THE MAHARASHTRA STATE CO OP MARKETING FEDERATION LTD, MUMBAI V. ADDL CIT RG 13(3), MUMBAI

ITA 2760/MUM/2017

AI Insights

The case involves The Maharashtra State Co-op. Marketing Federation Ltd, which appealed against the disallowance of certain expenses under section 40(a)(ia) of the Income Tax Act, 1961, for not deducting tax at source on payments made towards sub-agent commissions and market cess and supervision fees. The Tribunal consolidated three appeals for the assessment years 2010-11, 2011-12, and 2012-13, due to identical issues involved. The primary contention was whether the payments made were for services rendered or were in the nature of duties/cess, which would not require tax deduction at source. The Tribunal noted that the payments were made on behalf of the Government of Maharashtra for procurement activities and were reimbursed by the government, thus not attracting the provisions of section 40(a)(ia).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123346 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 11-01-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 16-04-2017
• Other Referred Cases: Arvind Murjani Brands Private Limited Vs. Income Tax Officer, Santosh Kumar Kedia vs ITO, G Shankar vs ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Business expenditure; TDS
• Section: 139; 143(3); 40(a)(ia); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 2760/MUM/2017 Assessment Year: 2010-11 The Maharashtra State Co-op. Marketing Federation Limited Kanmoor House, Narsi Natha Street, Masjid, Mumbai-400 009 Vs. Addl. CIT Range-13(3), 4 th floor, Aayakar Bhavan, Mumbai-400020. PAN No. AAAAT 6218 L Appellant Respondent ITA No. 2761/MUM/2017 Assessment Year: 2011-12 The Maharashtra State Co-op. Marketing Federation Limited Kanmoor House, Narsi Natha Street, Masjid, Mumbai-400 009 Vs. Jt. CIT Range-13(3), 4 th floor, Aayakar Bhavan, Mumbai-400020. PAN No. AAAAT 6218 L Appellant Respondent ITA No. 3368/MUM/2017 Assessment Year: 2012-13 The Maharashtra State Co-op. Marketing Federation Limited Kanmoor House, Narsi Natha Street, Masjid, Mumbai-400 009 Vs. Asst. CIT-17(3), Aayakar Bhavan, M.K. Road, Mumbai-400020. PAN No. AAAAT 6218 L Appellant Respondent Assessee by Revenue by Date of Hearing Date of pronouncement PER OM PRAKASH KANT, AM These three appeals by the assessee are directed against three separate orders, i.e. two orders dated 02/12/2016 for Assessment Years 2010-11 & 2011 A.Y. 2012-13, passed by the Ld.CIT(A) Ld.CIT(A)]. As identical issues are involved in these three appeals, therefore, same were heard together and disposed of consolidated order for convenience 2. As the issue being identical in all the three appeals, the appeal for A.Y. 2010-11 is taken as lead case and adjudicated accordingly. Grounds raised by t under:- “1. ADDITION OF SUB AGENT COMMISSION UNDER SECTION 4Q(a)(ia): On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in confirming the addition of Rs. 1,20,83,1977 made towards subagent commission. Learned Commissioner of the Income Tax (Appeals) has simply followed the order of the first appellate authority in appellants own case for the earlier year and has ignored the appellants submissions that the payments made to subagents are payments for and The Maharashtra State Co ITAs 2760, 2761 & 3368 Assessee by : Mr. Jitendra Singh, AR : Smt. Mahita Nair, CIT Date of Hearing : 12/01/2023 Date of pronouncement : 19/01/2023 ORDER PER OM PRAKASH KANT, AM three appeals by the assessee are directed against three orders, i.e. two orders dated 02/12/2016 for Assessment 11 & 2011-12 and third order dated 03/02/2017 for passed by the Ld.CIT(A)-28, Mumbai [in short, the Ld.CIT(A)]. As identical issues are involved in these three appeals, fore, same were heard together and disposed of for convenience. As the issue being identical in all the three appeals, the appeal 11 is taken as lead case and adjudicated accordingly. Grounds raised by the assessee in the appeal are reproduced as ADDITION OF SUB AGENT COMMISSION UNDER SECTION On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in confirming the addition of Rs. 1,20,83,1977- in respect of payments made towards subagent commission. Learned Commissioner of the Income Tax (Appeals) has simply followed the order of the first appellate authority in appellants own case for the earlier year and has ignored the appellants submissions that the payments made to subagents are payments for and The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 2 Jitendra Singh, AR Smt. Mahita Nair, CIT-DR three appeals by the assessee are directed against three orders, i.e. two orders dated 02/12/2016 for Assessment 12 and third order dated 03/02/2017 for 28, Mumbai [in short, the Ld.CIT(A)]. As identical issues are involved in these three appeals, fore, same were heard together and disposed off by way