Amendment in Sec 201(1) of the Income Tax Act is Retrospective in nature, rules ITAT Kolkata [Read Order]

While confirming the deletion of the disallowance of amount spent on machine hire charges, the Income Tax Appellate Tribunal, Kolkata bench has ruled that TDS provisions are not applicable if the payee has included the receipt in its books of account and has offered for taxes. While allowing the claim of the assessee, the Tribunal emphasized that the amendment mae to section 201(1) of the Income Tax Act, 1961 have retrospective operation.

The assessee, in the instant case, is an individual is engaged in hiring of cranes, digging equipments and other equipments which are used in civil construction.The assessing officer completed the assessment by disallowing the expenditures claimed by him on account of the machine hire charges and transport charges by pointing out that TDS under section 194I of the Income Tax Act, has not been paid on such amount.

The first appeal preferred by the assessee was allowed by the Commissioner of Income Tax (Appeals) on ground that the above charges should be treated as the hire charges paid as items forming part of the trading accounts of the assessee.It was found that the above expenditure has been allowed by the Assessing Officer for the earlier assessment years. On this basis, the CIT(A) observed that “It was for the AO to prove that the provision of section 194I is attracted for invoking section 40(a)(ia) after ascertaining the facts and circumstances surrounding the appellant’s case.Mere assumption in the matter will not justify his action which needs to be corroborated with conclusive proof and reasoning to make out his case. In view of this the addition made by the AO to the tune of ₹1,90,32,520/- on account of disallowance made u/s. 40(a)(ia) read with section 194I treating the amount as rental payment is hereby deleted.” 

Aggrieved by the above order, the Revenue approached the Appellate Tribunal for relief. The Tribunal found that the Amendment in Sec. 201(1) of the Act has been brought by the Finance Act, 2012 which is curative in nature. Therefore, it should be effective from the retrospective date.

The Tribunal noticed the decision Santosh Kumar Kedia vs. ITO in which it was held that the above Amendment has come into effect with retrospective date and as per the amended provision if the payee has included the receipt in its books of account and has offered for taxes then the disallowance on account of non-deduction of TDS will not arise.

Concurring with the findings of the CIT(A),the Tribunal observed that the assessee is not default for non-deduction of TDS.

Read the full text of the order below.