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Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
Per S.S.Godara, JM:
This assessee’s appeal for Assessment Year 2008-09 is directed against the Commissioner of Income Tax(Appeals)-7, Pune’s order dated 15.11.2018 passed in appeal no.PN/CIT(A)-7/Cir- 1/0804/2016-17, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short “the Act”].
Heard both the parties. Case file perused. 2. The assessee’s sole substantive grievance raised in the instant appeal challenges correctness of both the lower authorities action invoking section 40(a)(ia) disallowance of Rs.43,76,025/- in the instant second round of proceedings. The CIT(A)’s detailed A.Y. 2008-09 Mahavir Adinath Salve (A) discussion affirming the Assessing Officer’s action to this effect reads as follows: “4. The brief facts of the case are that the assessee is engaged in the business of civil contract mainly carrying on trenching and excavation works for BSNL and other routine civil maintenance work. The assessee has e-filed return of income on 29.09.2008 declaring total income of Rs. 6,98,560/- on contract receipts of Rs. 1,32,61,248/-. Originally the assessment was completed u/s. 143(3) vide order dated 22.12.2010 assessing the income at Rs. 50,74,590/- by making a disallowance of Rs. 44,76,025/- u/s. 40(a)(ia) on the ground that the appellant had not deducted the tax at source on payments made to sub contractors. On appeal the ClT(A)-Hl vide order 01.11.2013 confirmed the addition.- The CIT(A)-III did not uphold the contention that the section 40(a)(la) is applicable only in respect of the amount which are actually payable at the end of the year and not which paid within the year. Similarly he did not admit the form No. 15G filed as additional evidence under Rule 46A. Aggrieved by the CIT(A) order the appellant preferred an appeal before the ITAT, and the ITAT in IT A No. 20/PN/2014 [A.Y. 2008-09] dated 23.10.2015 set-aside the order to the file of the AO with the direction to decide the(Tssue afresh in the light of 15G/15H forms submitted by the sub contractor to whom the assessee has made payments exceeding Rs. 20,000/- without deduction of tax. 4.1 In the set-aside assessment, the AO examined and got verification done in 6 eases out of 47 sub contractors through the inspector in respect of the 15G forms filed by the assessee. The AO then examined the provisions of section 194C and 1941 and concluded that the appellant cannot claim non deduction of the payments made to the subcontractors and machinery hirers on submission of 15G/15H forms. It was held that there is no provision for non-deduction of TDS in respect of 194C and 194I by relying on 15G/15H forms. He therefore, held that the payments made without tds irrespective of 15g/-5h forms are liable to be disallowed u/s. 40(a)(ia). He accordingly, added, no amount of Rs. 43,76,025/- to the returned income in the order passed on 30.12.2016. The AO also concluded that the second proviso section 40(a)(ia) is not applicable to the A. Y. 2009-10. 4.2 In the submission the appellant pleaded that the disallowance u/s. 40(a)(ia) was restored to the file of the AO with the direction to decide the issue fresh in the light of 15G/15H forms submitted by the sub contractors. The appellant further claimed that the payments made to the parties were for machinery hire charges and AO was‘wrong in treating them to be sub contract payments for A.Y. 2008-09 Mahavir Adinath Salve (A) labour and relied on the P & L A/c. in which the machine hire charges debited were of Rs. 43,76,025/- and the labour majeri account at Rs. 73,36,760/-. The appellant claims that the AO had so treated it to be labour contract payments relying on'the statement recorded during the assessment proceedings in the original assessment proceedings. The appellant relied on the Delhi High Court decision in case of CIT vs. Ansel Landmark Township reported in 279 CTR 384 for the proposition that the second proviso to section 40(a)(ia) has retrospective effect.
