TMI Blog2014 (5) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) w.e.f. 01-04-2010 and it has been held by various judicial authorities that such amendment is retrospective in nature. It is the submission of the Ld. Counsel for the assessee that the second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01-04-2013 wherein it is stated that disallowance u/s.40(a)(ia) of the Act need not be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the I.T. Act., therefore, this should also be held as retrospective since it has been introduced to eliminate unintended consequences which may cause undue hardship to the tax payers. We find some force in the above argument of the Ld. Counsel for the assessee. We find the Cochin Bench of the Tribunal in the case of Antony D. Mundackal (2013 (12) TMI 67 - ITAT COCHIN ) relied on by Ld. Counsel for the assessee, had an occasion to decide an issue in the light of the above argument and has restored the issue to the file of the Assessing Officer with certain directions. Thus we restore this issue to the file of the Assessing Officer with a direction to examine the above contention of the assessee and decide the issue afresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at Baner for a consideration of ₹ 61,00,000/- and on this property there was a civil suit filed by Vidyanagari Co-op.Hsg. society and due to the same development work was not carried out for a long time. The A.O. found that the assessee had debited ₹ 18,00,000/- as additional cost for the land and the same was paid to 3 persons on 17-7-2007. According to the AO, in the development agreement there was no other contractual liability on the part of the assessee to pay more than 61 lacs as agreed and the amount of ₹ 18 lacs was nowhere mentioned in the development agreement. He, therefore, held that the said amount cannot be considered as expenditure incurred for the land. He, accordingly, disallowed the said amount of ₹ 18 lacs claimed as additional cost of land and added to the total income of the assessee. 3. Before the Ld. CIT(A) it was submitted that the assessee firm had purchased a property at S.No 47 at village Baner, Pune as per the development agreement dated 17-5-2005 admeasuring 1H 23R from Shri. Shitaram Dharama Bhande Others for a consideration of ₹ 61,00,000/-. Because of the civil suit filed by the Vidyanagari Co-op. Hsg society, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , so that it cannot be disallowed. The law on this point is well settled as decided in CIT Vs Amalgamated Development Ltd (1967) 65 ITR (SC). It was held to be a case of commercial expediency. The Supreme Court itself in Prakash Cotton Mills P Ltd. Vs CIT (1993) 201 ITR 684 (SC) had held that even where penalty is levied, it may not always be a punitive one, so that where it is compensatory, it may well have to be allowed. The Punjab and Haryana Court therefore, allowed a claim for compensation for breach of contractual obligation in CIT Vs SA Builders P Ltd (2008) 299 ITR 88 (P H) after review of the case law on the subject and following its own decisions in CIT Vs Murarilal Ahuja and Sons (1989) 177 ITR 88 (P H) and CIT Vs Indo Asian Switch Gear P Ltd (1996) 222 ITR 772 (P H) 5.3 In view of the above fact and the ratio of the judicial decisions the disallowances made by the A.O. is directed to be deleted and ground No. 3 raised by the appellant is liable to be allowed . 4.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 5. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance u/s.40(a)(ia) applies only to those amounts which are payable and not to those amounts already paid. While passing this order, the Tribunal has considered the decisions of different High Courts both for and against the assessee on this issue. He accordingly submitted that in view of the above decision the order of the CIT(A) be set-aside and the disallowance be deleted. 7.4 In his alternate contention, the Ld. Counsel for the assessee submitted that the Finance Act, 2010 has amended the first proviso to section 40(a)(ia) w.e.f. 01-04-2010. Referring to the decision of the Ahmedabad Bench of the Tribunal in the case of Kanhubhai Ramji Bhai reported in 135 TTJ 364 and the decision of Hon ble Calcutta High Court in the case of CIT Vs. Virgin Creations vide ITA No.302/2011 he submitted that it has been held in the said decisions that the said amendment is retrospective in nature on the reasoning that it is clarificatory in nature. It was introduced to eliminate unintended consequences. He submitted that the second proviso in section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01-04-2013 wherein it is stated that the disallowance u/s.40(a)(ia) of the Act need not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Coordinate Bench of the Tribunal in the case of Vinay Ashwinikumar Joneja (Supra) has already taken a view that provisions of section 40(a)(ia) are applicable even if no amount is payable at the end of the year. Therefore, the order of the CIT(A) on this issue has to be upheld. 9.1 However, the assessee has made a new legal argument that the Finance Act, 2010 has amended the first proviso to section 40(a)(ia) w.e.f. 01-04-2010 and it has been held by various judicial authorities that such amendment is retrospective in nature. It is the submission of the Ld. Counsel for the assessee that the second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01-04-2013 wherein it is stated that disallowance u/s.40(a)(ia) of the Act need not be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the I.T. Act., therefore, this should also be held as retrospective since it has been introduced to eliminate unintended consequences which may cause undue hardship to the tax payers. 9.2 We find some force in the above argument of the Ld. Counsel for the assessee. We find the Cochin Bench of the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chniques normally adopted by a business man to improve his sales, since it will be very difficult for customers to identify the polishing people and get the work done by themselves. Hence, we are of the view that it may not be correct to argue that the contract existed between the customers and the polishing people. In fact, the customer may not have any contact with the polishing people in this type of transactions. Hence, it is hard to believe the claim of the assessee that he has acted as mere conduit pipe between the customers and polishing people, Accordingly, the claim that the assessee stands in a fiduciary capacity is also liable to be rejected. In this kind of factual situation, in our view, the existence or absence of profit element in the polishing works does not make any difference. 7.2 The Ld Counsel, by placing reliance on the decision of special bench in the case of Meryline Shipping and transports (supra) contended that the provisions of sec. 40(a)(ia) shall apply only to amount payable and not to the amount paid. However, the Hon'ble Gujarat High Court in the case of CIT Vs. Sikandar Khan N Tunvar (357 ITR 312) and the Hon'ble Calcutta High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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