TMI Blog2015 (3) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequently, any payment of tax deducted at source during previous years relevant to and from AY 05-06 can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. If payments are made as aforesaid, then no deduction u/s.40(a)(ia) of the Act can be made. Admittedly in the present case, the Assessee had deposited the tax deducted at source on or before the due date for filing return of income u/s.139(1) of the Act and therefore the impugned disallowance deserves to be deleted. - Decided in favour of assessee. - ITA No.430/Bang/2014 - - - Dated:- 13-2-2015 - Shri N.V. Vasudevan And Shri Abraham P. George JJ For the Appellant : Dr. P.K. Srihari, Addl. CIT(DR) For the Respondent : Shri Suresh M, C.A. ORDER Per N.V. Vasudevan, Judicial Member This appeal by the revenue is against the order dated 30.1.2014 of the CIT(Appeals), Hubli relating to assessment year 2008-09. 2. The assessee is a partnership firm, engaged in the business of arecanut trading at APMC Yard, Shimoga. In the course of assessment proceedings u/s. 143(3) of the Act, the AO noticed that the assessee had paid commission totaling to ₹ 21, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd added to the total income. The AO accordingly disallowed a sum of ₹ 10,88,339 claimed as deduction by the assessee under the head commission and a sum of ₹ 12,22,734 which was claimed as deduction under the head interest expenses . 6. On appeal by the assessee, the CIT(Appeals) deleted the additions made by the AO by holding that if the tax deducted at source is paid on or before the due date for filing the return of income u/s.139(1) of the Income Tax Act, 1961 (Act), than no disallowance u/s.40(a)(ia) of the Act could be made. In holding so, the Tribunal held that the amendment to the provisions of Sec.40(a)(ia) of the Act by the Finance Act, 2010 whereby it was laid down that if the tax deducted at source is paid on or before the due date for filing the return of income u/s.139(1) of the Act than no disallowance can be made u/s.40(a)(ia) of the Act, is retrospective in operation and operates from 1.4.2005 though it is said to be retrospective only from 1.4.2010. 7. Aggrieved, the Revenue has preferred the present appeal before the Tribunal. 8. We have heard the rival submissions. It is not in dispute that before us that this Tribunal in the case of Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 194C; 10. The Memorandum explaining the provisions in the Finance Bill explained the rationale of the insertion of the new provision in following words :- With a view to augment compliance of TDS provisions, it is proposed to extend 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 subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amendment to section 40(a)(ia) by the 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. 14. 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 the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05-2006. 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. 16. Prior to the decision of the Special Bench, identical issue had come up for consideration before the ITAT Kolkata Bench in the case of Virgin Creations Vs. ITO, Ward 32(4), Kolkata ITA No. 267/Kol/2009 for AY 05-06. The issue that arose for consideration was disallowance of expenses u/s.40(a)(ia)claimed as deduction while computing income from business being embroidery charges, dyeing charges, interest on loan and freight charges without deducting tax at source. The Embroidery charges were paid between 22nd may, 2004 to 30.11.2004. Tax had been deducted at source but were paid to the Government only on 28.10.2005 and not within the time contemplated by Section 200(1) of the Act. The dyeing charges were paid between 5.4.2004 to 20.8.2004. Tax was deducted at source but was paid to the Government only on 28.10.2005. Freight outward charges were paid without deduction of tax at source. Interest on loans were credited to the creditors account on 31.3.2005 to the extent they were paid after the due date for filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso 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 source from the freight charges during the period 01/04/2005 to 28/02/2006 was paid by the Assessee in the month of July and August 2006 i.e., well before the due date of filing of its return of income for the year under consideration. This being the undisputed position, we hold that the disallowance made by the A.O. and confirmed by the learned CIT(A) on account of freight charges by invoking the provisions of Section 40(a)(ia) is not sustainable as per the amendments made in the said provisions by the Finance Act, 2010 which, being remedial/curative in nature, have retrospective application , we find no reason to deviate from the decisions of the ITAT s Mumbai Bench and Ahmedabad Bench, in the absence of a contrary view, except the other benches decisions or any other High Court. Therefore, respectfully following the decision of the Coordinate Benches (supra), we allow the ground nos. I to 3 of the assessee s app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment by the Finance Act, 2010 to the provisions of Sec.40(a)(ia) of the Act is prospective and not retrospective from 1.4.2005 or the decision of the Hon ble Calcutta High Court taking a contrary view. On the above question, the learned counsel for the Assessee brought to our notice the decision of the ITAT Delhi in the case of Tej International (P) Ltd. v. Dy. CIT (2000) 69 TTJ (Del) 650, wherein it was held that in the hierarchical judicial system that we have in India, the wisdom of the court below has to yield to the higher wisdom of the Court above, and therefore, once an authority higher than this Tribunal has expressed its esteemed views on a an issue, normally, the decision of the higher judicial authority is to be followed. The Bench has further held that the fact that the judgment of the higher judicial forum is from a non-jurisdictional High court does not really alter this position, as laid down by the Hon'ble Bombay High Court in the case of CIT v. Godavaridevi Saraf 113 ITR 589(Bom). 20. In view of the above, we hold following the decision of the Hon ble Calcutta High Court, that Amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 201 ..... 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