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TMI Blog2014 (9) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... many as nineteen grounds of appeal, the only grievances pressed before us are - (a) against Commissioner of Income tax (Appeals) confirming the disallowance of Rs. 1,38,80,552/- under section 40(a)(ia) even though recipients have included the related payment in computation of their income in respect of which income tax return is duly filed under section 139; and (b) against Commissioner of Income tax (Appeals) confirming the disallowance of Rs. 1,16,400/- under section 40(a)(ia) even though the payment made were less than Rs. 2,500/- each, and, accordingly, the tax withholding requirements under section 194H did not come into play. No other grievance was pressed before us. 3. The relevant material facts are like this. The assessee is engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 40(a)(ia) and, therefore, it should be construed as effective from the date on which this provision was introduced. In support of this proposition, he relied upon the decision of a coordinate bench in the case of Rajeev Kumar Agarwal vs. ACIT (149 ITD 363). He, however, fairly accepts that since this aspect was not raised or examined by the authorities below, the matter will have to go back to the file of the Assessing Officer for factual verification. Ld. counsel also submits that so far as payments of Rs. 1,16,400/- are concerned, all the payments are less than Rs. 2,500/- each, and, accordingly, provisions of section 194H do not come into play at all. He submits that this issue can also be remitted, for examination of related facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i 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 actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing this judicial precedent, we consider it appropriate to remit the matter to the file of the Assessing Officer for fresh examination, on the same lines and in the light of the above legal position. The assessee is directed to furnish all the relevant information and co-operate in expeditious disposal of remanded proceedings. 9. As regards the payments aggregating to Rs. 1,16,400/- which consist of amounts less than the threshold limit 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 disa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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