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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-I, Rajkot [Ld.CIT(A) in short] dated 29/11/2017 arising in the matter of assessment order passed under s. 201(1) and 201(1A) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 30/03/2016 relevant to Assessment Year (A.Y) 2009-2010.
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The assessee has raised the following grounds of appeal: 1. The Hon’ble CIT(A) has erred in considering effective date of new proviso 1 to section 201(1)r.w.r. 31ACB of the Income Tax Act, 1961. 2. The Hon’ble CIT(A) has erred in calculating time allowed for submission of certificate in Form 26A. The appellant craves leave to add, amend alter, and withdraw any Ground of appeal any time up to the hearing of this appeal.
The issue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by treating the assessee in default under section 201(1)/201(1A) of the Act on account of non-deduction of TDS.
The facts in brief that the assessee is a registered co-operative society and engaged in providing credit facilities to its members. The assessee in the year under consideration paid the commission to its agents amounting to ₹13,56,864.00 without the deduction of the TDS under section 194H of the Act at the appropriate rate. As such the assessee failed to deduct the TDS amounting to ₹59,316.00 only. The AO on the amount of TDS further levied the interest under section 201(1A) of the Act at ₹56,943.00 only. Accordingly, the AO treated the assessee in default under section 201(1)/201 (1A) of the Act and raised the demand of ₹1,16,259.00 ( 59,316 plus 56,943.00) only.
The aggrieved assessee preferred an appeal to the learned CIT (A).
The assessee before the learned CIT (A) submitted that all the agents are permanently associated with the society. Therefore, all of them are
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working like any other employee of the assessee. As such, they are working in the capacity of quasi-employment with society.
3.1 The assessee also claimed that all the agents have duly offered tax on the amount of commission collected from the assessee. Therefore the assessee cannot be treated as assessee in default. Consequentially, there cannot be any liability on the assessee under the provisions of section 201(1)/ 201(1A) of the Act.
3.2 However, the learned CIT (A) disregarded the contention of the assessee by observing as under: 7. In ground of appeal 2, the argument of assessee are two fold. The first contention is that the agents to whom commission has been paid are quasi employees of assessee and the paymentswere in nature of salary and the provision of section 194 don not apply. I find no merit in this contention of the assessee. The said agents are paid commission on the basis of collection they make and there is no letter of appointment. None of the conditions satisfied so as to term it an employer – employee relationship. The contention of the assessee is therefore rejected. The second contention is that th assessee ought to have been given benefit of proviso to section 201(1)r.w.s Rule 31ACB and Form 26A as the recipients were not taxable. This contention of the assessee is not tenable because the proviso ha sbeen inserted w.e.f 01/07/2012 and is not applicable to the Assessment Year 2009- 10. The contention is therefore rejected.
Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 45 and submitted as under
There is consensus as regards applicability of the amendment inserting proviso 2 to the section 40(a)(ia) which is though made effective from AY 2013-14 but in the light of Hon.Delhi High Court decision in CIT vs Ansal Land Mark Township Pvt Ltd.[2015] in which the Hon’ble court held that even though the amendment inserting proviso 2 to the section 40(a)(ia) is made effective from AY 2013-14, yet it
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is considered declaratory and curative in nature and therefore applicable retrospectively from AY 2005-06. [i.e the year of enactment of section 40(a)(ia)] … the Forms 26A in this case are acceptable as per the proviso.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The assessee in the year under consideration has failed to deduct the TDS under section 194H of the Act. Therefore the assessee was treated as the assessee in default under the provisions of section 201(1)/(1A) of the Act.
6.1 However, we note that there is an amendment in the 1st proviso to Sec. 201 of the Act, wherein, if any payee has paid the taxes by offering/disclosing the said receipt in its return of income, then the payer (the assessee herein) should not be treated as assessee in default. The said proviso reads as under : Consequences of failure to deduct or Pay 201. (1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: [Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident— (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income,
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and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:]
6.2 The said proviso though inserted by the Finance Act 2012 w.e.f. 1-4- 2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:- “Question: Whether the second proviso to Section 40(a)(ia) (inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not?” Held: Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for tax withholding lapse but it is a provision introduced to compensate any loss to the revenue in cases where deductor hasn’t deducted TDS an amount paid to deductee and, in turn, deductee also hasn’t offered to tax income embedded in such amount The penalty for tax withholding lapse per se is separately provided under section 271C and, therefore, section 40(a)(i) isn’t attracted to the same. Hence, an assessee could not be penalized under section 40(a)(ia) when there was no loss to revenue. The Agra Tribunal in the case of Rajiv Kumar Agarwal-vs-ACIT [2014] 45 taxmann.com 555 (Agra – Trib) had held that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005, being the date from which sub-clause (ia) of section 40(8) was inserted by the Finance No.(2) Act, 2004, even though the Finance Act, 2012 had not specifically stated that proviso is retrospective in nature. The High Court affirmed the ratio laid down by the Agra Tribunal and held that said provisos is declaratory and curative in nature and ha retrospective effect from 1st April, 2005.”
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Respectfully following the aforesaid decision of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd., (supra) we deem it fit and appropriate in the interest of natural justice and fair play to set aside this issue to the file of AO to decide afresh in the light of the aforesaid judgment. Accordingly, we direct the AO to verify whether the payees have included the subject-mentioned receipts in their respective returns and paid taxes thereon or not. If that is so, then the assessee should not be treated as assessee in default u/s 201(1) of the Act. Accordingly, assessee’s ground is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Court on 25/06/2019 at Ahmedabad.
-Sd- -Sd- (Ms MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 25/06/2019 manish