TMI Blog2018 (5) TMI 1631X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law the Ld. CIT(A) has erred in deleting the disallowance u/s 40(a)(ia) made on account of non-deduction of TDS on interest payment to M/s Religare Finvest Pvt. Ltd. by invoking provisions of section 201 that were not applicable for the year under consideration. 2. The assessee paid interest of ₹ 54,94,669/- to Religare Finvest Ltd. and Magma Fincorp Ltd. Non Banking Finance Companies (NBFC). Since, the assessee did not deduct TDS on this payment of interest to the NBFC therefore, the AO disallowed the said amount u/s 40(a)(ia) of the Income Tax Act . The assessee challenged the action of the AO before the ld. CIT(A) and submitted that as per second proviso to section 40(a)(ia) of the Act if recipient of the interest as included the said amount in the income offered to tax then, no disallowance is called u/s 40(a)(ia) of the Act. The assessee relied upon the decision of Hon ble Delhi High Court in case of CIT vs. Ansal Land Mark Township (P) Ltd. 234 Taxman 825 as well as the decision of this Tribunal in case of Shri Rajesh Tak vs. ITO in case of ITA No. 888/JP/2014. The ld. CIT(A) has accepted the contention of the assessee and deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act with retrospective effect or prospective effect. The Hon ble Delhi High Court in case of CIT vs. Ansal Landmark Township Pvt. Ltd. (supra) while considering this issue has held in para 9 to 14 as under:- 9. It is seen that the second proviso to Section 40(a)(ia) was inserted by the Finance Act, 2012 with effect from 1st April 2013. The effect of the said proviso is to introduce a legal fiction where an Assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such Assessee is deemed not to be an assessee in default in terms of the first proviso to sub-section (1) of Section 201 of the Act, then, in such event, 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 . 10. It is pointed out by learned counsel for the Revenue that the first proviso to Section 201(1) of the Act was inserted with effect from 1st July 2012. The said proviso reads as under: 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: '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 due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a fair, just and equitable interpretation of law- as is the guida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2004.' 14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance. We further note that a similar has been taken by the other High Courts including Hon ble Allahabad High Court in case of Allahabad Wholesale Central Coop. Store vs. Pr. CIT 248 Taxmann 302. Further, the Coordinate Benches of this Tribunal in series of decisions have taken a consistent view that the second proviso to section 40(a)(ia) is declaratory in nature and therefore, it has to be given retrospective effect. Though a divergent view is taken by the Hon ble Kerala High Court in case of Thomas George Muthoot Vs. CIT however, to maintain the rule of consistency of this Tribunal has been taking a view on this issue by following the decision of Hon ble Delhi High Court in case of CIT vs. Ansal Landmark Township Pvt. Ltd. (supra). Accordingly following the decision of Hon ble Delhi High Court as well as decisions of the Coordinate Bench of this Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes subject matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress. Such could not be the intention of the legislature. Hence, the amendment made by the Finance Act, 2010 being curative in nature required to be given retrospective operation i.e., from the date of insertion of the said provision. 29. Further, in Allied Motors (P) Limited (supra) , this Court while dealing with a similar question with regard to the retrospective effect of the amendment made in section 43-B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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