TMI Blog2017 (8) TMI 1354X X X X Extracts X X X X X X X X Extracts X X X X ..... RI AND HON'BLE MR. JUSTICE INDERJEET SINGH For the Appellant : Mrs. Parinitoo Jain with Ms. Shiva Goyal For Respondent : Mr. Gunjan Pathak with Ms. Ishita Rawat JUDGMENT 1. By way of this appeal, the department has challenged the judgment and order of the tribunal whereby the tribunal has allowed the appeal preferred by the assessee. 2. This court while admitting the appeal on 19.03.2012 has framed following substantial questions of law:- 1. Whether the Tribunal was legally justified in reversing the findings of the CIT(A) and holding that the assessee had deducted tax at source and deposited it in accordance to Chapter XVII and Section 194C and no disallowance was to be made u/s 40(a)(ia)? 2. Whether the Tribunal was legally justified in reversing the findings of the CIT(A) and holding that the assessee was entitled for the payment of ₹ 1,01,50,000/- made to the sub contractors without deducting TDS according to Section 40(a)(ia) r/w 194C? 3. Counsel for the appellant has taken us to the order passed by the A.O. and contended that the A.O. while considering the mater in detail observed as under:- S. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1238045 12628 37141 1188276 -17678 432322 750000 1182322 5954 10 Rahul Sharma 1247645 12726 37429 1197490 -324083 875917 551834 1427751 -230261 Total 12316160 125625 369485 11821050 -1132971 6600882 4151834 10752716 1068334 It was required from the assessee that why the TDS on such sub contractors has not been deposited in case of payments made upto 28.02.2007 as per in accordance with provisions of law and why the provisions of section 40(a) (ia) of the Income-tax Act, 1961 may not be applied on such payments made upto 28.02.2007 but amount of TDS deposited after 31.03.2007. On going through the details and on verification of such third parties/sub contractors u/s 133(6) of Income-tax Act, 1961 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount only during the last month. In such a situation his case falls in category B of above para i.e. in any other case on or before the last date of the previous year . Therefore, TDS for such earlier months was to be deposited only before end of the previous year for claiming the respective amount ad deduction during the year. Argument of the appellant that since he has deducted the tax in the last month i.e. March 2007 and deposited the same before due date of filing of return, his case is covered in category A of above para is not acceptable. 3.5 The argument of the appellant that section 40(a)(ia) laid the conditions for allowability of the deduction and the provisions of section 194C are relevant only for the purpose of ascertaining the deductibility of tax on payments is fallacious. If this argument is accepted, then a deductor who dutifully deducts tax during the year in various months, but due to some reason is not able to deposit the same before the end of the year will be at a disadvantage, because in his case the respective payments will not be allowed as deduction. While on the other hand a deductor who does not deduct the tax during the year (even though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment in tax, duty, ceee and fee with contribution to welfare funds was held as curative in nature and held applicable retrospectively w.e.f. 01-04-1988. 3. CIT Vs. Poddar Cement (P) ltde, 226 ITR 625 By Finance Bill, 1987, the meaning and expression of house property in Section 27 was enlarged. The Hon'ble Apex Court in this case held that the amendment was intended to supply an obvious omission or to clear up the doubts as to the meaning of the word owner . 4. CIT Vs. Vs. Gold Coin Health Food (P) Ltd., 304 ITR 308 (SC) There was an amendment in explanation 4 to Section 271(1)( c) by the Finance Act , 2002,. This explanation was not held as clarificatory by the Hon'ble Apex Court in the case of Virtual Soft Systems Ltd. Vs. CIT , 207 CTR 733. However, a larger bench held that an amendment was intended to make clear which was otherwise implied and explicit. Hence it was held that penalty in loss case is also leviable even in prior to 01- 04- 2003. 3.9 The amendment in Section 40a((ia) has been held as curative in following cases:- 1. Kanubhai Ramjibhai Vs. ITO 135 ITD 364 (Ahd,) 2. Bansal Parvahan India (P) Ltd. Vs. ITO 137 TTJ 319 (Mum) 3.10 Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year in which the payment was made and would not be allowed, even in cases of mercantile system of accountancy, in the year of accrual. It was noticed that in some cases hardship would be caused to assessees, who paid the statutory dues within the prescribed period though the payments so made would not fall within the relevant previous year. Accordingly, a proviso was added by Finance Act, 1987 applicable with effect from 1st April, 1988. The proviso stipulated that when statutory dues covered by Section 43B were paid on or before the due date for furnishing of the return under Section 139(1), the deduction/expense, equal to the amount paid would be allowed. The Supreme Court noticed the purpose behind the proviso and the remedial nature of the insertion made. Of course, the Supreme Court also referred to Explanation 2 which was inserted by Finance Act, 1989 which was made retrospective and was to take effect from 1st April, 1984. Highlighting the object behind Section 43B, it was observed that the proviso makes the provision workable, gives it a reasonable interpretation. It was elucidated: 12. In the case of Goodyear India Ltd. V. State of Haryana this Court said that the rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e operation is generally intended. In fact the amendment would not serve its object in such a situation unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained. 