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Before: Shri V. Durga Rao & Shri G. Manjunatha
आयकर अपीलीय अिधकरण, ‘ए’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी वी. दुगा� राव, �ाियक सद� एवं �ी जी. मऺजुनाथा, लेखा सद� के सम� । Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. No.2427/Chny/2019 िनधा�रण वष�/Assessment Year: 2011-12 & C.O. No. 99/Chny/2019 [in I.T.A. No. 2427/Chny/2019] The Assistant Commissioner of M/s. Studio Green, Income Tax, Central Circle 1(2), Vs. Old No. 13, New No. 6, II Floor, Investigation Wing, Room No. 311, 6, Thanikachalam Road, No. 46, MG Road, Chennai. T. Nagar, Chennai 600 017. [PAN: ABSFS6433Q] (अपीलाथ� /Appellant) (��थ�/Respondent/Cross Objector) अपीलाथ� की ओर से / Appellant by Shri S. Bharath, CIT : ��थ� की ओर से/Respondent by Shri V. Vivek Rajan, C.A. : सुनवाई की तारीख/ Date of hearing 18.08.2021 : घोषणा की तारीख /Date of Pronouncement : 18.08.2021 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 18, Chennai, dated 26.06.2019 relevant to the assessment year 2011-12.
The only issue involved in the appeal of the Revenue is relating to whether the second proviso section 40(a)(ia) of the Income Tax Act, 1961 [“Act” in short] applies retrospectively or only prospective from the date of
2 I.T.A. No. 2427/Chny/2019 & C.O. No. 99/Chny/2019 insertion i.e., 01.04.2013. In the assessment order, the Assessing Officer has noted that the assessee has made following payments and claimed the same as advertisement expenses in the profit and loss account: Date Paid to Amount in ₹. 05.08.2010 Om Sai Publication 5,94,500/- 09.08.2010 Aamoda Publications 8,21,197/- 10.01.2011 M/s. Vijay Television Pvt. Ltd. 64,88,265/- M/s. Vision Time India Pvt. Ltd. 85,55,095/- Total 1,64,59,057/- The Assessing Officer further noted that the above payments are contractual in nature and attracts to deduct TDS under section 194C of the Act. The Assessing Officer asked the assessee to produce the evidence that the TDS has been deducted on the above payments. However, the assessee has not filed any documentary evidence. Accordingly, the Assessing Officer has disallowed the entire expenditure under section 40(a)(ia) of the Act. Similarly, the assessee has paid an amount of ₹.1,00,00,000/- to M/s. Sun Pictures and claimed the same as expenditure in the profit and loss account. The Assessing Officer asked for details of TDS deduction. No details were filed before the Assessing Officer. Therefore, the Assessing Officer has disallowed the entire expenditure under section 40(a)(ia) of the Act. Further, on verification of the books of accounts, the Assessing Officer has noted that the assessee has paid ₹.1,30,00,000/- to Actor Karthi for Siruthai movie. The said payment is professional in nature and attracts to deduct TDS under section 194J of the Act. No TDS was deducted, therefore, by invoking the
3 I.T.A. No. 2427/Chny/2019 & C.O. No. 99/Chny/2019 section 40(a)(ia) of the Act, the Assessing Officer disallowed the entire amount.
On appeal before the ld. CIT(A), the assessee has submitted that in all the above payments, the recipients have paid tax by filing return of income and submitted that the second proviso to section 40(a)(ia) of the Act applies retrospectively and once the recipients paid the tax, the assessee cannot be held as assessee is in default under section 201 of the Act. By following various decisions particularly, the decision of the Hon’ble Delhi High Court in the case of CIT v. Ansal Landmark Township (P) Ltd. 377 ITR 365 and also the decision of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages P. Ltd. v. CIT 293 ITR 226 and also by following jurisdictional ITAT in the case of Quantum Knits P. Ltd. in ITA Nos. 2164/Mds/2014 and 287/Mds/2016, the ld. CIT(A) directed the Assessing Officer to provide an opportunity to the assessee to furnish Form 26A from the recipients of the payments made without TDS and to delete the addition to the extent the recipients have offered the above payments in their respective returns of income.
Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR strongly supported the order passed by the Assessing Officer.