of this As the issue being identical in all the three appeals, the appeal 11 is taken as lead case and adjudicated accordingly. he assessee in the appeal are reproduced as ADDITION OF SUB AGENT COMMISSION UNDER SECTION On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in in respect of payments Learned Commissioner of the Income Tax (Appeals) has simply followed the order of the first appellate authority in appellants own case for the earlier year and has ignored the appellants submissions that the payments made to subagents are payments for and behalf of Government of Maharashtra for its procurement activity. Appellant relies on the decision in case of Arvind Murjani Brands Private Limited Vs. Income Tax Officer [21 Taxmann 131 (2012) Mumbai Tribunal], in support of its argument. 2. ADDITION OF MARKET CESS AND SUPERVISION FEES UNDER SECTION 40(a)(ia): On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in confirming the addition of Rs. 1,21,77,1907 made towards market cess and supervision fees under section 40(a)(ia). . Learned Commissioner of the Income Tax (Appeals) has simply followed the order of the first appellate authority in appellants own case for the earlier year and has ignored the app that the payments made towards market cess and supervision fees are not only for and behalf of Government of Maharashtra for its procurement activity, but are also in the nature of cess / duty and not a payment for services rendered. Le Tax (Appeals) failed to understand that payment is in the nature of duty / cess paid to APMC's, a regulatory body and payment is not for availing any services. Further the Learned Commissioner of the Income Tax (Appeals) has also erred in holding that these payments are covered by provision of section 194H when payment is not made towards commission or brokerage. 3. PRIOR PERIOD EXPENSES: On the facts and in the circumstance of the case, the Learned Commissioner of the confirming the addition of Rs.21,42,072/ expenses. The Learned Commissioner of the Income Tax (Appeals) also erred in facts and in law in not considering prior period of income o Rs.3,07,117/-. Appellant relies on the judgement delivered by Delhi High Court in case of Shri Ram Pistons following the judgement in the case of CIT vs. Nagri Mills Ltd. 330 ITR 681 and also in the case of CIT vs. Vishnu Industrial Gases that where the expenditure was deductible but was only disputing the year in which the deduction could be allowed then if the tax rates were the same in The Maharashtra State Co ITAs 2760, 2761 & 3368 Government of Maharashtra for its procurement activity. Appellant relies on the decision in case of Arvind Murjani Brands Private Limited Vs. Income Tax Officer [21 Taxmann 131 (2012) Mumbai Tribunal], in support of its argument. MARKET CESS AND SUPERVISION FEES UNDER On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in confirming the addition of Rs. 1,21,77,1907- in respect of paymen made towards market cess and supervision fees under section Learned Commissioner of the Income Tax (Appeals) has simply followed the order of the first appellate authority in appellants own case for the earlier year and has ignored the appellants submissions that the payments made towards market cess and supervision fees are not only for and behalf of Government of Maharashtra for its procurement activity, but are also in the nature of cess / duty and not a payment for services rendered. Learned Commissioner of the Income Tax (Appeals) failed to understand that payment is in the nature of duty / cess paid to APMC's, a regulatory body and payment is not for any services. Further the Learned Commissioner of the Income s also erred in holding that these payments are covered by provision of section 194H when payment is not made towards commission or brokerage. PRIOR PERIOD EXPENSES: On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in confirming the addition of Rs.21,42,072/- in respect of prior period expenses. The Learned Commissioner of the Income Tax (Appeals) also erred in facts and in law in not considering prior period of income o Appellant relies on the judgement delivered by Delhi High Court in case of Shri Ram Pistons following the judgement in the case of CIT vs. Nagri Mills Ltd. 330 ITR 681 and also in the case of CIT vs. Vishnu Industrial Gases that where the Department has not disputed that the expenditure was deductible but was only disputing the year in which the deduction could be allowed then if the tax rates were the same in The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 3 Government of Maharashtra for its procurement activity. Appellant relies on the decision in case of Arvind Murjani Brands Private Limited Vs. Income Tax Officer [21 Taxmann 131 (2012) Mumbai Tribunal], in MARKET CESS AND SUPERVISION FEES UNDER On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in