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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER
I.T.A. No. 417/Asr/2018 Assessment Year: 2013-14
M/s Speed Surya Movies Vs. DCIT, Central Circle-II, 6th Floor, Grand Mall, Jalandhar Near BMC Chowk, Jalandhar [PAN: ACDFS 7807C] (Appellant) (Respondent)
Appellant by : Sh. Ashray Sarna, CA Respondent by: Sh. S. M. Surendranath, Sr. DR
Date of Hearing: 03.03.2022 Date of Pronouncement: 25.03.2022
ORDER Per Dr. M. L. Meena, AM:
This appeal is filed by the Assessee against the impugned order
dated 21.05.2018, passed by Ld. Commissioner of Income Tax (Appeals)-
5, Ludhiana, in respect of the Assessment Year 2013-14.
The assessee has raised the following grounds of appeal:
“1. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order u/s 143(3) r.w.s.263 and without
2 ITA No.417/ASR/2018 Speed Surya Movies v. DCIT complying with the mandatory conditions u/s 143(3)/263 as envisaged under the lncome Tax Act, 1961. 2. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of laboratory expense amounting to Rs.21,59,500/- u/s 40(a)(ia) of Act, on account of non deduction of TDS, without considering the missions of the assessee and without observing the principles of natural justice.
That in any case and in any view of the matter, action of Ld. CIT(A) in making disallowance of 100% of the laboratory expense and not restricting the same to b of the expenditure, is bad in law and against the facts and circumstances of base.
That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
The sole issue raised by the assessee is that the learned CIT appeal at confirming the disallowance of laboratory expense amounting to Rs.21,59,500/- on account of non-deduction of TDS, u/s194A read with section 40(a)(ia) of Act. 4. At the outset, learned counsel for the assessee stated that the Ld.CIT appeal has not been justified in confirming the disallowance of laboratory expenses amounting to � 2,159,500 under section 40(a)(ia) the act, on account of non-deduction of TDS, without considering the principles of natural justice and the missions of the assessee. He has explained the purpose of the amendment in the memorandum by referring to the budget speech of the finance Minister and stated that while introducing the amendment in para 207 of the budget speech it was clarified that the disallowances shall be restricted to 30% of the amount of such expenditure
3 ITA No.417/ASR/2018 Speed Surya Movies v. DCIT claimed. He contended that the amendment made by the FA (no.2) Act,2014 w.e.f. 01.04.2015 was to remove unintended in undue hardship. He prayed that the disallowances made by the AO and confirmed by the learned CIT appeal may be restricted to 30%. 5. The Ld. DR stands by the impugned order. 6. We have heard the rival submissions and perused the materials available on record. In the present case, the expense claimed by the assessee toward laboratory expense amounting to Rs.21,59,500/- was disallowed on account of non-deduction of TDS, u/s194A read with section 40(a)(ia) of Act. The said disallowance made by the AO was subsequently confirmed by the learned CIT (A). Now, the issue for our consideration and the adjudication is whether the disallowance of the expense should be restricted to 30% by virtue of the amended provisions of section 40(a)(ia) of the Act which was brought in the statute by the Finance Act (No. 2) 2014. Admittedly, as per the provision of section 40(a)(ia) of the Act, the disallowance has to be restricted to the tune of 30% in respect of the expenses on which TDS was not deducted by the assessee. Such amendment was held as retrospective by the Delhi Tribunal in the case of “Muradul Haque vs. ITO”, reported in 184 ITD 58 by observing as under:
We find that Finance (No.2) Act has made amendment to section 40(a)(ia) of the Act w.e.f. 1-4-2015. Various benches of the Tribunals including the Delhi Benches of the Tribunal, have held the amendment made by Finance (No 2) Act to be curative in nature. We further finds the coordinate bench of the Tribunal in the case of R.H. International (supra) has held that disallowance u/s. 40(a)(ia) of the Act be restricted to 30% of the expenses paid as against 100% because amended provision is curative in nature and the provisions should be applied retrospectively.
4 ITA No.417/ASR/2018 Speed Surya Movies v. DCIT 7. Similarly, the Ahmedabad Tribunal in the cases of ‘Electronic Instrumentation & Control Pvt. Ltd. vs. ITO’, in ITA No. 3055 and 3056/AHD/2013 and ‘DRAIPL-MSKEL(JV) vs. ITO’, in ITA No. 1499/AHD/2015 have held that the amendment brought under the provisions of section 40(a)(ia) of the Act by the Finance Act (No. 2) 2014 is applicable retrospectively. 8. In view of the amended provisions, the expenses incurred by the assessee without deducting the TDS cannot be disallowed at 100%. Accordingly, such disallowance shall be restricted to the extent of 30% only. We, therefore, direct the AO to restrict the disallowance to the tune of 30% out of the laboratory expense, incurred by the assessee as discussed above. Thus, the ground of appeal of the assessee is partly allowed. 9. In the result, the appeal is partly allowed.
Order pronounced in the open court on 25.03.2022.
Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member Date: 25.03.2022 Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T