Pages

Thursday, December 19, 2013

CBDT Circular on 40(a)(ia). CBDT Instruction:- allows 143(1) intimation of Refunds beyond time


CIRCULAR No 10/DV/2013 (Departmental View)

F. No. 279/Misc./M-61/2012-ITJ (Vol.-II)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, the December 16th 2013

Subject: Circular on Section 40(a)(ia) of the Income Tax Act, 1961-reg.

It has been brought to the notice of the Board that there are conflicting interpretations by judicial authorities regarding the applicability of the provisions of section 40(a)(ia) of the Income-tax Act, 1961 (`the Act') with regard to the amount not deductible in computing the income chargeable under the head 'Profits and gains of business or profession".

2. Section 40(a)(ia) of the Act reads as under:

" any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139…':

3. In the case of Merilyn Shipping & Transports v. Addl. CIT, it was held by Special Bench of ITAT, Vishakhapatnam, that the provisions of section 40(a)(ia) of the Act would apply only to the amount which remained payable at the end of the relevant financial year and could not be invoked to disallow the amount which had actually been paid during the previous year without deduction of tax at source. The order of the Special Bench has since been put under interim suspension by the Andhra Pradesh High Court.

3.1 The Hon'ble Calcutta High Court and Hon'ble Gujarat High Court in the case of Commissioner of Income-tax, Kolkata-XI v. Crescent Exports Syndicate and Commissioner of Income-tax-IV v. Sikandarkhan N Tunvar respectively, have held that section 40(a)(ia) of the Act would cover not only the amounts which are payable at the end of the previous year but also which are payable at any time during the year.

3.2 The Hon'ble High Courts have further held that the intention of the legislation was to disallow certain types of expense, subject to provisions of Chapter XVII-B, which are payable at any time during the year but no tax was deducted at source or if deducted was not paid within the stipulated time. There is no such condition that amount should remain payable at the end of the year.

3.3 The Hon'ble Allahabad High Court in CIT v. Vector Shipping Service (P) Ltd. has affirmed the decision of the Special Bench in Merilyn Shipping that for disallowance under section 40(a) (ia) of the Act, the amount should be payable and not which has been paid during the year. However, the decisions of the Hon'ble Gujarat and Calcutta High Courts (supra) were not brought to the attention of the Hon'ble Allahabad High Court.

3.4 In the case of ACIT, Circle 4(2), Mumbai v. Rishti Stock and Shares Pvt. Ltd. in ITA No. 112/Mum/2012, Hon'ble ITAT, Mumbai in its order dated 02-08-2013 has examined the decision of the Hon'ble Allahabad High Court (supra) as regards to section 40(a)(ia) of the Act and concluded that the same was an 'orbiter dicta' while the decisions of the Hon'ble Gujarat and Calcutta High Court (supra) were 'ratio decidendi'. The ITAT accordingly applied the view taken by the Hon'ble Gujarat and Calcutta High Court as ratio decidendi prevails over an orbiter dicta.

4. After careful examination of the issue, the Board is of the considered view that the provision of section 40(a) (ia) of the Act would cover not only the amounts which arc payable as on 31st March of a previous year but also amounts which are payable at any time during the year. The statutory provisions are amply clear and in the context of section 40(a) (ia) of the Act the term "payable" would include "amounts which are paid during the previous year".

5. Where any High Court decides an issue contrary to the 'Departmental View', the `Departmental View' thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court. However, the CCIT concerned should immediately bring the judgement to the notice of the CTC. The CTC shall examine the said judgement on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for.

6. The above clarification may be brought to the notice of all officers.

(Priyanka Singh)

Dy. Commissioner of Income Tax (OSD) (ITJ)


The main reason behind the stand is that 

Dept got favour in following case 

Special Bench verdict in Merilyn Shipping on S. 40(a)(ia) tds disallowance is not good law .HIGH COURT AT CALCUTTA

http://taxguru.in/income-tax-case-laws/special-bench-verdict-in-merilyn-shipping-on-s-40aia-tds-disallowance-is-not-good-law-cit-vs-crescent-export-syndicate-calcutta-high-court.html








Instruction No. 18th/ 2013, dated the 17th of December, 2013

Subject: – Issue of Intimation under section 143(1) of Income-tax Act, 1961 beyond time-regarding.

Several instances have come to the notice of the Board Where due to certain technical or other reasons (which inter-alia included wrong migration of PAN and delayed release of returns by the Centralized Processing Cell to the jurisdictional authorities),intimation in refund cases could not be sent to the concerned assessees within the time-frame as prescribed in second proviso to sub-section (1) of section 143 of the Income-tax Act, 1961 ('Act'). This has caused grievances as assessees are unable to get their legitimate refunds in accordance with provisions of Act, although the delay is not attributable to them.

2. The matter has been examined. Central Board of Direct Taxes, by virtue of power vested in it under section 119(2)(a) of the Act, hereby relaxes the time-frame prescribed in second proviso to sub-section(1) of section 143 of the Act in those cases where the return¬of-income was filed by the assessee in accordance with provisions of section 139/142(1) of the Act, but due to technical or other reasons not attributable to such assessees, the date of sending intimation under section 143(1) of the Act has lapsed before 01-04-2013. In such cases, Central Board of Direct Taxes directs that such returns shall be processed and intimation of processing of such returns shall be sent to the assessee concerned by the Assessing Officer in accordance with provisions of section 143 of the Act notwithstanding the time-limit prescribed in second proviso to sub-section (1) of that section.

3. The progress of disposal of such cases shall be monitored by the Addl./Joint CIT.

4. It its reiterated that this Instruction shall only apply to those cases where a valid return-of-income was filed as per provisions of the Act with refund claim, but the same remained peOing beyond the prescribed date due to reasons not attributable to the assessee. Further, this relaxation shall not be applicable to those cases where either Demand is shown as payable in the return-of-income or as a result of processing beyond the date as prescribed in second proviso to sub-section (1) of section 143, Demand is determined As payable.

5. This should be immediately brought to the notice of all officers working in your region.

F.No. 225/196/2013-ITA.II

Yours faithfully,

(Rohit Garg)

Deputy Secretary to the Government of India



No comments:

Post a Comment