MUKESH MALHOTRA ,SHIMLA vs. INCOME TAX OFFICER , SHIMLA

 Disallowance of Rs. 37,25,543/- under section 40(a)(ia) for non-deduction of TDS on payments made to pay channels.  Disallowance of Rs. 6,88,125/- under section 40(a)(ia) for non-deduction of TDS on collection charges. 4. Against the order of the AO the assessee went in appeal before the Ld. CIT(A) who has since sustained the order of the AO. ITA No. 825/Chd/2024 4

5. Feeling aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us and has raised the following grounds:

A. That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) is not justified in sustaining the disallowances made under section 40(a)(ia) of the Income Tax Act, 1961, though proof of the payment of taxes deposited by the deductee in FORM 26A had been duly placed on record during the course of appellate proceedings. The sustenance of the addition is bad in law and facts. B. That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) is not justified in not adjudicating the ground raised in respect to the reopening of the case of the appellant under section 147 r.w.s. 148 of the Income Tax Act, 1961.

6. With respect to Ground No.1 the Ld. AR has drawn our attention to para 5.2 to 5.4 of the order passed by the Ld. CIT(A) which is to the following effect:

5.2 On perusal of the records, it is seen that order u/s 154 of the Act was passed on 09.05.2017 for AY 2009-10. On perusal of the order passed us/ 154 of the Act, it is seen that at the time of original assessment, it was noticed that assesse has made payment to 07 parties as pay channels amounting to Rs. 94,29,687/- out of which payments on which TDS was made were Rs. 57,04,114/- and balance Rs. 3,72,25,543/- were disallowed u/s 40(a)(ia) of the act. During the rectification proceedings, the appellant had furnished certificate only of two parties namely M/s. MSM Discovery (P) Ltd. And M/s. Stare Den Media Services as against 07 parties before AO. Therefore, total amount of Rs. 15,38,827/- was given relief while passing the order u/s 154 of the Act dated 09.05.2017. 5.3 During the appellate proceedings, the appellant has furnished copy of form 26A in the following parties in which payment was made to the appellant. (a) M/s. Zee Turner Ltd. (b) M/s. ESPN Software India Pvt. Ltd. (c) M/s. UTV Global Broadcasting Ltd. In this regard, page no. 23 of the appellant’s submission is as below:- ITA No. 825/Chd/2024 5 5.4 During the appellate proceedings, the appellant has furnished Form 26A but the appellant has not furnished any computation details in whether that revenue received from appellant has been offered in their ITRs or not? The appellant has not produced any computation sheet for the same. Hence, in absence of the complete details the addition made by the AO is hereby confirmed and ground of appeal no. 01 raised by the appellant is hereby rejected.

6.1 It was contended by the Ld. AR despite the assessee filed the requisite Form 26A of the M/s Zee Turner Ltd., M/s ESPN Software India Pvt. Ltd. and M/s UTV Global Broadcasting Ltd. the Ld. CIT(A) has not deleted the disallowance made on account of alleged non deduction of taxes while making the payment to these concerns. It was submitted that once the Form 26A has been filed by the Asessee in the appellate proceedings it was incumbent upon the Ld. CIT(A) to grant the relief to the assessee. 6.2 The Ld. AR also argued that the Ld. CIT(A) erred in sustaining the disallowance under section 40(a)(ia) despite the submission of Form 26A, which proves that the deductees had paid the taxes.The Ld. AR has relied on the second proviso to section 40(a)(ia) of the Act which has been inserted by the Finance Act, 2012 w.e.f. 1.4.2013, which reads as under:- “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”

6.3 The Ld. AR has finally relied upon the decision of the Coordinate Chandigarh Bench of the Tribunal in the case of M/s Kurukshetra Darpan (P) Ltd, Kurukshetra v Addl CIT, in dated 16.11.2015, whereby that the Coordinate Bench of the Tribunal while relying upon the decision of the Hon'ble Delhi High Court in the case of CIT v Ansal Landmark Township (P) Ltd in ITA No. 160/161 of 2015, vide its order dt. 26.8.2015.

“4. In the above judgment, the Hon'ble Delhi High Court has held that that the second proviso to Section 40 (a) (ia) of the Act is declaratory and curative in nature and should be given retrospective effect from 1st April 2005 being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. In the above decision the Hon’ble High Court has categorically held that no doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfillment of the conditions as stipulated in the first proviso to Section 201(1) of the Act. The first proviso to Section 201 (1) of the Act was inserted with effect from Ist July 2012.

Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P.) Ltd.[2007] 163 Taxman 355 (SC)/[2007] 293 ITR 226 held as under: 10. Be that as it may, the Circular No. 275/201/95-IT(B), dated 29-1-1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares "no demand visualized under section 201(1) of the Income-tax Act should be enforced after the tax deductor has satisfied the officer-in- charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty under section 271C of the Income-tax Act." 8.1 Furthermore we may point out that the AO while passing the rectification order has already given the benefit of abovesaid preposition of law, on being satisfied with respect to M/s MSM Discovery Pvt. Ltd. and Starden Media Services to the assessee, after considering the Form 26A certificate furnished by the assessee for these two service providers. ITA No. 825/Chd/2024 7 8.2 The assessee has provided the certificate of deposit of tax by (a) M/s. Zee Turner Ltd.(b) M/s. ESPN Software India Pvt. Ltd. and (c) M/s. UTV Global Broadcasting Ltd., before the Ld. CIT (A), however for the reason mentioned hereinabove benefit had not been granted by the Ld. CIT(A) by exercising his power under section 252 & 253 of the Act. 8.3 In the light of above we deem it appropriate to remand back the matter to the file of the AO with direction to verity whether the Form 26A has been issued by these parties or not, and in case, the AO found that the Form 26A has been issued by the parties then the consequential benefit shall be pass on to the assessee and no disallowance shall be made in the hands of the assessee. Needless to say the above said exercise shall be carried out by AO after affording the opportunity to assessee and following the principle of natural justice.

of the assessee.

13. In the result, appeal of the assessee is partly allowed.