TMI Blog2011 (8) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.16,31,275/- iv) Out of loading and unloading ₹ 86,340/- v) Disallowance u/s.40(a)(ia) Rs.46,01,943/- 3. In an appeal filed before Ld. CIT (Appeals) additions made on account of unsecured loans and disallowance u/s.40(a)(ia) was confirmed by Ld. CIT(Appeals). In respect of additions made on account of diesel expenses, Ld. CIT (Appeals) has confirmed the addition to the extent of ₹ 2 lakh and deleted the entire addition in respect of addition made on account of hire charges. Against this order of Ld. CIT (Appeals) both assessee and Revenue are in further appeal before us. 4. We have considered the rival contentions and carefully gone through the orders of authorities below and find from record that assessee was in the business of transportation. During the year assessee had gross receipts of hire charges amounting to ₹ 1.58 crores against which net profit of which ₹ 8.11 lakh was shown. The entire hire charges was received from M/s JBF Industries. For providing transport services, the assessee was having his own three trucks, assessee also used to hire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the transporters to whom payment was made were any how related to the Assessee. We also found that the written submission filed before Ld. CIT(Appeals) were also sent by him to the AO for his remand report vide letter dated 13-08-2008, however, uptill passing order by CIT (A) dated 12-01-2009, nothing came from the AO against the said submission. Ld. A.R. therefore contended that even ad hoc disallowance of ₹ 2 lakh was not warranted. From the record we find that assessee had received transportation charges from M/s JBF Industries as per the rate fixed per kg, however payment was made at the fixed rate to the transporters, in some cases the assessee was also reimbursing the diesel consumed by the transporters and the payment was only made to them after deducting the amount of diesel supplied by them. It is not the case of AO that in addition to agreed price of transportation the assessee was also supplying diesel to the transporter. The value of diesel so supplied was deducted out of the total bills and the assessee was accordingly making the net payment only to the transporters. For transportation of goods at different destinations the assessee is required to take prud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 precise observation of the Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 Finance Act, 2010, that the payment of expenses as specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 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 income specified in subsection(1) of section 139. This amendment is proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Corporation (1991) 191 ITR 676, has taken a similar view holding that the statutory liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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) 191 ITR 676 (Cal)], and CIT v. Chandulal Venichand [(1992) 197 ITR 718, 720 (Cal)] and CIT v. Pyarila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which worked out at ₹ 89,33,972/-. Thus against the amount expenditure of ₹ 1,05,65,247/- claimed by the assessee, the AO disallowed a sum of ₹ 16,31,275/- ( ₹ 1,05,65,244 ₹ 89,39,972/-). 12. By the impugned order the Ld. CIT(Appeals) deleted the addition after having the addition the following observation:- I have considered the submissions and find that the AO has presumed that in all cases of hiring of the trucks by the appellant, conditions would be the same and there would be no difference between a truck being hired at different points of time or different days or weather conditions or emergencies. The estimation of 60% of the total hire charges being passed on to the transporters is without appreciating the appellant s submission that in quite a few cases, the appellant was incurring expenditure by supplying diesel to these parties also which has been admitted by the AO also in the earlier part of his order. It is also a fact that the payment have been made by the appellant to the transporters through banking channels and no defects have been found in the books of accounts to warrant any such disallowance. Further as already decided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd exclusively for the purpose of assessee s business no disallowance was warranted. The finding recorded by CIT (A) while deleting the disallowance was as per material on record therefore do not warrant any interference. 15. In view of the above discussion we do not find any infirmity in the order of Ld. CIT (Appeals) for deleting the disallowance made on account of hire charges paid to the transporters and are inclined to agree with Ld. A.R. that estimation of expenditure by AO was devoid of any merits. 16. Next grievance of the assessee relates to addition of ₹ 11.50 lakh on account of unsecured loans. In this regard the Assessing Officer has observed that assessee has not filed any loan confirmation in respect of loan taken from Dipak Polytex and S.S. Transport for the amount of ₹ 10 lakh and ₹ 1.05 lakh respectively. 17. Before Ld. CIT(Appeals) the assessee has furnished confirmation letter from the said parties, however, the Ld. CIT(Appeals) did not admit the same and confirmed the addition made by Assessing Officer. During the course of hearing before us Ld. AR drawn our attention to the bank statement placed on record indicating clearing cheque of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been taken for not disposing the ground by the CIT (A) with regard to addition of ₹ 4,20,000/- made by way of unrecorded transportation income. From the record we find that specific ground was taken before the CIT (A) but he has not adjudicated the same. In the interest of justice we restore this ground back to the file of the CIT (A) for deciding afresh as per law, after giving due opportunity to the assessee to substantiate its claim. We direct accordingly. 23. The assessee is also aggrieved for confirming the addition of ₹ 1 lac out of unsecured loans. We have gone through the orders of the authorities below and find that addition was made in respect of loan from Dipak Polytex on the ground that confirmation was not filed. The appellant furnished confirmation letter from the said party before the CIT (A).. However, CIT(A) has declined to accept the confirmation and confirmed AO s action. As the confirmation filed by the assessee goes to the root of the issue for determining the genuineness of the transaction, accordingly this ground is also restored back to the file of the CIT (A) for deciding afresh as per law. 24. Last grievance of the assessee relates to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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