ITO, CHENNAI V. Shri Shanmugar Services, CHENNAI

MA 53/CHNY/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3364 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 01-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-07-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: TDS
• Section: 40A(3); 40(a)(ia)

Judgement Text

Miscellaneous Application Nos.53 & 54/Chny/2022 (in ITA Nos.1136 & 1137/Chny/2017) िनधा रण वष /Assessment Years: 2009-10 & 2010-11 The Income Tax Officer, Non-Corporate Ward-1(6), Chennai. v. M/s.Shri Shanmugar- Services, No.22, Thiru-Vi-Ka, 3 rd Street, Mylapore, Chennai. [PAN: AABFS 5053 L] (अपीलाथ /Appellant) ( यथ /Respondent) Department by : Mr.D.Hema Bhupal, JCIT Assessee by : Mr.S.Sathyanarayanan, Adv. सुनवाई क तारीख/Date of Hearing : 29.07.2022 घोषणा क तारीख /Date of Pronouncement : 02.08.2022 आदेश / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: The Revenue has filed present Miscellaneous Applications against the order of the Tribunal in ITA Nos.1136 & 1137/Chny/2017 dated 22.03.2022 and relevant assessment years 2009-10 & 2010-11. 2. The Revenue has narrated the facts of its cases and mistakes stated to be apparent on record from the order of the Tribunal dated 22.03.2022 and relevant contents of Miscellaneous Applications filed by the Revenue for the AYs 2009-10 & 2010-11 in ITA Nos.1136 & 1137/Chny/2017 are reproduced as under: आयकर अपीलीय अिधकरण, ’डी’ यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI ी वी. दुगा राव, माननीय ाियक सद एवं ी जी. मंजूनाथा, माननीय लेखा सद के सम BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER MA Nos.53 & 54/Chny/2022 (in ITA Nos.1136 & 1137/Chny/2017) :: 2 :: This office received ITAT order in ITA Nos.1136 & 1137/Chny/2017 dated 22.03.2022 for the appeals filed by the assessee against the order of the CIT(A) for the AYs 2009-10 & 2010-11. The assessments for the AY 2009-10 & 2010-11 of the assessee M/s.Shri Shanmugar Services PAN AABFS 5053 L, was completed u/s.143(3) of the IT Act. Asst. Yr. Dt. of filing of return Income returned Income assessed 2009-10 30.10.2009 20,54,311 76,14,976/- 2010-11 02.11.2010 12,56,176 40,96,715/- 1.) Disallowance Under section 40a) (ia). The Hon'ble ITAT in its order in ITA No. 1136 & 1137/Chny/2017 dt. 22.03.2022 has decided the issue disallowance under section 40(a)(ia) in favour of the Revenue. However, the assessee during the course of the proceedings the ITAT has also taken an alternative argument that in view of the amendment made to the provisions of sec 40(a)(ia) vide the Finance Act 2014; the disallowance may be restricted to 30 % of the expenditure debited to the P&L account. It was the contention of the AR that although the assessment years in question are 2009-10 & 2010-11, the amendment to the provisions was to be read as 'with retrospective effect' in view of the judgement of the Hon'ble Supreme Court in the case of CIT V.Calcutta Export Co. reported in (2018) 93taxmann.com 51 (SC). The Hon'ble ITAT has conceded to the argument of the counsel for the assessee and has decided in favour of assessee regarding the disallowance to be at 30%. (please refer to para No.3 of the ITAT order starting at Page No.7 and extending to Page No. 8). In this regard, it is observed that the findings of the Hon'ble Supreme Court in the case of Calcutta Export Co. (Supra) is with reference to the amendment brought to Sec.40(a)(ia) through Finance Act, 2010 but not through amendment made through Finance Act, 2014 which restricted the disallowance of expenditure to 30 % in case of non-compliance to the provisions. The Hon'ble Supreme Court, with reference to the amendment brought to Sec. 40(a) (ia) through the Finance Act,2014, has decided in a judgement delivered in the case of Shree Choudhary Transport Company Vs. ITO in Civil Appeal No.17865 of 2009 dt. 29 th July, 2020 (available in public domain) that the amendment to Sec.40(a)(ia) brought in through the Finance Act, 2014 is only prospective in nature but not retrospective (Please read Paragraph 19.5, 19.6 and 19.7 of the said order). In view of this reason , there is a mistake apparent from record in application of law by the Hon"ble ITAT in deciding that the amendment in to Sec 40(a)(ia) through Finance Act,2014 is retrospective in nature, which makes the order