TMI Blog2014 (9) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... for invoking section 40(a)(ia), this aspect of the matter is essentially a factual aspect which needs to be examined by the Assessing Officer. We direct him to do so, and in case it is actually found that the provisions of section could not have been invoked on these amount, the very foundation of disallowance under section 40(a)(ia) will cease to hold good in law. Let this aspect also be examined afresh in the above light. - ITA No.37/Jab/2013 - - - Dated:- 26-9-2014 - Shri Pramod Kumar, Accountant Member And Shri C.M. Garg, Judicial Member For the Appellant : Shri A.P. Shrivastava Shri Sapan Usrethe. For the Respondent : Shri Abhishek Shukla. ORDER Per Pramod Kumar, Accountant Member: This appeal, filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 1,38,80,552/-, and other commission paid to retailers amounting to ₹ 1,16,400/-, that the Assessing Officer disallowed these amounts under section 40(a)(ia). Aggrieved, assessee carried the matter in appeal before the Commissioner of Income tax (Appeals) but without any success. Ld. Commissioner of Income tax (Appeals) confirmed the disallowance. The assessee is aggrieved and is in appeal before us. 4. We have head the rival contentions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. 5. Ld. Counsel submits that in view of insertion of second proviso to section 40(a)(ia), as long as recipient has included the payments in computation of his taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) is fully justified. 7. We find that a co-ordinate bench of this Tribunal in the case of Rajeev Kumar Agarwal (supra) has inter alia observed as follows :- 8. ........... in view of legislative amendments made from time to time, which throw light on what was actually sought to be achieved by this legal provision, and in the light of the above analysis of the scheme of the law, we are of the considered view that section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non deduction of tax at source from payments for expenditure- particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually 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 guidance from Hon ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an intended consequence to disallow the expenditure, due to non deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of Section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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)(ia) 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. 10. In view of the above discussions, we deem it fit and proper to remit the matter to the file of the Assessing Officer for fresh adjudication in the light of our above observations and after carrying out necessary verifications regarding related payments having been taken into account by the recipients in computation of their income, regarding payment of taxes in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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