CHHAGANLAL SHAMLAL KIRAD vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

The brief facts of the case as emanating from records are : The assessee is engaged in transport business under the name and style of M/s. C.S. Kirad. The assessee filed his return of income for the impugned assessment year on 29-11-2006 declaring total income of Rs.10,51,150/-. The case of the assessee was selected for scrutiny. The Assessing Officer completed the assessment by determining the total income of assessee at Rs.1,64,34,580/-. One of the addition made by the Assessing Officer was u/s. 40(a)(ia) of the Act in respect of payments to the tune of Rs.1,53,83,426/- to various parties against truck hiring charges. Against the said addition the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) dismissed the appeal of assessee. The assessee thereafter carried the issue in second appeal before the Tribunal in ITA No. 1488/PN/2009 for assessment year 2006-07. The Tribunal vide order dated 23-05-2012 restored the issue back to the file of Assessing Officer with a direction to decide the issue in light of Special Bench of Tribunal in the case of Merilyn Shipping and Transport Vs. ACIT reported as 136 ITD 23 (Visak.). The Assessing Officer thereafter while giving effect to the order of Tribunal sustained the disallowance of Rs.1,53,83,426/- u/s. 40(a)(ia) of the Act by placing reliane on the decision of Hon’ble Andhra Pradesh High Court staying the decision of Special Bench and CBDT Circular No. 10/DV/2013 dated 16-12-2013.

Shri Nikhil Pathak appearing on behalf of the assessee submitted that the assessee is in second round of litigation before the Tribunal on the issue of disallowance u/s. 40(a)(ia) of the Act. The assessee by way of additional ground of appeal is seeking remedy under second proviso to section 40(a)(ia) inserted by the Finance Act, 2012 w.e.f. 01-04-2013. The ld. AR submitted that though the second proviso was inserted w.e.f. 01-04-2013 but the Hon’ble Delhi High Court in the case of Commissioner of Income Tax Vs. Ansal Land Mark Township (P) Ltd. reported as 377 ITR 635 has held that the proviso is declaratory and curative and has retrospective effect from 1st April, 2005. The ld. AR in support his contentions placed reliance on the decision of Pune Bench of Tribunal in the case of Yamazaki Mazak India Pvt. Ltd. Vs. Pr. Commissioner of Income Tax in ITA No. 153/PN/2016 for assessment year 2010-11 decided on 28- 10-2016.

On the other hand Shri Abhishek Meshram representing the Department vehemently defended the impugned order. The ld. DR submitted that the issue in appeal has been decided against the assessee by various Hon’ble High Courts. The CBDT after considering the decisions rendered by various High Courts has come with the Circular No. 10/DV/2013 dated 16-12-2013. Thus, the ground raised by the assessee on merits deserves to be rejected.

Both sides heard. Orders of the authorities below perused. The assessee in appeal has raised additional ground of appeal for invoking second proviso to section 40(a)(ia) of the Act. The second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01-04-2013. For the sake of completeness and ready reference the relevant extract of section 40(a)(ia) with newly inserted proviso is reproduced here-in-below : “40. Notwithstanding anything to the contrary in sections 30 to [38], the following amounts shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession”,— (a) in the case of any assessee— xxxxxxxxxx xxxxxxxxxx (ia) [any interest, commission or brokerage,[rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, [has not been paid on or before the due date specified in sub-section (1) of section 139;] Provided that xxxxxxxxxx Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub- clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.”

In the case of Commissioner of Income Tax Vs. Ansal Land Mark Township (P) Ltd. (supra) the Hon'ble Delhi High Court has held that insertion of proviso by the Finance Act, 2012 is declaratory and curative and applies retrospectively with effect from 1st April, 2005. Thus, we do not find any impediment in applying second proviso to section 40(a)(ia) in the case of present assessee. The Co-ordintae Bench of Tribunal in the case of Yamazaki Mazak India Pvt. Ltd. Vs. Pr. Commissioner of Income

In the result, appeal of assessee is partly allowed for statistical purpose.