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TMI Blog2014 (4) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... ows. The assessee is a partnership firm. The Assessee manufactures fire extinguishers In the course of assessment proceedings the AO noticed from the Tax Audit Report filed u/s.44AB of the Act that the Assessee deduct tax at source on payments made of RS.28,19,607, Rs.74,266 & Rs.25,000/- in respect of payments towards contract, commission and professional fee. 4. The Assessing Officer made an addition of Rs.29,18,873 to the total income by the AO invoking the provisions of section 40(a)(ia) of the Act for ITA No.352/Bang/2013 & CO 94/Bang/2013 Page 3 of 14 the assessee's failure to deduct tax at source on payments made referred to above. It is not in dispute that the Assessee had deducted tax at source at the time of making payment but had deposited the tax so deducted only on 26.9.2009 to the credit of the Central Government. According to the AO as per the provisions of Sec.40(a)(ia) of the Act as applicable to AY 09-10 the payments to the credit of the Central Government have to be made on or before 31.3.2009. The AO followed the decision of the Special Bench of the ITAT, Mumbai, in the case of Bharati Shipyard ITA No.2404/Mum/2009 dated 9.9.2011. The Special Bench had to consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the provisions of section 40(a)(i) to payments of interest, commission or brokerage, fees for professional services or fees for technical services to residents, and payments to a resident contractor or sub-contractor for carrying out any work (including supply of labour for carrying out any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-section (1) of section 200 and in accordance with the other provisions of Chapter XVII-B. It is also proposed to provide that where in respect of payment of any sum, tax has been deducted under Chapter XVII-B or paid in any subsequent year, the sum of payment shall be allowed in computing the income of the previous year in which such tax has been paid. The proposed amendment will take effect from 1st day of April, 2005 and will, accordingly, apply in relation to the assessment year 2005-2006 and subsequent years. [Clause 11]" 6. Thereafter the Finance Act, 2008 made amendment to clause (a) in sub-clause (ia) in section 40 with retrospective effect from 1st April, 2005. The section as amended by the Finance Act, 2008 read as under:- &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 2010 with retrospective effect from 1st April, 2010. The provision so amended, now reads as under :- "(ia) any 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, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or; after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139. Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid." 9. From the above provision as amended by the Finance Act, 2010 with retrospective effect from 1st April, 2010 it can be seen that the only difference which this amendment has made is dispensing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2005-2006. The Special Bench held that 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. 11. The AO following the decision of the Special Bench in the case of Bharati Shipyard (supra) disallowed a sum of Rs. Rs.29,18,873 invoking the provisions of section 40(a)(ia) of the Act. 12. Aggrieved by the order of AO, the Assessee preferred appeal before CIT(A). The CIT(Appeals) deleted the addition made by the AO following the decision of the ITAT Bangalore Bench in the case ACIT v. M.K. Gurumurthy, ITA No.717/Bang/2011 reported in [2012] 52 SOT 84 (Bang-Tri]. In the case of M.K. Gurumurthy (supra), the ITAT Bangalore Bench on the issue of disallowance u/s.40(a)(ia) of the Act followed the decision of the Hon'ble Calcutta High Court in the case of CIT v. Virgin Creations in IT Appeal No. 302 of 2011 GA 3200/2011 decided on 23.11.2011. 13. Prior to the decision of the Special Bench in the case of Bharati Shipyard Ltd. (supra), identical issue whether the amendment to Sec.40(a)(ia) of the Act by the Finance Act, 2010 was prospective or retrospective had come up for consideration before the ITAT Kol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Act 2010 thus were resulting into unintended consequences and causing grave and genuine hardships to the assesses who had substantially complied with the relevant TDS provisions by deducting the tax at source and by paying the same to the credit of the Government before the due date of filing of their returns u/s.139(1). In order to remedy this position and to remove the hardships which was being caused to the assessee belonging to such category, amendments have been made in the provisions of Section 40(a)(ia) by the Finance Act, 2010. The said amendments, in our opinion, thus are clearly remedial/curative in nature as held by the Hon'ble Supreme Court in the case of Allied Motors Pvt. Ltd. (supra) and Mom Extrusions Ltd. (supra) and the same therefore would apply retrospectively w.e.f. 1st April, 2005. In the case of R.B. Jodha Mal Kuthiala 82 ITR 570, it was held by the Hon'ble Supreme Court that a proviso which is inserted to remedy unintended consequences and to make the provision workable, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. In the present case, the amount of tax deducted at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence we dismiss the appeal without any order as to costs." 15. Following the decision of the Hon'ble Calcutta High Court, the Bangalore Bench of the Tribunal in the case of M.K. Gurumurthy Ltd. (supra)had held that tax deducted at source, if it is paid on or before the due date for filing return of income, will not attract disallowance u/s. 40(a)(ia) of the Act. In other words, it was held that the amendment by the Finance Act, 2010 was retrospective from 01.04.2005. 16. Aggrieved by the order of the CIT(Appeals), the revenue has preferred the appeal before the Tribunal. 17. Before us it was submitted by the Id. DR that the department has already filed an appeal before the Hon'ble High Court on the issue and therefore the revenue has filed the present appeal to keep the issue alive. 18. We are of the view that in the light of the decision rendered by the Tribunal in the case of M.K. Gurumurthy Ltd. (supra), the order of the CIT(A) has to be upheld. We may also add that the Hon'ble Delhi High court in the case of Rajinder Kumar in ITA No.65/2013 dated 01.07.2013, has also taken a similar view. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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