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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Vishnukanta Laxminiwas Modani 1701, Green Ridge Tower 1, Chickoowadi, New link Road, Borivali West, Mumbai-400092. PAN: AFEPM7784G ...... अपीलाथ' /Appellant बनाम Vs. ACIT 32(3), Kautilya Bhavan, G Block, Bandra Kurla Complex, Bandra, Mumbai-400051. ..... (ितवाद*/Respondent अपीलाथ' +ारा/ Appellant by : Sh. Anuj Kishnadwala (ितवाद* +ारा/Respondent by : Sh. Sanjay J. Sethi सुनवाई क, ितिथ/ Date of hearing : 26/07/2021 घोषणा क, ितिथ/ Date of pronouncement : 27/07/2021 आदेश/ ORDER PER VIKAS AWASTHY, J.M: This appeal by assessee is directed against the order of Commissioner of Income Tax (Appeals)-44, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 24.10.2019 for the Assessment Year (AY) 2011-12.
Shri Anuj Kishnadwala appearing on behalf of assessee submitted that the solitary issue raised in appeal is against confirming of disallowance of आअसं. 7666/मुं/20219 (िन.व.2011-12) (A.Y.2011-12)
Rs. 2,50,000/- under section 40(a)(ia) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] by the CIT(A). The ld. Authorized Representative (AR) of the assessee submitted that the assessee had made payment of Rs. 2,50,000/- to M/s The West Coast Paper Mills Ltd. for manufacturing of ‘Dandy’. The said payment was made without deducting tax at source. During the course of assessment proceedings, the assessee explained that the payment of Rs. 2,50,000/- was made for purchase of ‘Dandy’. It is a big metal slab with water-mark logo embossed on it which is placed in the paper machinery to get water-mark imprint on the paper. The assessee was under bonafide belief that water-mark dandy is a part of machinery and hence, payment made for procuring the same is on capital account. Therefore, no TDS was required to be deducted on such payment. The ld. AR of assessee raised an alternate plea that since the recipient of the amount has offered the amount to tax in its return of income, therefore, in the light of second proviso to section 40(a)(ia) of the Act, no disallowance for non-deduction of tax at source is warranted. The ld. AR submitted that M/s The West Coast Paper Mills Ltd. has filed a confirmation stating that the amount has been offered to tax. The ld. AR pointed that though second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01.04.2013, the Hon’ble Delhi High Court in the case of CIT v/s Ansal Land Mark Township (P) Ltd. reported as 377 ITR 635(Del.) and the Hon’ble Bombay High Court in the case of PCIT vs. Perfect Circle India Pvt. Ltd. in Income Tax Appeal No. 707 of 2016 decided on 07.01.2019 has held that the second proviso is declaratory and curative in nature and would operate retrospectively w.e.f. 01.04.2005 i.e. the date from which sub-clause (ia) of section 40(a) was inserted by the आअसं. 7666/मुं/20219 (िन.व.2011-12) (A.Y.2011-12)
Finance Act, 2004. The ld. AR contended that the matter can be restored to the AO for verification.
On the other hand, the Sh. Sanjay J. Sethi representing the Department vehemently defended the impugned order. The ld. DR submitted that the assessee has failed to deduct tax at source on the payment of Rs. 2,50,000/- made to M/s The West Coast Paper Mills Ltd. No document was placed on record by the assessee to substantiate that the recipient has offered the amount so received to tax. Therefore, the AO rightly disallowed the entire payment under section 40(a)(ia) of the Act. Similar was the situation before the CIT(A), therefore, the CIT(A) upheld the findings of AO and confirmed the disallowance under section 40(a)(ia) of the Act.
Both sides heard, orders of the authorities below examined. The short issue in the present appeal is with regard to disallowance of Rs. 2,50,000/- under section 40(a)(ia) of the Act. Admittedly, the assessee had made payment of aforesaid amount without deducting tax at source. Now, the assessee has filed confirmation from M/s The West Coast Paper Mills Ltd. (payee) that amount has been offered to tax. I deem it appropriate to restore this issue back to the file of AO for the limited purpose of verification of the confirmation filed by the recipient of the amount. In case, it is found that the amount has been offered to tax by payee, no addition under section 40(a)(ia) in the hands of assessee is warranted.
It is relevant to mention that though second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01.04.2013, the Hon’ble Delhi High Court in the case of CIT v/s Ansal Land Mark Township (P) Ltd. (supra) has आअसं. 7666/मुं/20219 (िन.व.2011-12) (A.Y.2011-12)
held that second proviso to section 40(a)(ia) is declaratory and curative and would apply retrospectively w.e.f. 01.04.2005. Similar view has been taken by the Hon’ble Jurisdictional High Court in the case of PCIT vs. Perfect Circle India Pvt. Ltd. (supra).
Thus, in light of the facts of case and decisions cited above, the appeal of assessee is allowed for statistical purpose.
Order pronounced in the open court on Tuesday, the 27th day of July, 2021.