Brief summary and decision
The appeal was filed by the assessee against the order of CIT(A) confirming the disallowance of payment to sub-contractor without deduction of TDS u/s 194C of the Act invoking the provision of section 40(a)(ia) related to assessment year 2008-09.
Ld. Counsel of the assessee submitted before the tribunal that the second proviso to section 40(a)(ia) of the Act, would apply in case of the assessee. He relied on the decision of coordinate bench in case of Santosh Kumar Kedia Vs. ITO in ITA No.1905/Kol/2014 for A.Y. 2007-08 wherein it was decided-
Second proviso to section 40(a)(ia) provides that where the assessee is not deemed to be assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-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 the resident payee referred to in the said proviso. It shows that the legislature was not in favour of creating undue hardship for assessee and that clause (ia) should not be construed as creating such hardship. Second proviso to sec. 40(a)(ia) of the Act is curative and it has retrospective effect w.e.f. 1st April, 2005, being a date from which Sec. 40(a)(ia) of the Act was inserted by the Finance (No. 2) Act, 2004.
