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TMI Blog2011 (12) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the Assessing Officer, taking recourse of the provisions contained in section 40(a)(ia) of the Act, disallowed the payments made for sub-contract amounting to Rs. 24,60,844 for which TDS amounting to Rs. 33,898 was paid on May 12, 2008. Aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). The assessee contended before him that the provisions of section 40(a)(ia) has been amended by the Finance Act, 2010 with effect from April 1, 2010 and since the amendment is of clarificatory and declaratory nature, it has to be treated as retrospective with effect from April 1, 2005, i.e., the date on which law came into existence. The learned Commissioner of Income-tax (Appeals) was of the view that retrospectivity is not to be lightly inferred unless it is specifically stated to be retrospective. Therefore, the learned Commissioner of Income-tax (Appeals) upheld the action of the Assessing Officer in disallowing the payments made for subcontract amounting to Rs. 24,60,844. Learned counsel for the assessee filed compilation of various judicial pronouncements and submitted that the assessee works as an "ore raising contractor" for three different firms, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny part of the work. (3) CIT v. United Rice Land Ltd. [2010] 322 ITR 594 (P&H) ; 217 CTR 332 wherein finding the fact that there was neither any oral or written agreement between the assessee and the transporters for carriage of goods, nor it has been proved that any freight charges were paid to them in pursuance of a contract for a specific period, quantity or price-Tribunal clearly stating that nothing has been brought on record by the Assessing Officer to prove that there was written or oral agreement between the parties for carriage of goods-Held-Therefore, the assessee was not liable to deduct tax under section 194C from the payments made to the transporters, addition under section 40(a)(ia) not sustainable. (4) CIT v. Ram Narain Goel [1997] 224 ITR 180 (P&H) : a proposition howsoever strong could not take the place of evidence of proof. Learned counsel for the assessee further submitted that the advocate appearing before the authorities below probably could not place the facts properly, but it is settled law that for the mistake of counsel, the assessee could not be made to suffer. He placed reliance on the decision of the Supreme Court of India in the case of Conco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11] 9 ITR (Trib) 565 (Mumbai) ; 137 TTJ 319 are based on the decisions of the Supreme Court of India in the cases of CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC), Allied Motors P. Ltd. v. CIT [1997] 224 ITR 677 (SC) and CIT v. Podar Cement P. Ltd. [1997] 226 ITR 625 (SC). CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) when a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso which supplies an obvious omission therein is required to be read retrospectively in operation, particularly to give effect to the section as a whole. Allied Motors P. Ltd. v. CIT [1997] 224 ITR 677 (SC) relied on. If strict construction leads to a result not intended to be subserved by the object of the legislation, and if construction is possible apart from the literal construction, then that construction should be preferred. CIT v. J. H. Gotla [1985] 156 ITR 323 (SC) followed. The decision of the "B" Bench of the Bombay Income-tax Appellate Tribunal in the case of Bansal Parivahan (India) P. Ltd. v. ITO [2011] 9 ITR (Trib) 565 (Mumbai) ; 137 TTJ 319 reaffirms the decision of "B" Bench of the Ahmedabad Income-tax Appellate Tribunal in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and remove the hardship which was being caused to the assessee, amendment has been made. Thus certainly the provision of section 40(a)(ia) by the Amendment Act, 2010 are clearly remedial/curative in nature and applicable retrospectively. Further it is also a settled law that in interpretation of a taxing statute, when two views are possible on the same fact, the assessee is entitled to interpretations favourable to him. In the case of CIT v. J. K. Hosiery Factory [1986] 159 ITR 85 (SC) and Union of India v. Onkar S. Kanwar [2002] 258 ITR 761 (SC), it has been held that if two views are possible then the one which is favourable to the assessee must be adopted. The honourable Supreme Court of India in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) has laid down the principle that when there are many reasonable constructions possible the one favourable to the assessee is to be interpreted. The honourable Supreme Court in the case of CIT v. J. H. Gotla [1985] 156 ITR 323 (SC) at 339 has held that where the plain and literal interpretation of a statutory provision produces a manifestly unjust result which could never been intended by the Legislature, the court can m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her