in respect of payments made towards market cess and supervision fees under section Learned Commissioner of the Income Tax (Appeals) has simply followed the order of the first appellate authority in appellants own ellants submissions that the payments made towards market cess and supervision fees are not only for and behalf of Government of Maharashtra for its procurement activity, but are also in the nature of cess / duty and not arned Commissioner of the Income Tax (Appeals) failed to understand that payment is in the nature of duty / cess paid to APMC's, a regulatory body and payment is not for any services. Further the Learned Commissioner of the Income s also erred in holding that these payments are covered by provision of section 194H when payment is not made On the facts and in the circumstance of the case, the Learned Income Tax (Appeals) erred in facts and in law in in respect of prior period expenses. The Learned Commissioner of the Income Tax (Appeals) also erred in facts and in law in not considering prior period of income of Appellant relies on the judgement delivered by Delhi High Court in case of Shri Ram Pistons following the judgement in the case of CIT vs. Nagri Mills Ltd. 330 ITR 681 and also in the case of CIT vs. Vishnu Department has not disputed that the expenditure was deductible but was only disputing the year in which the deduction could be allowed then if the tax rates were the same in the both the years, the Department should not waste its energies in raising questions as to the year of deductibility.” 3. Briefly stated, facts of the case are that the assessee is a State level Apex Co-operative Society (Federation) registered under the Maharashtra Co-operative Societies’ Act, 1960. During the year under consideration, the assessee was engaged in the business of marketing of the agricultural commodities procured through its Member Co-operative Societies through Maharashtra. The commodities include agricultural produce, fertilizers, machinery, etc. F assessee filed return of income on 30/09/2010 declaring total income of Rs.2,39,83,749/ assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in sh with. The assessment under section 143(3) of the completed on 26/03/2013, wherein the Assessing Officer made disallowance under section 40(a)(ia) of the Act for not deducting tax at sources on market ces commission paid to Member Co disallowance for prior period expenses, etc. On further appeal, the Ld. CIT(A) allowed part relief to the assessee. Aggrieved with the disallowance / addition in appeal before the Tribunal by way of raising grounds as reproduced above. The Maharashtra State Co ITAs 2760, 2761 & 3368 the both the years, the Department should not waste its energies in ions as to the year of deductibility.” stated, facts of the case are that the assessee is a State operative Society (Federation) registered under the operative Societies’ Act, 1960. During the year on, the assessee was engaged in the business of marketing of the agricultural commodities procured through its operative Societies throughout the state of Maharashtra. The commodities include agricultural produce, fertilizers, machinery, etc. For the year under consideration, the assessee filed return of income on 30/09/2010 declaring total income of Rs.2,39,83,749/-. The return of income filed by the assessee was selected for scrutiny and statutory notices under the tax Act, 1961 (in short ‘the Act’) were issued and complied with. The assessment under section 143(3) of the completed on 26/03/2013, wherein the Assessing Officer made disallowance under section 40(a)(ia) of the Act for not deducting tax at sources on market cess and supervision fee and paid to Member Co-operative Societies, disallowance for prior period expenses, etc. On further appeal, the CIT(A) allowed part relief to the assessee. Aggrieved with the disallowance / addition sustained by the Ld.CIT(A), the assessee is in appeal before the Tribunal by way of raising grounds as The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 4 the both the years, the Department should not waste its energies in stated, facts of the case are that the assessee is a State operative Society (Federation) registered under the operative Societies’ Act, 1960. During the year on, the assessee was engaged in the business of marketing of the agricultural commodities procured through its out the state of Maharashtra. The commodities include agricultural produce, or the year under consideration, the assessee filed return of income on 30/09/2010 declaring total . The return of income filed by the assessee was selected for scrutiny and statutory notices under the were issued and complied with. The assessment under section 143(3) of the Act was completed on 26/03/2013, wherein the Assessing Officer made (i) disallowance under section 40(a)(ia) of the Act for not deducting tax s and supervision fee and sub-agent operative Societies, (ii) disallowance for prior period expenses, etc. On further appeal, the CIT(A) allowed part relief to the assessee. Aggrieved with the sustained by the Ld.CIT(A), the assessee is in appeal before the Tribunal by way of raising grounds as 4. Before us, the Ld. book containing pages 1 to 152. 