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TMI Blog2015 (5) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... - representing freight charges incurred in the preceding assessment year 2009-10. The assessee explained that the tax deduction at source (TDS) corresponding to the impugned sum was deducted in the previous year relevant to the earlier assessment year 2009-10 but it was paid to the credit of the Government in the previous year relevant to the assessment year under consideration i.e. 2010-11. Under these circumstances by application of section 40(a)(ia) of the Act, such expenditure was not allowable while computing income chargeable under the profits and gains of business for assessment year 2009-10. However, in terms of the proviso to section 40(a)(ia) of the Act which prescribed that where such tax has been deposited to the credit of the Central Government in the subsequent year, such sum shall be allowed as a deduction in computing the income of the subsequent year in which such tax has been paid; assessee contended that in the previous year relevant to the assessment year under consideration such tax has been paid and therefore it claimed deduction for the corresponding expenditure of Rs. 70,35,997/- while computing the income for the year under consideration. Pertinently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for the Revenue has contended that since no additional taxes on the disallowance in question were paid by the assessee in the preceding assessment year, the assessee cannot be allowed to reduce its tax burden by claiming deduction of the said amount against taxable income of the current year by utilizing the proviso to section 40(a)(ia) of the Act. The Ld. Departmental Representative also referred to the following discussion in the order of the CIT(A) wherein the claim has been denied on the basis of the provisions of section 80A(4) of the Act :- "However, the contention of the appellant that the said amount on which deduction u/s 10B has already been allowed should be considered for allowance during A.Y. 2010-11 is not tenable under law in view of the insertion of a new sub-section (4) in section 80A with retrospective effect from the A Y. 2003-04 by the Finance (No.2) Act, 2009, The newly inserted sub-section (4) in section 80A provides that notwithstanding anything to the contrary contained in Sec 10A or sec 10AA or sec 10B or Sec 10BA or in any provisions of Chapter VI-A under the heading. "C-Deductions in respect of certain incomes", where, In the case of an assessee, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e due date specified in section 139(1) of the Act, such sum shall be allowed as a deduction in computing the income of the year in which such tax has been actually paid. In the present case, it is quite clear that in so far as the preceding assessment year 2009-10 is concerned, assessee had defaulted in terms of section 40(a)(ia) of the Act and in computing the income chargeable under the profits and gains of business it added back the sum of Rs. 70,35,997/- which represented freight charges. On the strength of the proviso to section 40(a)(ia) of the Act in the current assessment year i.e. assessment year 2010-11, the case setup by the assessee is that such sum be allowed as a deduction in computing the income because the same has been paid during the year under consideration. Having regard to the explicit provisions of section 40(a)(ia) of the Act, no fault can be found with the claim of the assessee. In-fact, in so far as the wording of section 40(a)(ia) of the Act is concerned, even the Revenue does not dispute that the claim of the assessee is in order. So however, according to the Revenue, the disallowance/add back in computing the income for assessment year 2009-10 is concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0BA or under any provisions of Chapter VI-A under the heading "CDeductions in respect of certain incomes". It is also pertinent to note that the said section seeks to deny multiple deductions for the same profits in the same assessment year. The aforesaid becomes amply clear from the phraseology of section 80A(4) of the Act itself. In-fact, a perusal of the notes on clauses explaining the various provisions in the Finance (No.2) Act, 2009 relating to section 80A(4) of the Act also bears out the aforesaid inference. In this context, the following statements in the notes of clauses to the Finance (No.2) Act, 2009 which inserted section 80A(4) of the Act is relevant, which is reported at 314 ITR 57 (statutes) especially at page 199, and reads as under :- "Amendment in Chapter VIA to prevent abuse of tax incentives The profit linked deductions in Chapter VIA are prone to considerable misuse. Further, since the scope of the deductions under various provisions of Chapter VIA overlap, the taxpayers, at times, claim multiple deductions for the same profits. With a view to preventing such misuse, it is proposed to amend the provisions of section 80A of the Income-tax Act to provide the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. CIT, 28 ITR 811 (Bom.). The issue before the Hon'ble High Court was relating to the liability for additional income tax on payment of 'excess dividends'. Actually, assessee was found to have paid excess dividend, so however, it resisted the liability to additional income tax on the ground that it had no taxable income otherwise. The Hon'ble High Court held that the claim of the Revenue was unsustainable, and in coming to such conclusion, the Hon'ble High Court made the following observations, as appearing in the Head notes :- "It is a condition precedent to the levy of additional income-tax under clause (ii) of the proviso to paragraph B of Part I of the First Schedule to the Indian Finance Act, 1951, in respect of "excess dividend" distributed by a company, that there must be a declaration of dividend by the company not payable out of any profits, but out of the specific profits referred to in the first part of the proviso, viz., "profits liable to tax under the Income-tax Act for the year ending on the 31st day of March, 1952" Consequently, if a company has no taxable income at all for the assessment year 1951-52 and in that year it pays dividends out of the profits earned in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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