TMI Blog2018 (2) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... no disallowance can be made u/s 40(a)(ia). Appeal of the assessee is allowed for statistical purpose. - ITA No. 445/JP/2017 - - - Dated:- 5-2-2018 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM Assessee by : Shri Rohan Sagani (C.A.) Revenue by : Shri Prithavi Raj Meena (JCIT) ORDER Per : Vijay Pal Rao, J. M. This appeal by the assessee is directed against the order dated 17.03.2017 of CIT(A) for the assessment year 2012-13. The assessee has raised the following grounds as under:- 1. In the facts and circumstances of the case and in law, the ld CIT(A) has erred in confirming the action of the ld. AO in disallowing a sum of ₹ 43,15,295/- u/s 40(a)(ia) of Income Tax Act, 1961. The action of Ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of ₹ 43,15,295/-. 2. The assessee company craves its right to add, amend or alter any of the grounds on before the hearing. 2. The assessee has debited the expenditure on account of advertisement and publicity expenditure of ₹ 37,08,645/-. Similarly an amount of ₹ 6,06,650/-was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 888/JP2014 4. On the other hand, ld. DR has submitted that the ld. CIT(A) has relied upon the decision of Hon ble Kerala High Court in case of Thomas George Muthoot vs. CIT 63 Taxmann.com 99. He has also relied upon the decision of Punjab and Haryana High Court PMS Diesels vs. CIT 374 ITR 562. Thus, the ld. DR has submitted that when the second proviso to section 40(a)(ia) of the Act is prospective and not retrospective then the additional evidence sought to be filed by the assessee would not help the case of the assessee. 5. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee has not debited TDS in respect of the expenditure in question though the TDS was required to deduct as per provisions of section 149C of the Act. However, the assessee claimed that the recipient of the amount have included the same while computing their income offered to tax. Therefore, in view of the second proviso to section 40(a)(ia) of the Act no disallowance is called for. In support of its contention the assessee relied upon the decision of the Hon ble Delhi High Court in case of CIT vs. Ansal Landmark Township Pvt. Ltd. (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a)(ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40(a)(ia) and Section 201(1) of the Act is that as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee's tax withholding lapses did not result in any loss to the exchequer. Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an intended consequence to punish the assessees for non-deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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