TMI Blog2010 (12) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... e with effect from 1st April, 2005, the date on which section 40(a)(ia) has been inserted by the Finance (No.2) Act, 2004. - Decided in favor of assessee - Deduction allowed. - ITA NO. 3983/AHD/2008 - - - Dated:- 3-12-2010 - MAHAVIR SINGH, JUDICIAL MEMBER J, AND D.C. AGRAWAL, ACCOUNTANT MEMBER J, M.G. Patel for the Appellant. K. Madhusudan for the Respondent. ORDER PER Mahavir Singh, Judicial Member :- This appeal by the assessee is arising out of the order of Commissioner of Income-tax (Appeals)-IV,Barodain appeal No.CAB/IV-A-256/07-08 dated29-08-2008. The assessment was framed by ITO Ward-1, Anand u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated24-12-2007for assessment year 2005-06. 2. The first issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by Assessing Officer by invoking the provisions of section 40A(2)(b) of the Act. For this, assessee has raised the following ground No.1 :- 1. The Learned Commissioner of Income Tax (Appeals)-IV, Baroda has erred in law and on facts of the case by confirming the addition of Rs.4,97,716/-u/s.40A(2)(b) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of ITAT Jodhpur Bench in the case of Neha Proteins v. ACIT (2004) 83 TTJ 236 (Jd.). In this context, one more decision viz. in the case of Shyam Oil Cake Ltd. v. ACIT (2004) 83 TTJ 414 (Jd.) has also been cited. In one of the case of Bativala Karani v. ACIT (2005) 2 SOT 379 (Mum.) an observation was made that the unreasonableness should be based upon some subjective perceptions of the AO and disallowance should be based upon some cogent material on record. Since in the present case, these basic requirements were wanting, hence, we are of the view that the approach of the AO of ad hoc disallowance was unwarranted, therefore, cannot be approved in the eyes of law considering the intention of the legislature and the law laid down by various judicial authorities. The findings of the authorities below are therefore hereby reversed. 4. We find that the facts are exactly identical in respect to disallowance of payments u/s 40A(a)(2b) of the Act in the present year also. Respectfully following and taking a consistent view, we allow this issue of the assessee s appeal. 5. The next issue in this appeal of assessee is against the order of CIT(A) confirming the addition ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4C Contract Sub 15,49,020 9/11/04 1.02 9/11/04 15800 15800 15800 7/12/04 19/7/05 194C Contract Sub 4,21,587 14/2/05 1.02 14/2/05 4300 4300 4300 7/3/05 19/7/05 194C Contract Sub 6,17,647 15/3/05 1.02 15/3/05 6300 6300 6300 7/4/05 19/7/05 194C Contract Labour 13,13,725 8/2/05 1.02 8/2/05 13400 13400 13400 7/3/05 19/7/05 194C Contract Labour 5,15,000 31/12/04 1.02 31/12/04 85263 5263 5263 7/1/05 19/7/05 194C Contract Labour 9,62,942 31/3/05 1.02 31/3/05 9822 9822 9822 31/5/05 19/7/05 194C Contract Labour 3,25,615 31/12/04 1.02 31/12/04 3321 3321 3321 7/1/05 19/7/05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month of March and deposited with the Government before submission of return of income, the provisions of section 40(a)(ia) are not attracted. In the above cases, since the tax had been deposited on 19.07.2005, the provisions of section 40(a)(ia) are not attracted. Therefore, the addition to the extent of Rs.53,02,227/- is deleted and balance is confirmed. Aggrieved, assessee came in second appeal before us. 8. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the CIT(A) has deleted the addition to the extent of Rs.53,02,227/- as the payments relates to the month of March and the TDS was deducted in March 04 and paid in 19-07-2005 i.e. before the due date of filing of return of income u/s. 139(1) of the Act. Balance, the CIT(A) confirmed as payments relates to April 04 to Feb 05 on which the TDS was deducted from Nov 04 to Feb 05 and TDS was paid on 19-07-2005. The Ld. counsel for the assessee, Shri M.G. Patel stated that the provisions as substituted by the Finance Act, 2010 that the TDS deducted is paid on or before the due date of filing of return of income as specified in section 139(1) of the Act, the expenses r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Explanation:- For the purposes of this sub-clause:- (i) commission or brokerage shall have the same meaning as in clause (i) of the explanation to section 194H; (ii) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (11) of section 9; (iii) professional services shall have the same meaning as in clause (a) of the explanation to section 194J; (iv) work shall have the same meaning as in explanation-III to section 194C; Subsequently, in sub-clause (ia) the words, (rent and royalty) has been inserted by the Taxation Laws (Amendment) Act, 2006 w.r.e.f. 1-4-2006 and similarly in Explanation sub-clauses (v) (vi) were inserted as under:- (v) rent shall have the same meaning as in clause (i) to the explanation to section 194-1; (vi) royalty shall have the same meaning as in explanation 2 to clause (vi) of sub-section (1) of section 9; Further, by the Finance Act, 2008, the quoted words were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve its object of removing hardship faced by the taxpayers. While bringing this amendment by Finance Bill, 2010, the object was explained in Notes On Clauses and the relevant Clause-12 was explained as under:- Clause 12 of the Bill seeks to amend section 40 of the Income-tax Act relating to amounts not deductible. Under the existing provisions contained in sub-clause (ia) of clause (a) of the aforesaid section, non-deduction of tax or non-payment of tax after deduction on payment of any sum by way of 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, results in the disallowance of the said sum, in the computation of income of the payer, on which tax is required to be deducted under Chapter XVII-B. The proviso to the said sub-clause provides that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the last month of the previous year but paid after the due date of filing of return or deducted during any other month of the previous year but paid after the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apex court held as under:- The departmental understanding also appears to be that section 43B, the proviso and Explanation 2 have to be read together as expressing the true intention of section 43B. Explanation 2 has been expressly made retrospective. The first proviso, however, cannot be isolated from Explanation 2 and the main body of section 43B. Without the first proviso, Explanation 2 would not obviate the hardship or the unintended consequences of section 43B. The proviso supplies obvious, omission. But for this proviso the ambit of section 43B becomes unduly wide bringing within its scope those payments, which were not intended to be prohibited from the category of permissible deductions. In the case of Goodyear India Ltd. v. State of Haryana (1991) 188 ITR 402, this court said that the rule of reasonable construction must be applied while construing a statute. A Literal construction should be avoided if it defeats the manifest object and purpose of the Act. Therefore, in the well known words of Judge Learned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment would not serve its subject in such a situation, unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained. 12. Accordingly, we are of the view that the Amendments brought out in section 40(a)(ia) of the Act from time-to-time was clarificatory and when an amendment is declaratory and clarificatory in nature, the presumption against its retrospectivity is not applicable and amendments of this kind only declare. It is no doubt true that, ordinarily, a statute, and particularly when the same has been made applicable with effect from a particular date should be construed prospectively and not retrospectively. But this principle will not be applicable in a case where the provision construed is merely explanatory, clarificatory or declaratory it cannot be disputed that the object of the Explanation is to explain the meaning and intendment of the Act itself and this view has been hold by Hon ble Calcutta High Court in the case of CIT v. India Steamship Co. Ltd. (1992) 196 ITR 917, 936 (Cal.)]. In that case, Explanation 8, which has newly been inserted by the Finance Act, 1986, with retrospective effect from 1 st Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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