MR. ASHISH J. POTDAR,MUMBAI vs. CIT - 24, MUMBAI

2. The Original Assessment order passed by the Income Tax Officer Ward 24(3)(1) was neither erroneous nor prejudicial to the interest of the revenue.

At the outset, appeal of the assessee is barred by limitation by 5 days. In the petition for condonation of delay accompanied by an affidavit, it has been stated that the appeal could not be filed in time as the Chartered Accountant who was entrusted with the filing of appeal had to urgently leave for native place to look after his ailing mother who got very sick. Immediately after coming back to Mumbai, the appeal was filed on the next day. In this process, delay of 5 days has occurred. After hearing both the parties and considering the averments made in the affidavit filed by the Chartered Accountant, Mr. Raju Sardar and by the assessee, we are of the considered view that there was a reasonable cause for not filing the appeal within the statutory time limit and accordingly, delay of 5 days is hereby condoned.

Brief facts qua the matter of revision u/s 263 by the ld.CIT is that, the assessee has filed his return of income on 30.07.2009 declaring total income of Rs.6,63,610/-. The said return was subjected to scrutiny under section 143(2) and accordingly, the assessment order was passed under section 143(3), vide order dated 03.12.2010 at an income of Rs.7,30,070/- after making ad- hoc disallowances aggregating to Rs.66,460/-under various heads, viz., telephone, travelling and refreshment expenses @ 5%. Later on the Ld. CIT while exercising revisionary jurisdiction and on examination of assessment records noticed that assessee has not deducted TDS in some of the cases and where TDS has been deducted, it has not been deposited into the government account and therefore, provisions of section 40(a)(ia) are clearly applicable. The details of such expenditures as highlighted by him are as under:- Sr. Name of the Nature of Payment Amt. on Corresponding No. Party Expenses to party Which Amount of TDS made Disallowance u/s 40(a)(ia) 1 Designtech Training 5,43,046 NIL 5,43,046 Systems(PL) & Support Ltd. maintenance 2 UGS India P Ltd Training & 22,36,849 19,57,376 2,79,473

Further elaborating the nature of expenses Ld. CIT noted that assessee has claimed training and support maintenance expenses from following three parties:- Sr. Name of the party Payment to No. party (Rs.) 1 Designetch Systems (PL) Ltd. 5,43,046 2 UGS India P Ltd. 22,36,849 3 Ask me Software Systems(P) Ltd. 3,53,850 on which the assessee has not deducted TDS even though TDS provisions were clearly attracted. The assessee’s case with regard to the amount paid in respect of training, support and maintenance services was that, it does not attract TDS provision. The Ld. CIT after going through the agreement entered with the above stated parties noted that, following services have been rendered by these parties: i) Providing software operation, installation and training for the personnel; ii) Providing software maintenance; iii) Providing client referrals and assistance. and accordingly, the TDS provision were clearly applicable.

With regard to the claim of commission paid to following three parties:

Before us, the Ld. Counsel made a very limited argument and stated that, all the six parties have shown this payment as their income in their Income-tax returns and have also paid taxes

Ld. DR too agreed that matter can be re-examined by the Ld. AO in light of this plea.

After considering the aforesaid submissions and on perusal of the relevant finding given in the impugned order, we find that it is undisputed fact that assessee has either not deducted TDS on account of payment made to various parties or after deducting TDS has not deposited in the account. This aspect as highlighted by the Ld. CIT has neither been examined by the AO nor considered by the AO, therefore, the order of the AO to this extent is erroneous in so far as prejudicial to the interest of the revenue within section 263 as held by the Ld. CIT. However a new plea has been raised before us by the Ld. Counsel that in the case of all the six parties, the payees have filed their confirmation that they have shown this payment as their income in their return of income and have paid taxes thereto. If that is so then, in the light of the newly amended second Proviso to section 40(a)(ia) and first Proviso to section 201(1), which has been inserted by the Finance Act, 2012 w.e.f. 1st April, 2013, no disallowance can be made. Therefore, in light of this law the entire matter needs to be re-examined by the AO afresh. So far as the applicability of amended provisions in the impugned assessment year is concerned, this issue stands clarified by Hon’ble Delhi High Court in the case of CIT vs. Ansal Landmark in & 161 of 2015 vide order dated 26.08.2015, wherein their Lordships have held that the said Provisos are declaratory and curative in nature and, therefore, have retrospective effect from 1st April, 2005. Accordingly, we modify the direction of the 6 Ashish J Potdar CIT and direct the AO to examine the contention of the assessee in the light of the newly inserted Provisos and the ratio laid down by the Hon’ble Delhi High Court in the case of CIT vs Ansal Landmark (supra). With this direction, appeal of the assessee is treated as partly allowed.

In the result, appeal of the assessee stands partly allowed.