SREE RAMA KRISHNA ENGINEERING COMPANY,VISAKHAPATNAM vs. PCIT-1, VISAKHAPATNAM

PER D.S. SUNDER SINGH, Accountant Member:

This appeal is filed by the assessee against the order of the Pr.Commissioner of Income-Tax (Pr.CIT]-1, Visakhapatnam vide F.No.Pr.CIT-1/VSP/263/6/2016-17 dated 27.03.2017 for the assessment

year 2012-13. 2. All the grounds of appeal are related to the order passed by the Pr.Commissioner of Income Tax (Pr.CIT) u/s 263. In this case, assessment

was completed u/s 143(3) on total income of Rs.42,24,770/- by an order

dated 10.03.2015. Ld.Pr.CIT has taken up the case for revision u/s 263 for the following two reasons :

(i) The Assessee has made the payment of rents but not deducted the TDS as per section194I of I.T.Act

(ii) Interest credits made to Cholamandalam DBS Finance Ltd.,

but not deducted the tax at source as required u/s 80G of I.T.Act.

persons but not deducted the tax at source and the expenditure required to be considered for the disallowance u/s 40(a)(ia) of I.T.Act.

Rent Paid S.No. Name of the property owner Address of the property (Rs.)

The payment of interest without deduction of tax at source also attracts the disallowance u/s 40(a)(ia) of I.T.Act. Hence the Pr.CIT taken up

the case for revision.

the disallowance is not attracted. Hence, requested the Pr.CIT not to resort

for the revision u/s 263 and requested to drop the proceedings. Similarly in respect of the rents the Ld.A.R submitted that the Andhra Cricket

Association is society and the income of the assessee is exempt and in the remaining cases either the rents paid were below the limit or the recipients

have admitted the income in their hands. Not being convinced with the explanation of the assessee, the Pr.CIT held that the amendment to second

proviso to 40(a)(ia) is prospective w.e.f. 1.4.2013 hence the assessee

required to deduct the tax and failure to deduct the tax the expenditure

required to be disallowed as per section 40(a)(ia) of I.T.Act. The Ld PCIT

further observed that unless and otherwise expressly stated to be retrospective or by intendment shown, a statutory provision is always

prospective. The Ld.Pr.CIT has also taken the support of the decision of Hon’ble High Court of Kerala in the case of Prudential Logistics &

Transports (364 ITR 689) and held that second proviso to Section 40(a)(ia)

of the I.T.Act is not retrospective in nature. Since the assessee failed to comply with the provisions of the tax deducted at source as required u/s 194A of the Act, the Pr.CIT held that the assessment made u/s 143(3) dated

as per law after conducting necessary inquiries.

this Tribunal. During the appeal hearing, the Ld.AR argued that there was an amendment to the Act by introduction of second proviso to Section 40(a)(ia) of I.T.Act and as per second proviso to section 40(a)(ia), if the deductee offers the income in its hands and file the return of income, the assessee should not be treated as assessee in default for the purpose of 201(1) of the Act and disallowance u/s 40(a)(ia) does not attract and argued that the payee had shown the receipt in their books of account and tax due was paid by the said company, hence there is no case for revision

u/s 263. The assessee also relied on the decision of following case laws

(i) No.337/Agra/2013)

(iii) Vedprakash Samaria Vs. ACIT (Jaipur Bench)

(iv) Sanjay Kumar (2016) – 48 CCH 34 (Kolkata Tribunal)

and argued that the order of Pr.CIT committed a mistake in not considering

the amendment to proviso as retrospective and requested to set aside the order of the Ld.Pr.CIT.

George Muthoot Vs. CIT and Prudential Logistics & Transports Vs. ITO

(supra) .

to M/s Cholamandalam DBS Finance Limited for the financial year 2011-12

relevant to the assessment year 2012-13 and also paid the rents

amounting to Rs.9,54,750/- to various persons as per details given above. .

The limited question in this case is whether the assessment order passed

by the AO is erroneous and prejudicial to the interest of revenue or not ?

The assessee has not deducted the TDS in respect of the payment made to M/s Cholamandalam DBS Finance Limited, and in respect of rent payments.

Non deduction of tax at source attracts the provision of section 40(a)(ia) of I.T.Act. The amendment to section 40(a)(ia) came in to effect from 01/04/2013 and the assessing officer has not examined the taxability of rents and interest. The AO during the assessment proceedings has called

for the details of TDS made, interest paid on TDS but not remitted to government account along with other details, but the assessee has not furnished the details to the AO. The assessee did not furnish the details

relating to non deduction of tax at source though the AO has called for the details and because of assessee’s failure to furnish the details the AO could

not examine the issue and did not make the disallowance which required

to be made u/s 40(a)(ia) of I.T.Act. The case laws regarding application of provisions of second proviso to Section 40(a)(ia) whether retrospective or prospective is a legal issue which is not finally settled and not related to the jurisdiction u/s 263 of I.T.Act. The second proviso to section 40(a)(ia) is prospective w.e.f. 1.4.2013. This view is also supported by the decision of Hon’ble High Court of Kerala relied up on by the Ld.Pr.CIT and Ld.DR in the deduct the tax at source which required to be deducted u/s 194A and 194I

of I.T.Act and the AO failed to consider the issue and make the addition u/s 40(a)(ia), the assessment made by the AO is erroneous and prejudicial to the interest of the revenue. The Pr.CIT directed the AO to disallow the interest expenditure and to redo the assessment after making inquiries.

Since the direction given by the Pr.CIT is ambiguous and confusing, we modify the direction and set aside both the issues to the file of the AO to redo the assessment as per law. The AO is free to conduct the inquiries and decide the issue as per law on merits.

The above order was pronounced in the open court on 7th March,

L.Rama, SPS आदेश क" ""त&ल प अ'े षत /Copy of the order forwarded to:-

आदेशानुसार / BY ORDER ////

Sr. Private Secretary ITAT, VISAKHAPATNAM