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2014 (12) TMI 613 - AT - Income TaxDeletion made u/s 40(a)(ia) – Failure to deduct TDS u/s 194C(2) – Effect of amendment to section 40(a)(ia) w.e.f. 1.4.2005 – Retrospective or prospective – Whether the Amendment by the Finance Act, 2010 as aforesaid is prospective or retrospective from 1.4.2005 - Held that:-Income from business stood enhanced by the amount disallowed by the AO and confirmed by the CIT(A) - the word "amounts credited or paid" with the word "payable" in the final enactment - only outstanding amounts are the provisions for expenses liable for TDS under Chapter XVII-B of the Act is sought to be disallowed in the event there is a default in following the obligations casted upon the assessee under Chapter XVII-B of the Act - While interpreting the word "payable" in section 40(a)(ia), the meaning of the word statute must be understood in its natural, ordinary or popular sense and constitute according to the grammatical meaning. The word "payable" used in Section 40(a)(ia) of the Act is to be assigned strict interpretation in view of the object of legislation which is intended from the replacement of the words in the proposed and enacted provision from the word "amount credited or paid" to "payable” – thus, the CIT(A) rightly relied upon Merilyn Shipping Transport v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] and held that the provisions of Section 40(a)(ia) of the Act are applicable only to the amount of expenditure which are payable as on 31st March, of every year and it cannot be invoked to disallow which had been actually paid during the previous year without deduction of TDS. In Bharati Shipyard Ltd. v. Dy. CIT [2011 (9) TMI 258 - ITAT MUMBAI] it has been held that the amendment carried out by the Finance Act, 2010 with retrospective effect from assessment year 2010-2011 cannot be held to be retrospective from AY 2005-2006 - the amendment brought out by the Finance Act, 2010 to section 40(a)(ia) w.e.f. 01.04.2010, is not remedial and curative in nature - the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year - To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. The use of word "Payable", in Section 40(a)(ia) of the Act has created controversy as to whether payable includes amounts paid during the year - there are two views on the issue, one in favour of the assessee expressed by the Hon'ble Allahabad High Court and the other against the assessee expressed by the Hon'ble Gujarat & Calcutta High Courts - there is no decision rendered by the jurisdictional High Court on this issue – thus, following the decision of the Commissioner of Income-Tax, West Bengal I Versus Vegetable Products Limited [1973 (1) TMI 1 - SUPREME Court] – decided against revenue.
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