5. In grounds 1 & 2 of the appeal, the of disallowance of commission amounting to Rs.1,20,83,197/ disallowance of market cess and supervision fees amounting to Rs.1,21,77,190/- under section 40(a)(ia) deduction of tax at source. 6. We have heard the relevant materials on record. On perusal of the paper book page 59, we find that the tax auditor in clause 17(f) of the form No.3CD pointed out that following amounts were not admissible under section 40(a)(ia) of the Act. The relevant note of the tax auditor is reproduced as under: Clause 17(f): Details amounts inadmissible under section (40)(a) Nature of Expenses Prof. Fees Contract Market Cess & Supervision Fees (Refer note below) Sub-agent Commission (Refer Note Below) Note: During the year federation has made provision for payment .of Market Cess & Supervision fees payable to variou. District Level Co op society's for use of market yards, weights & other marketing facilities for procurement of food grains on behalf of M The Maharashtra State Co ITAs 2760, 2761 & 3368 Before us, the Ld. Counsel of the assessee has filed a paper book containing pages 1 to 152. In grounds 1 & 2 of the appeal, the assessee has raised issue of disallowance of commission amounting to Rs.1,20,83,197/ disallowance of market cess and supervision fees amounting to under section 40(a)(ia) of the Act deduction of tax at source. rival submissions of the parties and perused the relevant materials on record. On perusal of the paper book we find that the tax auditor in clause 17(f) of the form No.3CD pointed out that following amounts were not admissible )(ia) of the Act. The relevant note of the tax auditor is reproduced as under:- Clause 17(f): Details amounts inadmissible under section (40)(a) Nature of Expenses Amt on which TDS Not Deducted Remark 2,05,000/- TDS Not Deducted 1,20,110/- TDS Not Deducted Market Cess & Supervision Fees 1,20,83,197/- TDS Not Deducted Commission (Refer 1,21,77,190 No TDS Deducted Note: During the year federation has made provision for payment .of Market Cess & Supervision fees payable to variou. District Level Co op society's for use of market yards, weights & other marketing facilities for procurement of food grains on behalf of M The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 5 Counsel of the assessee has filed a paper assessee has raised issue of disallowance of commission amounting to Rs.1,20,83,197/- and disallowance of market cess and supervision fees amounting to of the Act for non rival submissions of the parties and perused the relevant materials on record. On perusal of the paper book we find that the tax auditor in clause 17(f) of the form No.3CD pointed out that following amounts were not admissible )(ia) of the Act. The relevant note of the tax Clause 17(f): Details amounts inadmissible under section (40)(a) Remark TDS Not Deducted TDS Not Deducted TDS Not Deducted TDS Deducted Note: During the year federation has made provision for payment .of Market Cess & Supervision fees payable to variou. District Level Co- op society's for use of market yards, weights & other marketing facilities for procurement of food grains on behalf of Maharashtra Govt. & NAFED. For this as per Govt of Maharashtra Resolution (GR) market Cess & Supervision fees @ 1.05% & sub gent commission @1% payable to various district level APMC & Co However assessee has submitted that, these procurements on behalf of Govt; of Maharashtra & NAFED, and market cess & supervision fees & Sub Agent commissions. are reimbursed by the respective Governments and paid to various APMC & district level co-op society's for procurement of food grains for & be Government, Also, as per Section 10(26AAB of Income Tax Act, said income is exempt in the hands of various APMC & district Co Society. In view of these, provisions of section 40(a) are not attracted. The sum of Rs.1,20,83,197/ Co-op society's to whom payment .will not exceeds Rs.50,000/ the whole previous year 2009 6.1 The Assessing Officer noted that the assessee added back the amount of professional fee and contract expenses on which tax was not deducted. However, the amount in respect of ‘supervision fees’ and deducted at source, were not added back to the computation of income on the ground that assessee has made th behalf of the Government of Maharashtra for assisting various marketing co-operative societies in procuring food various parties. The Ld. assessee and observed that it is the assessee, who was responsible for