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Income Tax Appellate Tribunal, ‘ B’ BENCH : CHENNAI
Before: SHRI ABRAHAM P. GEORGE & SHRI G. PAVAN KUMAR
आदेश / O R D E R
PER SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER:
In this appeal filed by the assessee, it has taken extensive grounds running to two pages. However, effective grounds appear as relief sought by the assessee and these are reproduced as under:-
‘’1. The disallowance of expenditure u/sec. 40(a)(ia) be deleted.
2. The disallowance of claim of �2,12,489/- being the medial and life insurance premium of the Managing director be deleted’’.
ITA No.1031/Mds/2016. :- 2 -:
The assessee company engaged in the business of shipping, 2. clearing and forwarding, consolidation and groupage services had incurred an expenditure of �9,25,22,426/- under the head freight and clearing and forwarding and an expenditure of �22,54,374/- under the head delivery charges. While effecting these payments assessee has not deducted tax at sources. The ld. Assessing Officer invoked provision of Sec. 40(a)(ia) of the Income Tax Act, 1961 (herein after referred to as ‘the Act’) and made disallowance of the above expenditure. Aggrieved, the assessee moved an appeal before the Commissioner of Income Tax (Appeals).
Many fold arguments were taken by the assessee before the ld. Commissioner of Income Tax (Appeals) including a plea that the payee had furnished their returns and had shown the amounts received from the assessee as part of their income in such returns. Reliance was also placed by the assessee on the first proviso to Sec. 201(1) of the Act inserted by Finance Act, 2012 with effect from 1.7.2012 and second proviso to Sec. 40(a)(ia) of the Act, which were inserted through Finance Act, 2012 from 01.04.2013. Contention of the assessee was that the above provisions had retrospective operation and once the payee had filed their returns disclosing the payments received by them from the assessee and had paid taxes thereon, assessee being the payer could not be treated as a person in default.
ITA No.1031/Mds/2016. :- 3 -:
Argument of the assessee before ld. Commissioner of Income Tax (Appeals) was that it was saved by second proviso to Sec. 40(a)(ia) of the Act. The ld. CIT(A) sought a remand report from the ld. Assessing Officer since the assessee had in support of the above contention, filed a certificate in form 26A obtained from the payee shipping company.
The ld. Assessing Officer in the remand report stated that assessee did offer explanations for non deduction of taxes on payments totaling to �9,16,96,970/- against disallowance of �9,47,78,800/- made u/s.40(a)(ia) of the Act. Ld. Assessing Officer also opined that amendment to Sec. 40(a)(ia) and Sec. 201(1)of the Act were prospective and did not have any application so far as assessee the was concerned.
When the remand report was put to the assessee, it relying on 4. the judgment of Hon’ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township (P) Ltd 337 ITR 635 argued that second proviso to Sec. 40(a)(ia) of the Act was declaratory and curative in nature and had retrospective effect. However, the ld. Commissioner of Income Tax (Appeals) placing reliance on the Hon’ble Kerala High Court judgment in the case of Thomas George Muthoot vs. CIT (2015) 235 TAXMAN 246 held that second proviso to Sec. 40(a)(ia) of the Act introduced by the Finance Act, 2012 did not have retrospective
ITA No.1031/Mds/2016. :- 4 -: operation. He upheld the order of the ld. Assessing Officer and confirmed the disallowance.
Now before us, the ld. Authorised Representative strongly 5. assailing the order of the lower authorities below submitted that when there were different views expressed by different High Courts other than the jurisdictional High Court, assessee could always take refuge on the judgment favourable to it. Further, according to ld. Authorised Representative various Co-ordinate Bench of the Tribunal in a number of cases had held that second proviso of Sec. 40(a)(ia) of the Act operated retrospectively.
Per contra, the ld. Departmental Representative supported 6.
the order of the lower authorities.
We have considered the rival contentions and the orders of the authorities below. It is not disputed that Hon’ble Delhi High Court held second proviso to Sec. 40(a)(ia) of the Act, introduced by Finance Act, 2012 to have retrospective operation in the case of Ansal Land Mark Township (P) Limited (supra). It is also seen that Hon’ble Kerala High Court had taken a apposite view in the case of Thomas George Muthoot (supra). Ld. Commissioner of Income Tax (Appeals) had preferred to go by the order of the Kerala High Court for a reason that concerned provision was discussed in threadbare by their lordship.
ITA No.1031/Mds/2016. :- 5 -:
However, in our opinion this cannot be cited as a reason for not following a judgment in favour of the assessee. Unless and until the jurisdictional High Court judgment is available, on a point of law assessee can always fall back on a non jurisdictional High Court judgment which is favourable to it. Plethora of Tribunal judgments are also available were it was held that operation of second proviso to Sec.
40(a)(ia) of the Act had to be considered as retrospective. Few of the decisions are mentioned hereunder:-
Dilip Kumar Roy vs. ITO (2016) 68 Taxmann.com 129 (Kolkata- Trib)
New Alignment vs. ITO, (2016) 69 Taxmann.com 122 (Kolkata- Trib)
3. Mitra Guha Builders (India) Co. vs. DCIT (2016) 65 Taxmann.com 243 (Kolkata –Trib)
ITO vs. Dr. Jaideep Kumar Sharma (2014) 52 Taxmann.com 420 (Delhi –Trib)
Rajeev Kumar Agarwal vs. Addl. CIT (2014) 45 Taxmann.com 555(Agra-Trib)
ACIT vs. Raja Chkravarty (2015) 57 Taxmann.com 88 (Lucknow – Trib)
7. R K P Company vs. ITO (2016) 71 Taxmann.com 257(Raipur –Trib)
Brijgopal Madhusudan Bhattad vs. ITO (2015) 61 Taxmann.com 266(Nagpur –Trib)
DCIT vs. Ananda Marakala (2014) 48 Taxmann. com 402 (Bangalore –Trib)
Novo Nordisk India (P) Ltd vs. DCIT (2015) 63 Taxmann.com 351 (Bangalore –Trib)
Rusabh Diamonds vs. ACIT (2016) 68 Taxmann.com 141 (Mumbai-Trib)
ITA No.1031/Mds/2016. :- 6 -:
ITO vs. Dudani Metal Agencies (2016) 67 Taxmann.com 80 (Rajkot-Trib)’’ We, are therefore of the opinion that assessee has to succeed in this claim.
However, we find that the ld. Assessing Officer in the remand 8. report mentioned assessee’s inability to produce evidence with regard to payee having included the amount received from the assessee in their return only to the full extent. As per the ld. Assessing Officer evidence for �9,16,96,970/- alone was available out of total disallowance of �9,47,78,800/-. Hence, we delete the disallowance of �9,16,96,970/- out of the total disallowance of �9,47,78,800/-.
Balance disallowance of �30,81,830/- is sustained. In the result, the appeal of the assessee is partly allowed. 9. Order pronounced on Friday, the 23rd day of September, 2016, at Chennai.