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2016 (8) TMI 99 - CALCUTTA HIGH COURT

2016 (8) TMI 99 - CALCUTTA HIGH COURT - [2016] 386 ITR 322 - Applicability of provision of Section 40(a)(ia) - whether, a sum paid by the assessee to a contractor, during the previous year ended on 31st March, 2005 is deductible ? - Held that:- Admittedly, the Finance Act, 2004 got presidential assent on 10th September, 2004. The assessee could not have foreseen prior to 10th September, 2004 that any amount paid to a contractor without deducting tax at source was likely to become not deductible .....

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ent as regards rate of tax to be charged in any particular assessment year which has no application to the case before us. Section 11 of the Finance Act by which Clause (ia) was added to Section 40 of the Income Tax Act does not provide that the same was to become effective from the assessment year 2005-06. It merely says it shall become effective on 1st April, 2005 which for reasons already discussed should mean to refer to the financial year. There is, as such, no scope for any ambiguity nor i .....

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: The subject matter of challenge in the appeal is a judgement and order dated 24th April, 2009 passed by the learned Income Tax Appellate Tribunal, B Bench, Kolkata in ITA NO.1586/Kol/2008 pertaining to the assessment year 2005-06, by which an appeal preferred by the assessee was dismissed. The question formulated on 12th August, 2009 when the appeal was admitted reads as follows : Whether the Tribunal below substantially erred in law in applying provision of Section 40(a)(ia) of the Income Tax .....

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(ia) was added to Section 40 of the Income Tax Act. Section 40 provides for the amounts not deductible. To the long list of not deductible amounts , an addition was made by Clause (ia) which reads as follows: (ia) any interest, commission or brokerage, 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 ta .....

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ainst this order of the learned Tribunal, the assessee has come up in appeal. Mr.Bharadwaj, learned advocate appearing for the assessee/appellant submitted that sub-section 2 of section 1 of the Amendment Act provides that the law shall be deemed to have come into force on 1st April, 2004 except as otherwise provided. Clause (ia) was added to Section 40 by Section 11 of the aforesaid Finance Act of 2004. Section 11 provides that the law shall be deemed to come into effect on 1st April, 2005. He .....

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Electro Graphites Ltd , reported in (2000) 243 ITR 48 (SC). What had happened in that case was that the return for the assessment year 1989-90 was filed by the assessee in December, 1989. The Finance Bill, 1990 got presidential assent on 31st May, 1990 and was made applicable retrospectively with effect from 1st April, 1967. By the amendment cash assistance was made taxable. Since the assessee who had received cash assistance from the Government and had not offered the amount for taxation, the a .....

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the circumstances section 143(1A) could be invoked to levy the additional tax. The following observations by the Constitution Bench of this court in Pannalal Binjraj v. Union of India [1957] 31 ITR 565 are apt. (page 597): A humane and considerate administration of the relevant provisions of the Incometax Act would go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the Revenue with administering the pro .....

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the law there can be no doubt. He also drew our attention to section 4 of the Income Tax Act which provides as follows : 4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and [subject to the provisions (including provisions for the levy of additional income-tax) of, this Act ] in respect of the total income of the previous year [ *** ] of ever .....

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ssessee have come to know that the omission to deduct tax from any payment made to a contractor shall become not deductible under section 40 before the Finance Act 2004 got presidential assent on 10th September, 2004. This question he has not answered because he has no answer to offer. Admittedly, the Finance Act, 2004 got presidential assent on 10th September, 2004. The assessee could not have foreseen prior to 10th September, 2004 that any amount paid to a contractor without deducting tax at s .....

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n enactment as regards rate of tax to be charged in any particular assessment year which has no application to the case before us. Section 11 of the Finance Act by which Clause (ia) was added to Section 40 of the Income Tax Act does not provide that the same was to become effective from the assessment year 2005-06. It merely says it shall become effective on 1st April, 2005 which for reasons already discussed should mean to refer to the financial year. There is, as such, no scope for any ambigui .....

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