|CORAM:||Jason P. Boaz (AM), N. V. Vasudevan (JM)|
|SECTION(S):||40(a)(ia), second proviso|
|CATCH WORDS:||TDS disallowance|
|DATE:||October 10, 2014 (Date of pronouncement)|
|DATE:||October 28, 2014 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|Second proviso to s. 40(a)(ia) inserted w.e.f. 1.4.2013 should be treated as retrospectively applicable from 1.4.2005 and no disallowance for want of TDS can be made if payee has paid tax thereon. Assessee must be given opportunity to file Form 26A|
The undisputed fact is that the assessee has not deducted tax at source on the payments made to Uday Kumar Shetty. The fact that the payee has accounted for these payments in his books of account, financial statements and the same have been offered for tax in his return of income for the period relevant to AY 2005-06, has not been controverted by the authorities below. In our considered opinion, since the payee/ recipient has accounted for these payments in his books of account, audited u/s 44AB of the Act and has offered the same for tax in his return of income for the relevant period, by virtue of the amendment, by way of insertion of the second proviso to section 40(a)(ia) of the Act w.e.f. 1/4/2013, the provisions of section 40(a)(ia) of the Act would not be attracted to the payments made by the assessee to Uday Kumar Shetty. In coming to this view, we draw support from the two above cited decisions of the co-ordinate benches of this Tribunal in the case of DCIT vs. Anand Marakala and S.M.Anand vs. ACIT wherein it was held that insertion of the second proviso to section 40(a)(ia) of the Act should be read retrospectively from 1/4/2005 and not prospectively from 1/4/2013. In this view of the matter, the provisions of section 40(a)(ia) of the Act is not attracted to the payments made by the assessee since the object of introduction of section 40(a)(ia) is achieved for the reason that the payee/recipient has accounted for, declared and offered for taxation the payments received from the assessee in his hands. Earlier, we have held that the second proviso to section 40(a)(ia) of the Act is retrospective in operation w.e.f. 1/4/2005. As per this newly inserted proviso, the assessee is required to file Form No.26A as per rule 31ACB of the IT Rules, 1962 so as not to be held as an assessee in default as per the proviso to section 201 of the Act. As held in the decision of the co-ordinate bench in the case of S.M.Anand vs. ACIT (supra), since the assessee in the period under consideration i.e. assessment year 2005-06, could not have contemplated that such a compliance was to be made, we also in the case on hand, remit the matter to the file of the Assessing Officer for affording the assessee adequate opportunity to file Form No.26A and verification of whether the said payee has reflected the payment/receipt in his books of account and offered the same to tax in the period under consideration.