TMI Blog2011 (8) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... have been given in para 3 of ld. CIT(A) s order. Since the assessee did not deduct and deposit the TDS in respect of the payments/credits made before 31.3.2005, in consonance with Chapter XVII-B r.w.s. Rule 30 of the I.T. Rules, the Ao added back the sum of ₹ 15,12,485/- u/s 40(a)(ia) of the Act. 3. In appeal before ld. CIT(A) the assessee submitted that the addition of the above amount is notional in nature. It was also submitted that on the entire amount, TDS had been deducted and paid on 10.5.2003. It was further submitted that with the newly amended section effective from Asst. Year 2005-06 the matter has been settled, therefore, the AO was not correct in making the said disallowance. The ld. CIT(A) after considering the submissions of the assessee and the contention of the AO confirmed part of the disallowance and gave part relief to the assessee by observing as under :- 5. I have considered the submissions of the AR and the assessment order. The AO merely followed the provisions of the unamended section 40(a)(ia). As per the said section, the disallowance is justified. However, the following payments, i.e.: Shri Rahimkhan P. Pathan 24.03.2005 ₹ 12,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred by Ld. AR. We found that in the instant case disallowance has been made by Assessing Officer only on the plea that payment of TDS was not made to the credit to the government account within the prescribed time i.e. on or before 07-04-2005. The contention of Ld. AR was that payment was made before last date of filing return, therefore amendment made u/s.40(a)(ia) to the effect that if the payment of TDS made before last date of filing return, no disallowance can be made u/s.40(a)(ia) of the Act. Amendment brought in Section 40(a)(ia) by the Finance Act, 2010 has been elaborately discussed by Tribunal in the case of Shri KanubhaiRamjibhai v. ITO in ITA No.3983/Ahd/2008, order dated 03-12-2010, it was held that amendment brought out in u/s.40(a)(ia) by Finance Act, 2010 was declaratory and clarificatory in nature. Thus it is designed to eliminate unintended consequences which may cause undue hardship to the taxpayer and which made the provision un-workable or unjust in a specific situation, therefore has to be treated as retrospective with effect from 01-04-2005 that on the date on which Section 40(a)(ia) has been inserted by the Finance Act No.2 in 2004. Following was the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 substituted in sub-clause (ia) w.r.e.f. 1-4-2005 as under: 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) in any other case, on or before the lat day of the previous year And finally by the Finance Act, 2010 w.e.f. 1-4-2010 sub-clause (ia) is 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: 10. We find from the above provision of Section 40(a)(ia) of the Act, amended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Further the Amendment was explained in Memorandum Explaining the provision in Finance Bill, 2010 as under: Disallowance expenditure on account of non-compliance with TDS provisions, The existing provisions of section 40(a)(ia) of the Income-tax Act provide for the disallowance of expenditure like interest, commission,, brokerage, professional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid during the previous year. However, in case the deduction of tax is made during the last month of the previous year, no disallowance is made if the tax is deposited on or before the due date of filing of return. It is proposed to amend the said section to provide that no disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 imaginative discovery is the surest guide to their meaning. In the case of R.B. Jodha Mal Kuthiala v. CIT (1971) 82 ITR 570, this court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole. This view has been accepted by a number of High Courts. In the case of CIT v. Chandulal Venichand (1984) 209 ITR 7, the Gujarat High Court has held that the first proviso to section 43B is retrospective and sales tax for the last quarter paid before the filing of the return for the assessment year is deductible. This decision deals with assessment year 1984- 85. The Calcutta High Court in the case of CIT v. Sri Jagannath Steel C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p 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 1st April, 1974, to section 43(1), has been held to be clarificatory in nature and the same has been held to be deemed to be always in existence even before 1-4- 1974. Similarly, in the case of Allied Motors (P) Ltd (supra), it has been held that the provisions of the first proviso, which has newly been inserted by the Finance Act, 1987, with effect from 1st April, 1988 to section 43B is remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the assessee and which made the provision unworkable or unjust in a specific situation, and is of clarificatory nature and, therefore, has to be treated as retrospective with effect from 1st April, 1984, the date on which section 43B has newly been inserted by the Finance Act, 1983. In taking this view, the Supreme Court has approved Jamshedpur Motor Accessories Stores v. Union of India [(1991) 189 ITR 70 (Pat), special leave petition dismissed by the Supreme Court : (1991) 191 ITR (St.) 8 (SC)], CIT v. Sri Jagannath Steel Corporation [(1991) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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