- (1.) HEARD learned Counsel for the parties.
(2.) THE petitioner is challenging the assessment order dt. 31st Dec, 2007 (Annex. 5 to the writ petition) passed by Jt. CIT, Range -II, Allahabad, under Section 143(3) of the Income -tax Act, 1961 (hereinafter referred to as the 'Act') for the asst. yr. 2005 -06 insofar as it has fastened the liability of tax of Rs. 1,29,10,775 upon the petitioner. He has also challenged the vires of Section 40(a)(ia) of the Act. The petitioner is engaged in the business of manufacture and sale of cosmetics and medical products having its unit at Allahabad. With respect to some advertisements made by M/s Dey's Medical Stores ., the petitioner claims to have made certain payments being his share of expenditure towards advertisement but the said payments were made without deducting tax at source though mandated under Section 194C of the Act. For failure of deduction of tax at source, the amount paid by the petitioner claimed to be expenditure on account of advertisement was not allowed to be deducted from computation of his income in view of Section 40(a)(ia) of the Act and the AO treated the said payment to be the income of the petitioner fastening upon him the liability of tax under the Act.
(3.) THE learned Counsel for the petitioner contended that the aforesaid payment is also liable to be taxed in the hands of the persons to whom the payments are made being their income and TDS on such amount by the petitioner at best would have been in the nature of part payment of tax by such person. Therefore, for such failure of deduction of tax at source, the said payment in its entirety cannot be treated to be the income of the petitioner as it would amount to double taxation of the same amount and, therefore, is illegal and ultra vires.;