making such payments to the and claiming the expenses in its P&L Account agent commission, it was held nature of commission the assessee was required to deduct tax at source under section 194H of the Act. In respect of market cess The Maharashtra State Co ITAs 2760, 2761 & 3368 Govt. & NAFED. For this as per Govt of Maharashtra Resolution (GR) market Cess & Supervision fees @ 1.05% & sub gent commission @1% payable to various district level APMC & Co-op societies. However assessee has submitted that, these procurements on behalf of Govt; of Maharashtra & NAFED, and market cess & supervision fees & Sub Agent commissions. are reimbursed by the respective Governments and paid to various APMC & district level op society's for procurement of food grains for & be Government, Also, as per Section 10(26AAB of Income Tax Act, said income is exempt in the hands of various APMC & district Co Society. In view of these, provisions of section 40(a) are not attracted. The sum of Rs.1,20,83,197/- includes, some Di op society's to whom payment .will not exceeds Rs.50,000/ the whole previous year 2009-10. The Assessing Officer noted that the assessee added back the amount of professional fee and contract expenses on which tax was However, the amount in respect of ‘market cess and ‘sub agent commission’ on which tax was not deducted at source, were not added back to the computation of income on the ground that assessee has made those payments he Government of Maharashtra for assisting various operative societies in procuring food various parties. The Ld. AO, however, rejected the contention of the assessee and observed that it is the assessee, who was responsible aking such payments to the Member Co-operative Societies claiming the expenses in its P&L Account. In agent commission, it was held by the Ld. AO that being in the nature of commission the assessee was required to deduct tax at source under section 194H of the Act. In respect of market cess The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 6 Govt. & NAFED. For this as per Govt of Maharashtra Resolution (GR) market Cess & Supervision fees @ 1.05% & sub gent commission op societies. However assessee has submitted that, these procurements are for & on behalf of Govt; of Maharashtra & NAFED, and market cess & supervision fees & Sub Agent commissions. are reimbursed by the respective Governments and paid to various APMC & district level op society's for procurement of food grains for & behalf of Government, Also, as per Section 10(26AAB of Income Tax Act, said income is exempt in the hands of various APMC & district Co-op Society. In view of these, provisions of section 40(a) are not includes, some District Level op society's to whom payment .will not exceeds Rs.50,000/- for The Assessing Officer noted that the assessee added back the amount of professional fee and contract expenses on which tax was market cess’ and on which tax was not deducted at source, were not added back to the computation of se payments on he Government of Maharashtra for assisting various operative societies in procuring food-grains from AO, however, rejected the contention of the assessee and observed that it is the assessee, who was responsible operative Societies In respect of sub that being in the nature of commission the assessee was required to deduct tax at source under section 194H of the Act. In respect of market cess and supervision fees, according to the Assessing Officer, same were in the nature of payment made for the wor therefore, tax was to be deducted at source. The Ld. following the finding of his predecessor , sustained the disallowance in respect of sub agent commission and market cess and supervision fee paid. 7. Before us, the Ld. the alternative arguments that Member Co already offered those amounts of sub agent commission and market cess and supervsion fees as income them and, therefore, same are covered under Second Proviso to section 40(a)(ia) which has been inserted with effect from 01/04/2013. However, held to be retrospective by the Tribunal in the case of Santosh Kumar Kedia vs 1905/Kol/2014 and No.1832/2013/Bangalore assessee submitted that matter may be restored back to the file of the Ld. AO for verification and compli 8. On the other hand, the Ld.DR relied on the order of authority. 