bills drawn on the assessee when the tax at source was deducted on the misdirection of the professional advice as the amount would become disallowable under the provisions of section 40(a)(ia). It was not the case of the assessee to deduct tax at source and not deposit in accordance with the amended provisions when the hardships caused to the assessee was to deposit tax on time which amendment had taken place with effect from April 1, 2010. The assessing authorities therefore misdirected themselves to confine themselves to disallowance under section 40(a)(ia) when the contention of the assessee was not looked into regarding applicability of the provisions of section 194C. Learned counsel for the assessee filed a paper book which, inter alia, distinguished case law cited at the bar creating a controversy whether, the non-payment of tax deducted at source could lead to disallowance of expenditure under section 40(a)(ia) which has been lately confirmed as a hardship to the assessee by the Income-tax Appellate Tribunal, Special Bench, Mumbai when the said provision of the tax amount having been paid within due date on filing of the return. He pointed out that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer in the regular assessments, therefore, could have charged interest at a higher rate on the delayed payment as also provided in the amendment with effect from April 1, 2010 in the said provisions of section 40(a)(ia). Learned counsel also made a reference to the fact that no proceedings for delayed payment under section 201 has been initiated by the Assessing Officer, which clinches the issue in favour of the assessee on the fact that when the payees have not claimed credit for such deduction the amount of expenditure which the assessee paid by way of a contract for ore raising for which the assessee charged service tax cannot be subjected to deduction of tax at source in so far as the work contract does not include manufacturing or supplying products according to the requirements or specification to a customer by using material purchased from persons other than such customers. He, therefore, justified the raising of the ground before the Tribunal in so far as the controversy has been set at rest by the decision of the Income-tax Appellate Tribunal, Special Bench, Mumbai the hardship for claiming deduction under section 40(a)(ia) continues irrespective of the date of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appropriate to the extent that no effort has been made by the authorities to consider disallowing the tax deducted at source under the provisions of section 43B when the subject-matter was TDS deposit under the provisions of section 200. The law clarifies that a higher rate of interest is charged for delayed payment of such tax deducted at source was verified by the Assessing Officer in this case when he chose to abide by the delayed payment for disallowance under the provisions of section 40(a)(ia). Learned counsel for the assessee before us has rightly raised the issue whether disallowance of 99 per cent. was the hardship faced by the assessee for not having paid one per cent. expenditure claimed which tax was deducted but not deposited till such time the law clarified in the provisions of section 40(a)(ia). Learned counsel for the assessee therefore was justified in raising the alternate plea regarding not governed by the provisions of section 194C in view of the business transactions which have been dealt with by the Assessing Officer in so far as the assessee is providing service of transporting the ore extracted as per the direction of the owner. In order to comply with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected by the professional so advised. The amount of this TDS, which has been paid on May 12, 2008 therefore, is an expenditure against which no credit was obtained by the assessee or the payees. The crux of the issue therefore relates to the disallowance under section 40(a)(ia) only when the provisions of section 194C are applied to consider the hardship faced by the assessees has been totally ignored by the Assessing Officer and the learned Commissioner of Income-tax (Appeals) in so far as it was never the case of the assessee to claim expenditure of Rs. 33,898 being disallowed by the Assessing Officer merely because the amount paid by the assessee was on May 12, 2008. We are inclined to find the contention of learned counsel for the assessee appropriate for raising the alternate submissions in so far as learned counsel for the assessee has tried to analyse the interpretation of various decisions of the Tribunal and the High Courts relating to the issue regarding the due date of payment whether has to be considered in accordance with the amended provisions with effect from April 1, 2010 and whether the deduction of tax on payments without having entered into contracts have been su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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