in question Per in curium. By the amendment brought about in the year 2014, the legislature reduced the extent of disallowance u/s 40(a)(ia) of the Act and limited it to 30% of the sum payable. On the other hand, by the Finance Act of 2010, which was considered in the case of Calcutta Export Company (Supra), the proviso to section 40(a)(ia) of Act was amended so as to provide relief to a bonafide assessee who could not make deposit of deducted tax with in prescribed time. In fact, even before the year 2010, the said proviso was amended by the Finance Act 2008 and that amendment of the year 2008 was provide that retrospective operation by the legislature itself. The suggestion on behalf of the appellant about the likely prejudice because of disallowance deserves to be rejected for 3 major reasons. In the first place, it is MA Nos.53 & 54/Chny/2022 (in ITA Nos.1136 & 1137/Chny/2017) :: 3 :: clear from the provisions dealing with disallowance of deduction in part D of chapter IV of the Act. Particularly those contained in sections 40(a)(ia) and 40A(3)17 of the Act, that said provisions are intended to enforce due compliance of the requirement of other provisions of the Act and to ensure proper collection of tax and also transparency in dealings 17 section 40A(3) envisaged at the relevant time that 20% of the expenditure exceeding Twenty Thousand rupees, of which payment was made otherwise than by a crossed cheque or bank draft, shall not be allowed as deduction. For the reasons mentioned above, a miscellaneous petition is submitted before the Hon'ble ITAT filed with the approval of the Principal. commissioner of Income Tax- I, Chennai. 3. We have heard both the sides and considered the relevant contents of Miscellaneous Application filed by the Revenue for both the assessment years and we find that the Tribunal has disposed off appeals filed by the assessee in ITA Nos.1136 & 1137/Chny/2017 for the AYs 2009-10 & 2010- 11 vide order dated 22.03.2022 and partly allowed the appeals filed by the assessee for both the AYs. We further noted that the Tribunal has upheld the action of the AO by invoking the provisions of Sec.40(a)(ia) of the Act, for certain payments for non-deduction of TDS u/s.194C of the Act. However, accepted the alternative plea of the assessee and directed the AO to disallow 30% of expenses incurred by the assessee without deduction of TDS by considering amended provisions of Sec.40(a)(ia) of the Act, by holding that said proviso operates retrospectively from the date of insertion of provisions of Sec.40(a)(ia) of the Act. The Revenue pointed out in their Miscellaneous Applications that the decision rendered by the Tribunal on the issue of provisions of Sec.40(a)(ia) of the Act, and retrospective applicability is contrary to the decision rendered by the Hon’ble Supreme Court in the case of Choudhary Transport Co. v. ITO in Civil Appeal No.17865 of 2009 dated 29.07.2020, wherein, it has been clearly held that MA Nos.53 & 54/Chny/2022 (in ITA Nos.1136 & 1137/Chny/2017) :: 4 :: the amendment to proviso to Sec.40(a)(ia) of the Act, by the Finance Act, 2014, is in perspective in nature and thus applicable from AY 2015-16 onwards. Since, the decision rendered by the Tribunal on alternative plea of the assessee is contrary to the decision of the Hon’ble Supreme Court in the case of Choudhary Transport Co. (supra). we are of the considered view that the said findings constitute a mistake apparent on record which needs to be rectified u/s.254(2) of the Act and hence, we recall the order dated 22.03.2022 in ITA Nos.1136 & 1137/Chny/2017 for the AYs 2009-10 & 2010-11 qua alternative plea of the assessee in light of amendment to provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2014 only. The registry is directed to list the appeals for hearing in due course. 4. In the result, the Miscellaneous Applications filed by the Revenue are allowed. Order pronounced on the 02 nd day of August, 2022, in Chennai. Sd/- (वी. दुगा राव) (V. DURGA RAO) याियक सद य/JUDICIAL MEMBER Sd/- (जी. मंजूनाथा) ( G. MANJUNATHA) लेखा सद य/ACCOUNTANT MEMBER चे ई/Chennai, दनांक/Dated: 02 nd August, 2022. TLN आदेश क ितिलिप अ ेिषत/Copy to: 1. अपीलाथ /Appellant 4. आयकर आयु /CIT 2. यथ /Respondent 5. िवभागीय ितिनिध/DR 3. आयकर आयु (अपील)/CIT(A) 6. गाड! फाईल/GF