9. For ready reference, the said Proviso to section 40(a)(ia) is reproduced as under: The Maharashtra State Co ITAs 2760, 2761 & 3368 and supervision fees, according to the Assessing Officer, same were in the nature of payment made for the work done by the payee and, therefore, tax was to be deducted at source. The Ld. following the finding of his predecessor , sustained the disallowance in respect of sub agent commission and market cess and Ld. Counsel of the assessee has taken one of the alternative arguments that Member Co-operative Societies has already offered those amounts of sub agent commission and market cess and supervsion fees as income in the return of income filed by re, same are covered under Second Proviso to section 40(a)(ia) which has been inserted with effect from 04/2013. However, held to be retrospective by the Tribunal in Santosh Kumar Kedia vs. ITO in ITA No. and G Shankar vs. ACI No.1832/2013/Bangalore. Accordingly, the Ld. assessee submitted that matter may be restored back to the file of the Ld. AO for verification and compliance of the said Proviso. On the other hand, the Ld.DR relied on the order of For ready reference, the said Proviso to section 40(a)(ia) is reproduced as under:- The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 7 and supervision fees, according to the Assessing Officer, same were k done by the payee and, therefore, tax was to be deducted at source. The Ld. CIT(A), following the finding of his predecessor , sustained the disallowance in respect of sub agent commission and market cess and assessee has taken one of operative Societies has already offered those amounts of sub agent commission and market in the return of income filed by re, same are covered under Second Proviso to section 40(a)(ia) which has been inserted with effect from 04/2013. However, held to be retrospective by the Tribunal in ITO in ITA No. Shankar vs. ACIT in ITA Counsel of the assessee submitted that matter may be restored back to the file of nce of the said Proviso. On the other hand, the Ld.DR relied on the order of the lower For ready reference, the said Proviso to section 40(a)(ia) is “Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but pai section (1) of allowed as a deduction in computing the income of the previous year in which such tax has been paid : Provided further whole or any part of the tax in accordance with the provisions of Chapter XVII assessee in default under the first proviso to sub of section 201, then, for the purpose of this sub 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 38[resident] 9.1 The said Proviso further refers to Proviso below section 201(1) which is also reproduced below for read reference: “201. (1) Where any person, including the principal officer of a company,— (a)& (b) xxxxxxxxxxxxxxxxxxxxx Provided that any person, including the principal officer of a company, who fails to deduct the whole accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee The Maharashtra State Co ITAs 2760, 2761 & 3368 that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub section (1) of section 139, thirty per cent of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid : Provided further that where an assessee fails to d 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 201, then, for the purpose of this sub- be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by 38[resident] payee referred to in the said proviso. The said Proviso further refers to Proviso below section 201(1) h is also reproduced below for read reference:- (1) Where any person, including the principal officer of a (a)& (b) xxxxxxxxxxxxxxxxxxxxx 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 payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 8 that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during d after the due date specified in sub- section 139, thirty per cent of such sum shall be allowed as a deduction in computing the income of the previous that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) -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 payee referred to in the said proviso.” The said Proviso further refers to Proviso below section 201(1) (1) Where any person, including the principal officer of a that any person, including the principal officer of a or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such (i) has furnished (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the in return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed” 10. In view of the Second Proviso to section 40(a)(ia) read with Proviso to section 201(1) of the Act, no disallowance of expenses under section 40(a)(ia) can be made unless the assessee has been treated as an assessee in default under section 201(1) of the Ac its failure to deduct tax at source from the payment made on account of any interest, commission, brokerage, rent, royalty, fee for professional services, etc. In other words, if the amount paid by the payer has been included by the payee in his ret for relevant assessment year, also paid the tax thereon in such retu has included the sum return of income and filed the same, no d under section 40(a)(ia) of the Act. The Second Proviso below section 40(a)(ia) has been inserted by the Finance Act from 01/04/2012. However, in the case of G Shankar vs ACIT (supra), the Tribunal has held that this Proviso shou The Maharashtra State Co ITAs 2760, 2761 & 