Case Law Details
Niteshkumar Maganbhai Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that post amendment to section 40(a)(ia) of the Income Tax Act, as introduced vide Finance (No.2) Act, disallowance on account of non-deduction of TDS is restriction to 30% of the expenditure as against 100%.
Fact-Vide the present appeal, the appellant is contesting that CIT(A) has erred in confirming the disallowance of land leveling expenses for Rs. 7,55,750/- under section 40(a)(ia) of the Income Tax Act.
The AO during the assessment proceeding observed that the assessee made payment of Rs. 7,55,750/- to Sri Kanubhai M Parjapati for the work of land filling and leveling which was in the nature of work contract and liable to tax deduction at source under section 194C of the Act. However, the assessee failed to deduct tax at source. Hence the AO invoked the provision of section 40(a)(ia) of the Act and disallowed the impugned expenses.
Conclusion-Held that the assessee failed to provide the details that the payee has included the amount received from the assessee in its income. Thus, the assessee cannot be given the benefit of the proviso to section 40(a)(ia) of the Act. However, 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 have held the amendment made by Finance (No 2) Act to be curative in nature. We further find the coordinate bench of the Tribunal in the case of M/s. R. H. International v. ITO ITA No. 6724/Del/2018 dated 20-3-2019 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. We, therefore, hold that the disallowance of expenses on account of non-deduction of TDS be restricted to 30% of the expenses in the given facts and circumstances. We thus hold so. Hence, the ground of appeal of the assessee is partly allowed.
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