CHANDUBHAI SOMABHAI PATEL,MUMBAI vs. ACIT 31(1), MUMBAI

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ITA 2208/MUM/2017Status: DisposedITAT Mumbai21 August 2018AY 2011-124 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the second proviso to Section 40A(ia) is retrospective. The issue was set aside to the AO to verify if the recipient parties had included the receipts in their income.

What were the facts?

The assessee paid freight and trade handling charges but did not deduct tax at source. The AO disallowed these expenses under Section 40A(ia) for non-compliance with Section 194C. The CIT(A) confirmed the disallowance.

What were the issues?

Whether disallowance under Section 40A(ia) is justified for non-deduction of tax on payments that were mere reimbursements, and the retrospective applicability of the second proviso to Section 40A(ia).

Which sections of the Income-tax Act were involved?

Section 40A(ia),Section 194C,Section 143(3)

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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

For Appellant: Shri Ravikant Pathak, AR

Heard together (2 matters)

ITA No. 2208/Mum/2017
ITA No. 2207/Mum/2017

Read from the judgment's own cause title. This page is filed under one of them.

PER MAHAVIR SINGH, JM: These appeals by the assessee are arising out of the common order of Commissioner of Income Tax (Appeals)-42, Mumbai [in short CIT(A)], in appeal No. CIT(A)-42/IT-305 & 504/14-15 dated 23.12.2016. The assessments were framed by the Asst. Commissioner of Income Tax, & 2208/Mum/2017 Circle-31(1), Mumbai (in short ‘ACIT’/ ‘AO’) for the A.Ys. 2011-12 & 2012- 13 vide different orders dated 20.02.2015 & 12.03.2014 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2.

The only common issue in these appeals of assessee is against the order of CIT(A) confirming the action of the AO in making disallowance of freight and trade handling charges paid to various parties for non-deduction of tax under section 194C of the Act, thereby invoking the provisions of section 40A(ia) of the Act. In both the years, the assessee has raised identical grounds. Grounds raised in AY 2011-12 in reads as under: -

1.

“1) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming, the disallowance of Rs 77,54,330 made u/s 40a(ia) of the Income Tax Act, ignoring the fact, that these payments were mere reimbursement of expenses.

2) On the facts and circumstances of the case and in law, the learned CIT(A) erred in concluding that the provisions of 194C, is applicable even if there is no element of income in the amounts paid in the hands of the ignoring the provisions of section 4 and section 190 of the Income Tax Act;1961.

3) On the facts and circumstances of the case and in law, the learned CIT(A) erred in concluding, that the 2nd proviso to section 40a(ia) inserted by the Finance Act 2012 has no retrospective effect.

3.

At the outset, the learned Counsel for the assessee stated the second proviso to section 40a(ia) of the Act as introduced by the Finance Act 2012 is retrospective in nature in view of the decision of Hon’ble Delhi High court in the case of CIT vs. Ansal Land Mark Township (P) Ltd. vs. & 2208/Mum/2017 [2015] 377 ITR 635 (Delhi) and hence, he only requested that the assessee is ready to file all the details of the parties to whom these payments have been made and expenses claimed. The learned Counsel for the assessee undertook to comply with the provisions of second proviso to section 40a(ia) of the Act. When the same was confronted to the learned Sr. Departmental Representative, he fairly agreed for setting aside of the issue to the file of the Assessing Officer.

4.

After hearing both the sides and going through the facts of the case, we are of the view that the second proviso to section 40a(ia) of the Act is retrospective as held by Hon’ble Delhi High court in the case of Ansal Land Mark Township (P) Ltd. (supra). Hence, we set aside this issue to the file of the AO, who will go into the details file by assessee whether other parties have included the receipts in their respective returns of income or not and accordingly, decide the issue. The appeal of assessee is allowed for statistical purposes and remitted back to the file of the AO.

5.

Similar are the facts in for AY 2012-13 and taking a consistent view, this appeal of assessee is also remitted back to the file of the AO with the same directions. The appeal of the assessee is allowed for statistical purposes.

6.

In the result, both the appeals of assessee are allowed for statistical purposes.

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