3368 (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” In view of the Second Proviso to section 40(a)(ia) read with Proviso to section 201(1) of the Act, no disallowance of expenses under section 40(a)(ia) can be made unless the assessee has been treated as an assessee in default under section 201(1) of the Ac its failure to deduct tax at source from the payment made on account of any interest, commission, brokerage, rent, royalty, fee for professional services, etc. In other words, if the amount paid by the payer has been included by the payee in his ret for relevant assessment year, filed under section 139 also paid the tax thereon in such return, to the extent the payee included the sum, which has been paid by the assessee return of income and filed the same, no disallowance could be made under section 40(a)(ia) of the Act. The Second Proviso below section 40(a)(ia) has been inserted by the Finance Act from 01/04/2012. However, in the case of G Shankar vs ACIT (supra), the Tribunal has held that this Proviso should be treated as retrospectively The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 9 section 139; (ii) has taken into account such sum for computing income in come declared by him in such and the person furnishes a certificate to this effect from an In view of the Second Proviso to section 40(a)(ia) read with Proviso to section 201(1) of the Act, no disallowance of expenses under section 40(a)(ia) can be made unless the assessee has been treated as an assessee in default under section 201(1) of the Act for its failure to deduct tax at source from the payment made on account of any interest, commission, brokerage, rent, royalty, fee for professional services, etc. In other words, if the amount paid by the payer has been included by the payee in his return of income filed under section 139 of the Act and rn, to the extent the payee which has been paid by the assessee, in his isallowance could be made under section 40(a)(ia) of the Act. The Second Proviso below section 40(a)(ia) has been inserted by the Finance Act from 01/04/2012. However, in the case of G Shankar vs ACIT (supra), the Tribunal ld be treated as retrospectively applicable from 01/04/2005 and no disallowance for want of TDS can be made if the payee has paid tax thereon, an file form 26A be given Kedia vs ITO (supra), the Trib section 40(a)(ia) is curative and retrospective and legitimate business expenses cannot be disallowed if the payee has paid taxes thereon. 11. Before us, the Ld. the payee co-operative marketing societies have paid taxes therein. In view of the same, we feel it appropriate to restore the matter to the file of the Assessing Officer for verification of conditions stipulated in Proviso to section 201(1). If the assessee satisfies t conditions, furnishes certificate as required under the said Proviso, no disallowance may be made in accordance with the provisions of the Act. Grounds 1 & 2 of the appeals of the assessee are accordingly allowed for statistical purpose. 12. As far as ground 3 is concerned, the Assessing Officer observed, amount of Rs.21,42,072/ pertained to earlier years. claim of the assessee in view of the mercantile system of accounting followed and in view of the tax auditor’s report. upheld the finding of the Ld.AO. The Maharashtra State Co ITAs 2760, 2761 & 3368 applicable from 01/04/2005 and no disallowance for want of TDS can be made if the payee has paid tax thereon, and be given. Similarly, in the case of Santosh Kumar Kedia vs ITO (supra), the Tribunal has held that Second Proviso to section 40(a)(ia) is curative and retrospective and legitimate business expenses cannot be disallowed if the payee has paid taxes Before us, the Ld. Counsel of the assessee has claimed that rative marketing societies have paid taxes therein. In view of the same, we feel it appropriate to restore the matter to the file of the Assessing Officer for verification of conditions stipulated in Proviso to section 201(1). If the assessee satisfies t conditions, furnishes certificate as required under the said Proviso, no disallowance may be made in accordance with the provisions of the Act. Grounds 1 & 2 of the appeals of the assessee are accordingly allowed for statistical purpose. ground 3 is concerned, the Assessing Officer observed, amount of Rs.21,42,072/- to the P&L Account th pertained to earlier years. The Assessing Officer disallowed the claim of the assessee in view of the mercantile system of accounting iew of the tax auditor’s report. upheld the finding of the Ld.AO. The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 10 applicable from 01/04/2005 and no disallowance for want of TDS d opportunity to Santosh Kumar unal has held that Second Proviso to section 40(a)(ia) is curative and retrospective and legitimate business expenses cannot be disallowed if the payee