TULSI ENTERPRISES,MUMBAI vs. ITO WD 29(3)(2), MUMBAI

O R D E R This is an appeal filed by the assessee against the order of CIT(A) for assessment year 2010-2011. 2. In ground No.1, assessee is aggrieved for confirming the addition of labour charges of Rs.3,40,210/- u/s.40A(3). 3. Next grievance of the assessee relates to confirming the addition of labor charges u/s.40(a)(ia). 4. The AO disallowed following payment made to the parties on account of labour charges on the plea that no tax has been deducted at source u/s.40(a)(ia):-

6. I found that assessee has filed declaration in Form 26A as well as certificate by CA of the respective recipients of income indicating the amount received and the tax paid thereon. The certificate so issued by the CA duly indicates that the return of income filed by respective recipients, wherein amount received by the assessee was included and due taxes were paid thereon. Similar certificates have been filed with respect to all the three parties. We found that in view of the insertion of second proviso to Section 40(a)(ia) by the Finance Act 2012, and in view of the fact that the recipients of the income have already included the income embedded in these payments in their tax returns filed under section 139, disallowance under section 40(a)(ia) could not be made. Even though this proviso is stated to be effective from 1st April 2013, since the amendment is “declaratory and curative in nature, and, therefore, it 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”.

7. In view of the above, I restore the issue back to the file of AO for considering the above evidences filed before the CIT(A) and for deciding the issue afresh in terms of my above observation.

8. The assessee is also aggrieved for disallowance of Rs.3,40,210/- out of total payment of Rs.8,98,875/- to following four parties :-

3 Sl. Payee Total Expenditure Disallowed No u/s.40A(3) 1. Lalji Jaisawar 3,30,240 1,88,905 2. Rupesh Patil 49,330 49,330 3. Dattatray Vishnu 45,545 45,545 Pawar 4. Alam Raja 56,430 56,430 8,98,875 3,40,210 9. The contention of ld. AR was that the payment was made to the group leader whereas amount paid to each labourers was less than Rs.20,000/-. In the interest of justice and fair-play, we restore this ground also back to the file of AO for examining actual amount paid to the group leader in respect of each labourers. If the AO finds that amount pertaining to each labourer is less than Rs.20,000/-, no disallowance u/s.40A(3) should be made. We direct accordingly.