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2014 (9) TMI 194 - AT - Income TaxYear of taxability of amount - Amount spent on projects reworked for sub-project in various locations – Held that:- CIT(A) was right in holding that AS-7 is not applicable to Real Estate also Bench mark for recognizing revenues adopted by the assessee are reasonable and the rule of consistency applies in this case, in order to invoke sec. 145(3), the AO must necessarily express dissatisfaction about the correctness and completeness of the accounts and also note that such system of accounting is not regularly followed by the assessee, and the correctness of the overall profit from the project is not disputed by the AO only year of taxability is disputed – relying upon Commissioner of Income Tax and Another vs. Hyundai Heavy Industries Co. Ltd. [2007 (5) TMI 196 - SUPREME Court] - the project completion method followed by the assessee would result in deferment of the payment of the taxes which are to be assessed annually under the Income Tax Act – AS-7 issued by the Institute of Chartered Accountants of India also recognize the position that in the case of construction contracts, the assessee can follow either the project completion method or the percentage completion method - the order of the CIT(A) is upheld – Decided against revenue. Deduction u/s 40(a)(ia) - Payment made for purchase of technical know-how – Tax withholding obligations u/s 194A of the Act not discharged – Held that:- Following the decision in Rajeev Kumar Agarwal Versus Additional Commissioner of Income Tax [2014 (6) TMI 79 - ITAT AGRA] - The net effect of the amendments is that the disallowance u/s 40(a)(ia) shall not be attracted in the situations in which even if the assessee has not deducted tax at source from the related payments for expenditure but the recipient of the monies has taken into account the receipts in computation of income, paid due taxes, if any, on the income so computed and has filed his income tax return u/s 139(1) - it is beyond doubt that the underlying objective of section 40(a)(ia) was to disallow deduction in respect of expenditure in a situation in which the income embedded in related payments remains untaxed due to non-deduction of tax at source by the assessee - section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non-deduction of tax at source from payments for expenditure- particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the law. A curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced - it cannot subscribe to the view that it could have been an "intended consequence" to punish the assessees for non-deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax - That will be going much beyond the obvious intention of the section - the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004 – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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