has paid taxes Counsel of the assessee has claimed that rative marketing societies have paid taxes therein. In view of the same, we feel it appropriate to restore the matter to the file of the Assessing Officer for verification of conditions stipulated in Proviso to section 201(1). If the assessee satisfies the conditions, furnishes certificate as required under the said Proviso, no disallowance may be made in accordance with the provisions of the Act. Grounds 1 & 2 of the appeals of the assessee are ground 3 is concerned, the Assessing Officer to the P&L Account though he Assessing Officer disallowed the claim of the assessee in view of the mercantile system of accounting iew of the tax auditor’s report. The Ld.CIT(A) 13. We have heard rival submissions of the parties on the issue on dispute and perused the materials on record. On perusal of the paper book pages 70 & 71 reproduced the details of prior period expenses in respect of the various units as under: Debits during the year Less : Credits during the year PARTICULARS VCFF FACTORIES RICE MILL D’PHATA WASHI GODOWN RDS FOODGRAIN JOWAR / PADDY FERTILISER BHAGIRATH MACHINERY HEAD OFFICE TOTAL 13.1 We find that authorities below have not examined the exact nature of the expenses and, year under consideration. If those expenses though pertained to earlier years; however, have crystallized in the year under consideration, then same are liable to be allowed in the year under consideration. Since t authorities, we deem it appropriate to restore this issue back to the Ld. CIT(A) for deciding afresh. The Maharashtra State Co ITAs 2760, 2761 & 3368 We have heard rival submissions of the parties on the issue on dispute and perused the materials on record. On perusal of the paper book pages 70 & 71, we find that the tax auditor has reproduced the details of prior period expenses in respect of the various units as under:- Particulars Debits during the year 21,42,071.84 Less : Credits during the year 3,07,116.63 Net Credit 18,34,955.21 PARTICULARS DEBIT RUPEES CREDIT RUPEES VCFF FACTORIES 40963 202369.10 RICE MILL D’PHATA 271470 0 24466.61 0 1118767 0 232499.64 0 163490.59 183.52 JOWAR / PADDY 0 14237.05 16457 89607.87 0 6 0 713 273958 0 2142071,84 307116.63 We find that authorities below have not examined the exact nature of the expenses and, crystallization of those expenses year under consideration. If those expenses though pertained to earlier years; however, have crystallized in the year under consideration, then same are liable to be allowed in the year under consideration. Since this issue has not been examined by the lower authorities, we deem it appropriate to restore this issue back to the CIT(A) for deciding afresh. The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 11 We have heard rival submissions of the parties on the issue on dispute and perused the materials on record. On perusal of the ax auditor has reproduced the details of prior period expenses in respect of the Rupees 21,42,071.84 3,07,116.63 18,34,955.21 NET BAL RUPEES 161406.10 271470 24466.61 1118767 232499.64 163307.07 14237.87 73150.87 6 -713 273958 1834955.21 We find that authorities below have not examined the exact of those expenses in the year under consideration. If those expenses though pertained to earlier years; however, have crystallized in the year under consideration, then same are liable to be allowed in the year under his issue has not been examined by the lower authorities, we deem it appropriate to restore this issue back to the 14. The grounds raised in identical to the grounds which we have adjud and therefore, our decision shall apply mutatis mutandis on the grounds raised in A.Ys 2011 15. In the result, all the three appeals of the assessee are allowed, for statistical purpose. Order pronounced the ITAT Rules, 1963 on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 19/01/2023 Pavanan, Sr. P.S (on contract) Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// The Maharashtra State Co ITAs 2760, 2761 & 3368 The grounds raised in appeals for A.Ys 2011-12 & 2012 identical to the grounds which we have adjudicated in A.Y. 2010 and therefore, our decision shall apply mutatis mutandis on the grounds raised in A.Ys 2011-12 & 2012-13. In the result, all the three appeals of the assessee are allowed, for statistical purpose. Order pronounced in the open Court/under Rule 34(4) of the ITAT Rules, 1963 on 19/01/2023. Sd/ SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary) ITAT, Mumbai The Maharashtra State Co-op. Marketing Federation Ltd 2760, 2761 & 3368/Mum/2017 12 12 & 2012-13 are icated in A.Y. 2010-11 and therefore, our decision shall apply mutatis mutandis on the In the result, all the three appeals of the assessee are allowed, under Rule 34(4) of Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Sr. Private Secretary) ITAT, Mumbai