TMI Blog2018 (3) TMI 1508X X X X Extracts X X X X X X X X Extracts X X X X ..... by : Shri S. L. Poddar (Adv.) ORDER Per : Bhagchand, A. M. This Misc. application has been filed by the revenue for rectification of mistake U/s 254(2) of the Income Tax Act, 1961 (in short the Act) in the order dated 09/12/2016 in ITA No. 278/JP/2016. 2. The Bench have heard both the sides on the Misc. application. From perusal of the issue raised in the Misc. application, it is noted that the revenue s main plea is that in view of the decisions of Hon'ble Supreme Court in the case of M/s Palam Gas Service Vs CIT in Civil Appeal NO. 5512 of 2017, upholding the order of ld. CIT(A) by the ITAT is mistake apparent from the record and the same is pleaded to be rectified. The Bench also find that the ld. CIT(A) has decided this issue in his order as under: I have gone through assessee s submission and AO s findings. The appellant has explained that out of the total addition of ₹ 27,40,977/- the details of which were submitted before the AO in the assessment proceedings, provision for deduction of TDS U/s 194C of the I.T. Act, 1961 are not applicable as the amount of individual contract was less than ₹ 30000/- the total payment during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilure to deduct TDS or deposit TDS results in loss of revenue and may deprive the Government of the tax due and payable (Emphasis by underlining supplied by us) . Having noted the underlying objectives, Their Lordships also put in a word of caution by observing that, the provision should be interpreted in a fair, just and equitable manner . Their Lordships thus recognized the bigger picture of realization of legitimate tax dues, as object of Section 40(a)(ia) and the need of its fair, just and equitable interpretation. This approach is qualitatively different from perceiving the object of Section 40fa)(ia) as awarding of costs on the assessees who fail to comply with the relevant provisions by considering overall objective of boosting TDS compliance . Not only the conclusions arrived at by the special bench(In Bharati Shipyard Ltd. case) were disapproved but the very fundamental assumption underlying its approach, i.e. on the issue of the object of Section 40(a)(ia), was ITA No. 2098/D/2013 CO No. 177/D/13 AY: 2009-10 rejected too. In any event, even going by Bharti Shipyard decision (supra), what we have to really examine is whether 2012 amendment, inserting second proviso t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /13 AY: 2009-10 law. As a corollary to this proposition, in our considered view, declining deduction in respect of expenditure relating to the payments of this nature cannot be treated as an intended consequence of Section 40(a)(ia). If it is not an intended consequence i.e. if it is an unintended consequence, even going by Bharti Shipyard decision (supra), removing unintended consequences to make the provisions workable has to be treated as retrospective notwithstanding the fact that the amendment has been given effect prospectively . Revenue, thus, does not derive any advantage from special bench decision in the case Bharti Shipyard (supra). 9. On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ial is declaratory and curative in nature and it has 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 .. 13. If we analyse the facts and circumstances of the present case, in the light of ratio laid down by ITAT Agra in order dated 29.5.2014 (supra), we observe that the CIT(A) agreed that the correct rate of TDS applicable on the interest payment was 22.66% and not 10% as applied by the AO, therefore, the impugned amount of interest payment of which TDS of ₹ 3,70,021 was required to be made comes to ₹ 16,32,925. However, we further observe that the CIT(A) declined to accept the contention of the assessee that since the said interest had been accounted for by the payee J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective income, regarding payment of taxes in respect of such income and regarding filing of related income tax return by the recipients. Accordingly, sole cross ITA No. 2098/D/2013 CO No. 177/D/13 AY: 2009-10 objection of the assessee is allowed in principle and deemed to be allowed for verification by the AO in the manner as indicated above. 15. In the result, the appeal of the revenue is dismissed and sole cross objection of the assessee is allowed for statistical purposes. In view of the facts involved, the above quoted judgement passed by the ITAT Delhi and the ratio of the judgement in the case of CIT V/s Ansal landmark Township (P) ltd. 279CTR 384(Del), the addition on account of payments made to M/s M/s Craftman Advertisement, New Delhi for ₹ 15,61,130/- and M/s Ram Niwas Advertisers for ₹ 2,63,978/- without deduction of tax at source, in this case cannot be sustained. However it is also seen that the appellant has not provided any explanation with regard to non deduction of tax in respect of payments made to M/s M.S. Advertisers, Hindaun for ₹ 5,08,962/- and M/s Ma Bharti News for ₹ 50,000/-. The addition in respect of these two ..... X X X X Extracts X X X X X X X X Extracts X X X X
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