5. It has been held that the second proviso to section 40(a)(ia) has retrospective effect by the Delhi High Court in the Ansal Landmark Township cited supra while there is contrary decision of the Kerala High Court in case of Prudential Logistics & Transport• vs. ITO reported in 364 ITR 689. On consideration the ITAT, Pune Bench has held in favour of the appellant as the one that is favourable to the appellant has to be adopted and relied on the judgment of the Supreme Court in the case of CIT vs. Vegetable Products [1972] 88 ITR 172 {SC). However, the appellant has not filed the relevant form No. 26A issued by the CA supporting that the said parties have reflected in theiij books and hSi/R^filed the returns of income. Therefore, the appellant does not get any benefit of the second proviso to section 40(a)(ia) in the absence of requisite forms. 5.1 It is further seen that the section 197A(1A) r.w.s 197A(1B) provides for non deduction of tax in respect of persons other than a ‘company' or a 'firm' provided the declaration is made in prescribed form No. 15k, if such Amounts credited does not exceed the maximum amount which is chargeable to tax. The section is applicable in respect of the payments made u/s. 192A, 193, 194A, 194D, 194DA, 1941, 194K. However, in respect of section 1941 which is applicable to the rent payable on land, building, equipment and machinery has been inserted only by the Finance Act, 2016 w. e. f. 01.06.2016. The appellant’s case relates to AY 2008-09 and therefore, the same is not applicable to the appellant’s case. Therefore, irrespective of the facts whether the payments have been made to machinery hirers or Form No. 15G have been filed, the appellant is not entitled to any relief, as the relevant provision was not on statute at that time. Therefore, the appeal is dismissed.”
We have given our thoughtful consideration to rival submissions and find no merit in Revenue’s stand supporting the impugned disallowance. This is for the reason that the assessee has admittedly produced his sub-contractors in issue so far as section A.Y. 2008-09 Mahavir Adinath Salve (A)
194C contractual payments are concerned wherein it has been found that the latter party(ies) had duly filed all the relevant details indicating them as not liable to pay tax since not covered beyond the exempt income limit in the relevant previous year. This clinching fact has gone unrebutted from the Revenue’s side. Case law GE India Technology Centre (P.) Ltd., Vs. CIT [2010] 329 ITR 456 (SC) holds that taxability of the recipients concerned is a pre-condition for setting into motion the impugned TDS deduction mechanism Chapter XVII in the Act. We thus accept the assessee’s vehement arguments to this effect.
The factual position is no different regarding the latter aspect of the matter so far as the assessee’s payments covered under section 194I are concerned. A perusal of the CIT(A)’s detailed discussion in para 5.1 makes it clear that he has refused to grant benefit of the statutory amendment in section 197A(1A) r.w.s 197A(1B) of the Act on the ground that the same had been inserted vide in Finance Act, 2016 w.e.f 01.06.2016 having prospective operation only whereas the instant appeal relates to 2008-09. This latter objection is also found to be without any substance as the CIT(A) has not considered the CBDT’s circular no.3/2017 dated 20th January, 2017 making it clear that the foregoing amendment’s objective is to reduce compliance burden wherein the payer concerned furnishes Form- A.Y. 2008-09 Mahavir Adinath Salve (A)
15G/15H; as the case may be. We thus hold that this section 197 amendment in the Act by the Finance Act, 2015 w.e.f 01.06.2016 is a beneficial one carrying retrospective effect being curative in nature. Case law CIT Vs. Calcutta Export Company [2018] 404 ITR 654 (SC) holds in similar circumstances that the beneficial amendment section 40(a)(ia) first proviso vide in Finance Act, 2010 w.e.f. 01.04.2010 also carries retrospective effect since curative in nature. We draw similar reasoning in the instant appeal as well in light of the foregoing CBDT’s circular issued after section 197A amendment (supra). The assessee succeeds in its latter arguments as well. The impugned section 40(a)(ia) disallowance of Rs.43,76,025/- is directed to be deleted.
Delay of 32 days in filing of the instant appeal stands condoned in light of the assessee’s condonation averments owing the same to various communication gaps and lack of compilation of necessary records.
This assessee’s appeal is allowed in above terms.
Order pronounced in the open Court on 29th August, 2022. (DR. DIPAK P. RIPOTE ACCOUNTANT MEMBER पुणे / Pune; "दनांक / Dated : 29th Aug, 2022/ SGR* A.Y. 2008-09 Mahavir Adinath Salve (A)