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TMI Blog2017 (4) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case the disallowance U/s. 40(a)(ia) is uncalled for. 5. For that on the facts and circumstances of the case the order of the CIT(A) be modified and the assessee be given the relief prayed for. 6. For that the assesee cravfes leve to add, alter or amend any ground before or at the time of hearing.´ 3. The assessee is a partnership firm which is engaged in the business of civil construction as promoter, developer and builder. During the previous year relevant to the assessment year 06-07, the assessee had carried out three projects which were under execution. In pursuance of its activities. payment in the sum of Rs. 15,03,990/- on account of labour charges was made to Shri Azim Ansari along with amounts of Rs. 47.980/- and Rs. 84.000/- to Madan Mohan Enterprises and Surya Udyog respectively. The return of income u/s. 139(4) of the Income Tax Act. 1961 was filed by the assessee on 30-03* -2007 disclosing a total income of Rs. 11,580/-. In course of assessment proceedings. the Income Tax Officer, Ward 1 (4), Hooghly (hereinafter referred to as the Assessing Officer for the sake of brevity) found that the payments to Shri Azim Ansari along with Madan Mohan Enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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." 7. 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 those provisions which read thus: "Sec.201: (1) Where any person, including the principal officer of a company - (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of Section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayee 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. 10. 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.40(a)(ia) were introduced. Keeping in view the purpose behind the proviso inserted by the Finance Act, 2012 in section 40(a)(ia) of the Act, it can be said to be declaratory and curative in nature and therefore, should be given retrospective effect from 1st April, 2005, being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. In CIT Vs. Alom Extrusions Ltd. 319 ITR 306 (SC), the Hon'ble Supreme Court had to deal with the question, whether omission (deletion) of the second proviso to s. 43B of the IT Act, 1961, by the Finance Act, 2003, operated w.e.f. 1st April, 2004, or whether it operated retrospectively w.e.f. 1st April, 1988? Prior to Finance Act, 2003, the second proviso to s. 43B of the IT Act, 1961 (for short, "the Act") restricted the deduction in respect of any sum payable by an employer by way of contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 underlying object being to disallow deductions claimed merely by making a book entry based on mercantile system of accounting. At the same time, s. 43B (main section) made it mandatory for the Department to grant deduction in computing the income under s. 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act (octroi) and other tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the return under the IT Act (due date), the assessee(s) then would be entitled to deduction. However, this relaxation/incentive was rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P) Ltd. Etc. (supra), held that the first proviso was curative in nature, hence, retrospective in operation w.e.f. 1st April, 1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgment in Allied Motors (P) Ltd. Etc. (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003, will operate retrospectively w.e.f. 1st April, 1988 (when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 of civil appeals filed by the Department which are hereby dismissed with no order as to costs." 12. We are of the view that the reasoning of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd(supra) will equally to the amendment to Sec.40(a)(ia) of the Act whereby a 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. The provisions are intended to remove hardship. It was argued on behalf of the revenue that the existing provisions allow deduction in the year of payment and to that extent there is no hardship. We are of the view that the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year. To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. 13. The Hon'ble Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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