23. Section 43B deals with statutory dues and stipulates that the year in which the payment is made the same would be allowed as a deduction even if the assessee is following the mercantile system of accountancy. The proviso, however, stipulates that deduction would be allowed where the statutory dues covered by Section 43Bstand paid on or before the due date of filing of return of income. Section 40(a)(ia)is applicable to cases where an assessee is required to deduct tax at source and fails to deduct or does not make payment of the TDS before the due date, in such cases, notwithstanding Sections 30 to 38 of the Act, deduction is to be allowed as an expenditure in the year of payment unless a case is covered under the exceptions carved out. The amended proviso as inserted by Finance Act, 2010 states where an assessee has made payment of the TDS on or before the due date of filing of the return under Section 139(1), the sum shall be allowed as an expense in computi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Vs. Harish Chand Ahuja reported in (2015) 280 CTR 0403 (Raj.) wherein it has been held as under:- 11. A Division Bench of Gujarat High Court while examining a question in the terms that whether the Income Tax Appellate Tribunal was justified in deleting the addition of ₹ 23,13,933/-, relying upon the amendment made in Section 40[a](ia) of the Income Tax Act, 1961 by the Finance Act, 2010 and thereby giving it retrospective effect, after taking into consideration the facts noticed above arrived at conclusion that the amendment made in Section 40[a](ia) of the Income Tax Act, 1961 by the Finance Act, 2010 is retrospective in operation i.e. from the date of insertion of Section 40[a](ia) of the Act. The conclusion aforesaid was arrived by discussing the entire issue as under:- 16.5 Of course, the Legislature has given the effect from a specified date and applied the same to A.Y. 2010-11 and subsequent years, this provision being curative in nature, its effect needs to be read retrospectively in operation. Its very purpose would not be subserved, if the effect is limited to A.Y. 2010-11 and subsequent years only. Strict construction if leads to a result not intended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage the speech of Finance Minister while introducing this provision by way of Finance Act, 2010, this amendment essentially has been brought for relaxing the current provision on disallowance of expenditure. The tax, if is deducted at any time during the financial year and paid before the date of filing of the return, the Legislature intended to allow deduction on such expenditure with an intention to permit additional time for most deductors upto September of the next financial year. 17.1 We draw further support from the fact that the rigor of payment of interest is also enhanced by increasing the interest charged on tax deducted, if any deposit by the specified date i.e., up to the filing of the return is not made, from 12% to 18% per annum in the provision of Section 201(1A). Prior to the said amendment of Finance Act, 2010 under Section 201(1A), assessee was liable to pay simple interest at one per cent for every month or part of month, in case of failure to deduct tax on payment of deducted tax, increase is made correspondingly from one per cent to one and half per cent for every month or part of month for discouraging delay in deposit. 17.2 As rightly contended by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing the fact that the parliament made its intention clear by declaring that it comes into effect from 01.04.2010. Therefore, the impugned orders are liable to be set aside. 6. This question came up for consideration before the Gujarat High Court in the case of Commissioner of Income Tax, Ahmedabad IV Vs. Om Prakash R Chaudhary in Tax Appeal Nos.412/2013 and connected matter, which came to be decided on 22.11.2013, after referring to the judgments of Alide Motors (P.) Ltd. Vs. CIT reported in AIR 1997 SC 1361 and CIT Vs. Alom Extrusions Limited reported in (2009) 319 ITR 306, has held as under: 15.4: Thus, considering relevant legislative changes made by the Parliament from time to time and some of the decisions relevant to consider the question of retrospectivity raised in these present appeals, the focal question, therefore, would be whether the amendment brought about by way of Finance Act 2010 in Section 40 [a](ia) with effect from 1st April 2010 could be said to be clarificatory in nature for attending to unintended consequences, and therefore, is having retrospective effect from 1st April 2005. 16: A closer examination needs to be done as to whether the amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anomaly, whereby tax deducted in the last month was permitted payment till filing of return as per sub-section (1) of Section 139 whereas for the TDS deducted during the rest of the months, period was provided only till 31st March of the previous year, Finance Act, 2010 was brought. To bring parity, to remedy unintended consequences and to make the provision workable, it proposed to amend the said provision and provided inter alia that no disallowance would 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 as specified in sub-section (1) of Section 139. This has been given retrospective effect from 1st April 2010. 16.5: Of course, the Legislature has given the effect from a specified date and applied the same to A.Y.2010-11 and subsequent years, this provision being curative in nature, its effect needs to be read retrospectively in operation. Its very purpose would not be sub-served, if the effect is limited to A.Y.2010-11 and subsequent years only. Strict construction if leads to a result not intended to be fulfilled by the object of legislation and another construction is possible apart fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, 2010, this amendment essentially has been brought for relaxing the current provision on disallowance of expenditure. The tax, if is deducted at any time during the financial year and paid before the date of filing of the return, the Legislature intended to allow deduction on such expenditure with an intention to permit additional time for most deductors upto September of the next financial year. 17.1: We draw further support from the fact that the rigor of payment of interest is also enhanced by increasing the interest charged on tax deducted, if any deposit by the specified date i.e., up to the filing of the return is not made, from 12% to 18% per annum in the provision of Section 201 (1A). Prior to the said amendment of Finance Act, 2010 under Section 201 (1A), assessee was liable to pay simple interest at one per cent for every month or part of month, in case of failure to deduct tax on payment of deducted tax, increase is made correspondingly from one per cent to one and half per cent for every month or part of month for discouraging delay in deposit. As rightly contended by the respondents arithmetical discrepancy can be well judged from the fact that the rates of TD ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