4 I.T.A. No. 2427/Chny/2019 & C.O. No. 99/Chny/2019 5. On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A).
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The assessee has made various payments and no TDS was deducted. No details were also filed before the Assessing Officer. Therefore, the Assessing Officer disallowed the entire payments by invoking the section 40(a)(ia) of the Act. On appeal before the ld. CIT(A), the assessee has submitted that the recipients have already offered the entire payments made by the assessee in their returns of income and therefore, as per second proviso to section 40(a)(ia) of the Act, the assessee cannot be considered as assessee in default for not deducting TDS. We find that the assessee has neither filed the details before the Assessing Officer in respect of the recipients offering the entire income for taxation nor before the ld. CIT(A) or even filed before the ITAT. However, we are of the opinion that the ld. CIT(A) has correctly decided the legal issue i.e., the application of second proviso to section 40(a)(ia) of the Act is retrospective in nature. On this issue, very recently, the Coordinate Benches of the Tribunal has considered the very same issue in the case of Smt. Manimegalai Ganesan v. DCIT in I.T.A. Nos.1328 to 1331/Chny/2018 dated 09.08.2021 and held that the application of second
5 I.T.A. No. 2427/Chny/2019 & C.O. No. 99/Chny/2019 proviso to section 40(a)(ia) of the Act is retrospective in nature and relevant portions are extracted as under: “8. So far as invoking section 40a(ia) of the Act is concerned, the ld. CIT(A) has held that the applicability of second proviso introduced through Finance Act, 2012 is only prospective in nature and has no retrospective effect by following the judgement of Hon’ble Kerala High Court in the case of Thomas George Muthoot v. CIT 287 CTR 101. The ld. Counsel for the assessee has relied on the judgement in the case of CIT v. Calcutta Export Company [2018] 93 taxmann.com 51 (SC), wherein the Hon’ble Supreme Court has held that the amendment made by the Finance Act, 2010 to provisions of section 40(a)(ia) is curative in nature and it should be given retrospective operation from date of insertion of said provision i.e., with effect from assessment year 2005-06 and submitted that the above judgement of the Hon’ble Supreme Court has to be followed in the present case also. The ld. Counsel for the assessee has further relied on judgement of the Hon’ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P.) Ltd. [2015] 61 taxmann.com 45 (Delhi) and submitted that the Hon’ble Delhi High Court has held that the second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 with effect from 01.04.2013 is declaratory and curative and it operates retrospectively and submitted that the same may be followed. 8.1 We have heard both the sides, perused the materials available on record and gone through the orders of authorities below and also the judgements relied on by the assessee. The issue involved in this appeal is whether the assessee is in default under section 201 of the Act on account of failure to deduct TDS under section 194J of the Act warranting invocation of section 40a(ia) of the Act. In this case, the assessee has made payment of professional fees to her husband without deducting TDS. However, the assessee’s spouse filed return of income and disclosed the professional fee receipt of ₹.1,62,99,951/- from the Hitech Diagnostic Centre from the financial year 2007-08 relevant to the assessment year 2008-09. The Assessing Officer has disallowed the entire payment made to assessee’s husband on the ground that the assessee has not deducted TDS under section 194J of the Act and for not deducting the same, section 40a(ia) of the Act applies. On appeal, the ld. CIT(A) confirmed the same. The first point for our consideration is whether the operation of second proviso to section 40a(ia) of the Act introduced through Finance Act. 2012 with effect from 01.04.2013 is prospective or retrospective. The ld. CIT(A) has relied on the decision of Hon’ble Kerala High Court in the case of Thomas George Muthoot v. CIT (supra) for the preposition that the above provision applies only prospective. However, the Hon’ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P.) Ltd.(supra) has held that the second proviso to section 40(a)(ia) of the Act is declaratory and curative and it has retrospective effect
6 I.T.A. No. 2427/Chny/2019 & C.O. No. 99/Chny/2019 from 01.04.2005 [para 14 of the judgement of Delhi High Court]. The Hon’ble Delhi High Court has held that the second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 with effect from 01.04.2013. The effect of the said proviso is to introduce a legal fiction where an assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such assessee is deemed not to be an assessee in default in terms of the first proviso to sub-section (1) of section 201 of the Act, then, in such event, it shall be deemed that the assessee has deducted and paid the tax on such sum on the same of furnishing of return of income by the resident payee referred to in the said proviso. In the present case, the assessee’s spouse filed return of income offering the professional fee receipt for taxation. Thus, the assessee cannot be considered as an assessee in default under section 201 of the Act. Therefore, we are of the considered opinion that no disallowance can be made under section 40(a)(ia) of the Act. 8.2 We find that the ld. CIT(A) relied on the decision in the case of Thomas George Muthoot v. CIT (supra), wherein, the Hon’ble Kerala High Court has held that the second proviso operates prospectively. Whereas, in the case of CIT v. Ansal Land Mark Township (P.) Ltd.(supra), the Hon’ble Delhi High Court has held that it operates retrospectively. The Hon’ble Supreme Court also in the case of CIT v. Calcutta Export Company (supra) has considered similar amendment made by Finance Act, 2010 to provisions of section 40(a)(ia), which is curative in nature and should be given retrospective operation from the date of insertion of said provision. Keeping in view of the above judgements of Hon’ble Supreme Court as well as Hon’ble Delhi High Court and also by following the judgement of the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. 88 ITR 192, wherein, the Hon’ble Supreme Court has held that where two views are possible, the view which is favourable to the assessee has to be followed, we are of the considered opinion that the issue has to be decided in favour of the assessee. In view of the above facts and circumstances of the case, the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) stands reversed and the ground raised by the assessee is allowed. The above decision for the assessment year 2008-09 mutatis mutandis applies to all the assessment years under appeal and no separate adjudication is required”. 6.1 Respectfully following earlier decisions of the Tribunal, decision of Hon’ble Delhi High Court as well as the decision of Hon’ble Supreme Court, the ld. CIT(A) has rightly held that the application of second proviso to section 40(a)(ia) of the Act is retrospective in nature and directed the Assessing Officer to provide an opportunity to the assessee to furnish Form
7 I.T.A. No. 2427/Chny/2019 & C.O. No. 99/Chny/2019 26A from the recipients of the payments made without TDS and to delete the addition to the extent the recipients have offered the above payments in their respective returns of income. Further, the assessee is directed to file all the details in respect of the payments made to various parties and offering the same by all the recipients in their returns of income before the Assessing Officer and the Assessing Officer shall decide the issue in view of our findings stated hereinabove. Thus, we find no reason to interfere with the order of the ld. CIT(A). Accordingly, the ground raised by the Revenue stands dismissed.
6.2 Since we have sustained the order of the ld. CIT(A) on this issue, the Cross Objection filed by the assessee became infructuous and accordingly dismissed.
In the result, the appeal of the Revenue is dismissed and the Cross Objection filed by the assessee also dismissed. Order pronounced on the 18th August, 2021 at Chennai.
Sd/- Sd/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 18.08.2021 Vm/- आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��यथ�/ Respondent, 3. आयकर आयु� (अपील)/CIT(A), 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR & 6. गाड� फाईल/GF.