TMI Blog2013 (7) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the order dated 21.06.2011 of the CIT(Appeals), Mysore relating to assessment year 2008-09. 2. The assessee is an individual. He derives income from rendering consultancy services and also executes engineering contracts as a consulting engineer. In the course of assessment proceedings for the A.Y. 2008-09, the Assessing Officer noticed that assessee had made payments of ₹ 43,07,493 to sub-contractors. The assessee was liable to deduct tax at source on such payments u/s. 194C of the Act. The assessee deducted tax at source on the payments made to sub-contractors and payment of the tax so deducted was paid to the credit of the Government only on 15.04.2008. 3. As per the provisions of section 40(a)(ia) of the Act, any payments made to a contractor or a sub-contractor who is a resident for carrying out any work on which tax is not deducted at source as per the provisions of section 194C of the Act, or if tax is deducted but not paid on or before 31st March of the previous year, then the aforesaid payment to the subcontractor cannot be claimed as deduction by the assessee while computing income from business. Section 40(a)(ia) provides an exception insofar as the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the order of the CIT(A) dated 21.06.2011. 7. The facts as narrated above have been affirmed by the assessee in the form of affidavit filed before us. Based on the contents of the affidavit, the assessee has prayed for condonation of delay in filing the appeal. We have considered the contents of the affidavit explaining the delay in filing the appeal and are of the view that there was a reasonable cause for the delay in filing the appeal by the assessee. Accordingly, the same is condoned. 8. As far as the merits of the issue raised by the assessee in his appeal is concerned, the same relates to the question as to whether an amount of ₹ 31,67,175 on which tax was deducted but paid on 15.04.2008 can be disallowed by invoking the provisions of section 40(a)(ia) of the Act? For deciding this question, a brief history of the provisions of section 40(a)(ia) of the Act is required to be narrated. 9. The legislative history of the provisions of Sec.40(a)(ia) of the Act is as follows: Section 40 has certain clauses providing for the amounts which are not deductible. Sub-clause (ia) of clause (a) of section 40 was inserted by the Finance (No.2) Act, 2004 with effect from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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] 11. 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:- (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 subcontractor, 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 paid,- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139 ; or (B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious 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 earlier two categories of defaults as per the Finance Act, 2008, as discussed in the earlier para, causing disallowance on the basis of the period of the previous year during which tax was deductible. The first category of disallowances included the cases in which tax was deductible and was so deducted during the last month of the previous year but there was failure to pay such tax on or before the due date specified in sub-section (1) of section 139. The Finance Act, 2010 has not tinkered with this position. The second category of the Finance Act, 2008 which required the deposit of tax before the close of the previous year in case of deduction during the first eleven months, as a pre-condition for the grant of deduction in the year of incurring expenditure, has been altered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 return of income u/s.139(1) of the Act, the disallowance was made u/s.40(a)(ia) of the Act. Before the Tribunal, the Assessee contented that the amendment by the Finance Act, 2010 with retrospective effect from 1st April, 2010 whereby amount of tax deducted at the time of making payment in respect of expenditure referred to in Sec.40(a)(ia) of the Act, if paid to the Government on or before the due date for filing the return of income due date u/s 139(1) of the Act should be allowed as a deduction. In other words it was argued that the amendment by the Finance Act, 2010 to the provisions of Sec.40(a)(ia) has to be held to be retrospective w.e.f. 1-4-2005. The ITAT Kolkata Bench by its order dated 15.12.2010, held as follows: 8. After hearing the rival submissions and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 appeal. 17. As against the aforesaid decision the Revenue preferred appeal before the Hon ble Calcutta High Court. The Hon ble Calcutta High Court in ITA No. 302 of 2011 GA 3200/2011 decided on 23.11.2011, held as follows: We have heard Mr. Nizamuddin and gone through the impugned judgment and order. We have also examined the point formulated for which the present appeal is sought to be admitted. It is argued by Mr. Nizamuddin that this court needs to take decision as to whether section 40(A)(ia) is having retrospective operation or not. The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April 1, 2005 and April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e. well b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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, 2010 is retrospective from 1.4.2005. Consequently, 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. We order accordingly and allow the appeal by the Assessee. 21. The aforesaid view has also been taken in the following decisions of the Tribunal:- Rajamahendri Shipping Oil Field Services Ltd., ITA No.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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