TMI Blog2016 (3) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005 Disallowance of carriage expenses for want of vouchers - Held that:- As submitted that the vouchers could not be produced earlier because the issue was argued on legal grounds before CIT(A) and the counsel for the Assessee in the proceedings before the lower authorities did not think it fit to file the vouchers, though they were available. In view that the vouchers now sought to be filed by the Assessee as additional evidence is required to be admitted as additional evidence as they are material for deciding the issue in the appeal. Since, the additional evidence requires verification by the AO, deem it fit and proper to remand the issue to the AO for fresh consideration in the light of the additional evidence now filed. The AO will afford opportunity of being heard to the Assessee before deciding the issue. - I.T.A No. 615/Kol/2015 - - - Dated:- 3-2-2016 - Sri N.V.Vasudevan, JM For The Appellant : Miss Varsha Jalan, Advocate For The Respondent : David Z. Chawngthu, Affl.CIT ORDER This is an appeal by the Assessee against the order dated 16.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Assessee in their return of income and if they have so declared then the addition u/s.40(a)(ia) of the Act should be deleted by the AO. The above submission was made in the context of the following amendments to the provisions of Sec.40(a)(ia) of the Act. With a view to liberalize provisions of Section 40(a)(ia) of the Act Finance Act 2012 brought amendment w.e.f 01.04.2013 as under. The following second proviso was inserted in sub-clause (ia) of clause (a) of Section 40 by the Finance Act, 2012, w.e.f. 1-4-2013 : Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of Section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. 5. Since provisions of Section 40(a)(ia) as amended by Finance Act, 2012 is linked to Section 201 of the Act, in which a proviso was inserted, it is necessary to look into thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are found to be achieved, it would be unjust to disallowance legitimate business expenses of an Assessee. Despite due collection of taxes due, if disallowance of genuine business expenses are made than that would be unjust enrichment on the part of the Government as the payee would have also paid the taxes on such income. In order to remove this anomaly, this amendment has been introduced. In case of payment to non-resident, the government does not have any other mechanism to recover the due taxes. Hence, no amendment was made in section 40(a)(i). The legislature has not given blanket deduction under section 40(a)(ia). The deduction as per amended section will be allowed only if the - (i) payee has furnished his return of income under section 139; (ii) payee has taken into account such sum for computing income in such return of income; and (iii) payee has paid the tax due on the income declared by him in such return of income, and the payer furnishes a certificate to this effect from an accountant in such form as may be prescribed. 8. The question is as to whether the amendment made as above is prospective or retrospective w.e.f. 1.4.2005 when the provisions of Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istorical background and the object of introduction of the provisions of S. 43B. The Court also referred to the earlier amendments made in 1988 with introduction of the first and second provisos. The Court also noted further amendment made in 1989 in the second proviso dealing with the items covered in S. 43B(b) (i.e., contribution to employees welfare funds). After considering the same, the Court was of the view that it was clear that prior to the amendment of 2003, the employer was entitled to deduction only if the contribution stands credited on or before the due date given in the Provident Fund Act on account of second proviso to S. 43B. The situation created further difficulties and as a result of representations made by the industry, the amendment of 2003 was carried out which deleted the second proviso and also made first proviso applicable to contribution to employees welfare funds referred to in S. 43B(b). 15. We find no merit in these civil appeals filed by the Department for the following reasons : firstly, as stated above, s. 43B (main section), which stood inserted by Finance Act, 1983, w.e.f. 1st April, 1984, expressly commences with a non obstante clause, the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod ended on 30th June, 1983. The ITO disallowed the deduction claimed by the assessee which was on account of sales-tax collected by the assessee for the last quarter of the relevant accounting year. The deduction was disallowed under s. 43B which, as stated above, was inserted w.e.f. 1st April, 1984. It is also relevant to note that the first proviso which came into force w.e.f. 1st April, 1988 was not on the statute book when the assessments were made in the case of Allied Motors (P) Ltd. Etc. (supra). However, the assessee contended that even though the first proviso came to be inserted w.e.f. 1st April, 1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1st April, 1984, when s. 43B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P) Ltd. Etc. (supra). This Court, in Allied Motors (P) Ltd. Etc. (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the provisions of Finance Act, 2003. 16. Before concluding, we extract hereinbelow the relevant observations of this Court in the case of CIT vs. J.H. Gotla (1985) 48 CTR (SC) 363 : (1985) 156 ITR 323 (SC), which reads as under : We should find out the intention from the language used by the legislature and if strict literal construction leads to an absurd result, i.e., a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. 17. For the aforestated reasons, we hold that Finance Act, 2003, to the extent indicated above, is curative in nature, hence, it is retrospective and it would operate w.e.f. 1st April, 1988 (when the first proviso came to be inserted). For the above reasons, we find no merit in this batch o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed, there was also a possibility of violation of the provisions of Sec.194C of the Act. On appeal the CIT(A) confirmed the order of the AO. Hence ground No.2 by the Assessee before the Tribunal. 14. The learned counsel prayed for alternative relief in terms of ground No.3. For the reasons already discussed while allowing the alternative relied in terms of ground No.3, the prayer made is accepted. 15. As far as the disallowance of carriage expenses for want of vouchers is concerned, the learned counsel for the Assessee filed an application for admission of additional evidence in terms of Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 (ITAT Rules). It was submitted that the vouchers could not be produced earlier because the issue was argued on legal grounds before CIT(A) and the counsel for the Assessee in the proceedings before the lower authorities did not think it fit to file the vouchers, though they were available. I am of the view that the vouchers now sought to be filed by the Assessee as additional evidence is required to be admitted as additional evidence as they are material for deciding the issue in the appeal. Since, the additional evidence requires ..... X X X X Extracts X X X X X X X X Extracts X X X X
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