Section 40(a)(ia) – Second proviso to section 40(a)(ia), inserted w.e.f. 1.4.2013, is curative in nature and hence has retrospective effect.
Facts:
In the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee was getting professional and technical services from SRL Ranbaxy and had paid Rs. 64,55,563 for the same. He held that tax on this sum was deductible u/s.194J of the Act. He also noticed that a sum of Rs. 88,689 was paid by the assessee for getting MRI envelopes, visiting cards, forms, etc printed for exclusive use of the assessee. This amount, according to the AO, was liable for deduction of tax at source u/s 194C of the Act. Since the assessee had not deducted tax at source on these amounts, he disallowed both these amounts u/s. 40(a)(ia).
Aggrieved, the assessee preferred an appeal to the CIT(A) who deleted the addition of Rs. 64,55,563 by holding that assessee was an agent of M/s. SRL Ranbaxy Ltd. and hence was not liable for deduction u/s. 194J. He also deleted the addition of Rs. 88,689 by considering the said transaction to be purchase of goods and not a case of job work liable for TDS u/s. 194C.
Aggrieved, the revenue preferred an appeal to the Tribunal. Before the Tribunal, the assessee filed necessary confirmation from the payee that they have paid the taxes on the amounts received from the assessee and contended that the second proviso to section 40(a)(ia) is clarificatory and therefore operates retrospectively.
Held:
The Tribunal noted the second proviso, inserted by Finance Act, 2012 w.e.f. 1.4.2013, and held that even though the said proviso has been inserted w.e.f. 1.4.2013, the Agra Bench of the Tribunal has in the case of Rajiv Kumar Aggarwal (ITA No. 337/Agra/2013 order dated 29.5.2013) following the jurisdictional High Court in the case of CITR vs. Rajinder Kumar (362 ITR 241)(Del) held that the second proviso is declaratory and curative in nature and has retrospective effect from 1.4.2005.
Following the above mentioned decision of the Agra Bench, the Tribunal directed the AO to verify whether the payee has filed his return of income and paid taxes within the stipulated time. If it has done so, no disallowance u/s. .40(a)(ia) in respect of the above payments be made.
The Tribunal set aside the two cases to the file of the AO for the limited purpose of examination whether the payee has filed its return of income and paid taxes on the same within the stipulated time.
