the said judgement of the Hon’ble Supreme Court to submit that the amendment to
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the provisions of section 40(a)(ia) of the Act by the Finance (No.2) Act did not have retrospective effect and the disallowance was to be at 100% itself.
We have considered the rival submissions. A perusal of the decision of the Co-ordinate Bench of this Tribunal in the case of Om Sri Nilamadhab Builders (P) Ltd(supra) clearly shows that the decision of the Hon’ble Supreme Court in the case of Choudhary Transport Company (supra) had been considered and after that in paras 5 & 6 held that the disallowance was to be restricted at 30% under section 40(a)(ia) of the Act and that the amendment by the Finance (No.2) Act, 2014 was to be given retrospective effect. The Co-ordinate Bench in paras 5 & 6 has held as follows:
“5.In reply, the ld. DR vehemently supported the orders of the ld. AO and ld. CIT(A). It was the submission that the decision of the Hon’ble Supreme Court in the case of Shree Choudhary Transport Company, referred to supra, though did not directly hold that the amendment brought by the Finance (No.2) Act, 2014 into the Section 40(a)(ia) of the Act, was not retrospective, however, the interpretation is to be given to hold the same as not retrospective. 6. 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 P a g e 3 | 4
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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%.”
This being so, respectfully following the decision of the Co-ordinaate Bench in the case of Om Sri Nilamadhab Builders (P) Ltd(supra), the Assessing officer is directed to restrict the disallowance to 30% under section 40(a)(ia) of the Act.
In the result, appeal of the assessee stands partly allowed .
Order dictated and pronounced in the open court on 13/08/2024.
Sd/- sd/- (Manish Agarwal) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 13/08/2024 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : M/s.Jagannath Construction, At/PO: Tikini, Rayagada 2. The Respondent: ITO, Rayagada Ward, Rayagada 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, 6. Guard file. //True Copy// By order
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