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Income Tax Appellate Tribunal, ‘A’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
These are appeal and cross objection of the Revenue and assessee respectively directed against an order dated 30.01.2017 of ld. Commissioner of Income Tax (Appeals)-3, Chennai.
ITA No. 927/17 & CO 122/17. :- 2 -:
Assessee has filed this cross objection with a delay of 2. ninety six days. Condonation petition has been filed. Reason shown for the delay seems to be justified. Ld. Departmental Representative did not raise any serious objection. Delay is condoned. Cross objection is admitted.
Revenue in its appeal is aggrieved that ld. Commissioner of 3.
Income Tax (Appeals) deleted a disallowance made by the ld. Assessing Officer u/s.40(a)(ia) of the Income Tax Act, 1961 (in short ‘’the Act’’) relying on a decision of this Tribunal in the case of M/s.
Merilyn Shipping and Transports Limited vs. CIT, 136 ITD 23 (Visakhapatnam). As against this, assessee in its cross objection states that the recipients had shown the receipts in their respective return of income and paid tax thereon, and by virtue of second proviso to Section 40(a)(ia) of the Act, rigours of said section could not be applied on it.
We have considered the rival contentions and perused the 4. orders of the authorities below. In so far as appeal of the Revenue is concerned, we find that the Hon’ble Apex Court in the case of Palam Gas Agencies Limited vs. ACIT, (2017) 394 ITR 300 has held that Section 40(a)(ia) of the Act, could be applied on paid as well as payable amounts. In our opinion ld. Commissioner of Income Tax
ITA No. 927/17 & CO 122/17. :- 3 -:
(Appeals) fell in error in holding that assessee could not be visited with a disallowance u/s.40(a) (ia) of the Act for the amounts paid by it during the relevant previous year.
In support of assessee’s cross objection ld. Authorised Representative submitted that interest payments of �1,21,27,160/- for which disallowance was made u/s.40(a) (ia) of the Act was reflected in the returns of income filed by the respective payees and assessee was saved by second proviso to Section 40(a)(ia) of the Act, read along with first proviso to Sub Section (1) of Section 201 of the Act.
Contention of the ld. Authorised Representative was that payee had paid taxes on their respective income and assessee could be visited with a disallowance u/s.40(a)(ia) of the Act. Per contra, ld. Departmental Representative submitted that no such plea was taken by the assessee before the lower authorities.
We have considered the rival contentions and perused the orders of the authorities below. Second proviso to Section 40(a)(ia) of the Act is reproduced hereunder:-
“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.”
ITA No. 927/17 & CO 122/17. :- 4 -:
The above proviso was introduced through Finance Act, 2012 with effect from 01.04.2013. The said proviso refers to First Proviso to sub- section (1) of Section 201 of the Act. First proviso to Section 201(1) of the Act is reproduced hereunder:-
“Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident— (i) has furnished his return of income under section 139 ; (ii) has taken into account such sum for computing income in such return of income ; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed “
The above proviso was inserted by the very Finance Act, 2012 with effect from 01.07.2012. Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd.(377 ITR 635) has held that these provisos, being clarificatory in nature could be applied retrospectively.
Thus, if the assessee is able to show that the recipient of interest had furnished their return of income, taking into account such interest for computing their income and paid tax due on such interest, then it cannot be visited with the rigours of Section 40(a)(ia) of the Act. Since lower authorities has not verified whether payees have shown the receipt of interest in their respective returns and considered such amount while computing their income, we are of the opinion that the matter requires a fresh look by the ld. Assessing Officer. We set
ITA No. 927/17 & CO 122/17. :- 5 -: aside and remit the issue regarding disallowance of �1,21,27,160/- u/s.40(a)(ia) of the Act back to the file of the ld. Assessing Officer for consideration afresh in accordance with law.
In the result, the appeal of the Revenue is allowed and Cross Objection of the assessee is allowed for statistical purpose.
Order pronounced on Thursday, the 3rd day of May, 2018, at Chennai.