TMI Blog2019 (4) TMI 2015X X X X Extracts X X X X X X X X Extracts X X X X ..... out treating the assessee as an assessee in default the disallowance u/s 40(a)(ia) should not be made. The assessee s appeal is accordingly allowed. - ITA No.1637/Hyd/2018 - - - Dated:- 3-4-2019 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER Appellant by: Sri P. Murali Mohana Rao Respondent by: Sri Kiran Katta, DR ORDER PER Smt. P. Madhavi Devi, J.M.: This is assessee s appeal for the assessment year 2009-10 filed against the order of the CIT(A)-6, Hyderabad dated 21/05/2018. 2. Brief facts of the case are that the assessee, an individual, deriving income from house property, income from services and income from other sources, filed his return of income electronically on 21/09/2009 declaring taxable income of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made towards legal and professional fee. The Hon ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township (P.) Ltd [2015] 61 taxmann.com 45 (Delhi), has considered the applicability of second proviso to section 40(a)(ia) of the Act and held that the second proviso to section 40(a)(ia) is declaratory and curative and it has retrospective effect from 01/04/2005. Relevant portion of the Hon ble High Court order is reproduced hereunder for the sake of convenience and ready reference: 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 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a)(ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, 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)(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.' 14. The Court is o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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