TMI Blog2022 (10) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... mandates deduction of tax from certain other payments such as salary, directors fee, which were not specified in section 40(a)(ia) of the Income-tax Act. The payments on which tax is deductible under Chapter XVII-B but not specified under section 40(a)(ia) of the Income-tax Act may also be claimed as expenditure for the purposes of computation of income under the head Profits and gains from business or profession Respectfully following the judgment of Vatika Township Private Limited [ 2014 (9) TMI 576 - SUPREME COURT] the amendment brought in by Finance (No.2) Act of 2014 in Section 40(a)(ia), the same is held to be retrospective in nature. Violation made by the appellant is marginal delay in deposit of tax which has resulted in hundred percent disallowance of the said expenditure. However, once tax has been deposited with the due interest etc. further disallowance of hundred percent expenditure is against the intent of law. Legislative intent is to foster compliance of tax deduction provisions and inculcate discipline in the deductors. In present facts tax has been deducted and has been deposited which is not called in question. Only marginal delay in deposit of tax deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2013- 14 is directed against the order of Ld. CIT(A)-6, Delhi dated 16.10.2017. The Revenue has raised following grounds of appeal:- 1. Whether on facts and in circumstances of the case, the Ld.CIT(A) is legally justified in deleting disallowance of Rs. 2,22,64,353/- on account of 'non-deposit of TDS' deducted from payment to Non- Residents u/s 40(a)(i) r.w. section 195 of the Income Tax Act, 1961 (the Act) by completely ignoring the detailed findings of the Assessing Officer (the AO) in assessment order on the issue and also by ignoring a fact that the assessee had claimed expenses without complying with TDS provisions r.w. section 200(1) of the Act? 2. Whether on facts and in circumstances of the case, Ld. C1T(A) is legally justified in deleting disallowance of Rs. 6,57,572/- u/s 14A of the Act without considering a legal principle that allowability or disallowability of expenditure under the Act is not conditional upon the earning of the income as upheld by Hon'ble Supreme Court in case of CIT Vs. Rajendra Prasad Moody [1978] 115 ITR 519? 3. Whether on facts and in circumstances of the case, Ld. CIT(A) is legally justified in not holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l.), deleted the disallowance. 5. Aggrieved against the order of Ld.CIT(A), the Revenue is in appeal before this Tribunal. 6. Ld.Sr.DR on the other hand opposed the reasoning of the learned CIT(Appeals) and supported the order of the AO. 7. We have heard the Ld. Sr. DR and perused the material available on record. In respect of deletion of disallowance of Rs. 2,22,64,353/- on account of non-deposit of TDS, deducted from payment to non-residents u/s 40(a)(i) read with Section 195 of the Act, we find that the Ld. CIT(Appeals) has considered the submissions of the assessee and has given a finding of fact by relying on various case laws as under: 3.1.3. The facts of the case and the submissions of the appellant have been carefully considered. It is undisputed fact that payments are made to non residents, that tax has been duly deducted at source, said tax deduction is not called in question, only limited aspect on basis of which subject disallowance is made by the assessing officer is belated payment of tax deducted at source before the time limit prescribed under section 200(1) of the act, whereas in similar provision time limit given for depositing the tax deducted at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling of return under section 139(1) of the Income-tax Act. 14.3 As mentioned above, in case of non-deduction of tax at source or non-payment of tax so deducted from certain payments made to residents, the entire amount of expenditure on which tax was deductible is disallowed under section 40(a)(ia) for the purposes of computing income under the head Profits and gains of business or profession . The disallowance of whole of the amount of expenditure causes hardship, especially in case of payment made to a resident in whose case the withholding of tax is only a mode of collection of tax and does not result into final discharge of tax liability. 14.4 Accordingly, section 40(a)(ia) of the Income-tax Act has been amended to provide that in case of non-deduction of tax at source or non-payment of tax so deducted on payments made to residents as specified in section 40(a)(ia) of the Income-tax Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed. 14.5 Further, the first proviso to section 40(a)(ia) of the Income-tax Act, prior to its amendment by the Act, provided that sum, which was disallowed due to non-deduction of tax at source or non-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2015-16 and subsequent years. From the aforesaid clarificatry notes, it is evident that subject amendment in section 40(a)(i) is made to provide similar time limits available in section 40(a)(ia) to have level playing field. It is noteworthy that although amendment is stated to be made applicable from assessment year 2015-16, but similar amendments made in the same finance no.2 act has been treated as retrospective nature. Few of the decisions wherein the said view is taken are referred below: i) IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD M/s. Amruta Quarry Works Date of Pronouncement: 19/07/2016 8. I have heard the rival contentions, perused the material available on record and gone through the orders of the lower authorities. I find merit in the contentions of the Id. Counsel for the assessee. Respectfully following the judgment of Vatika Township Private Limited (supra), the amendment brought in by Finance (No.2) Act of 2014 in Section 40(a)(ia), the same is held to be retrospective in nature; therefore, the amount to be disallowed u/s 40(a)(ia) should be restricted to 30% of the impugned amount ii) DELHI BENCH - ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors It can be further seen that the violation made by the appellant is marginal delay in deposit of tax which has resulted in hundred percent disallowance of the said expenditure. However, once tax has been deposited with the due interest etc. further disallowance of hundred percent expenditure is against the intent of law. Legislative intent is to fost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed. The Explanation, therefore, requires a strict construction and the principle against doubtful penalization would come into play. The detriment in the present case, as is noticeable, would include initiation of proceedings for imposition of penalty for concealment, as was directed by the Assessing Officer in the present case. The aforesaid principle requires that a person should not be subjected to any sort of detriment unless the obligation is clearly imposed. When the words are equally capable of more than one construction, the one not inflicting the penalty or deterrent may be preferred. In Maxwell s The Interpretation of Statutes, 12th edition (1969) it has been observed:- The strict construction of penal statutes seems to manifest itself in four ways: in the requirement of express language for the creation of an offence; in interpreting strictly words setting out the elements of an offence; in requiring the fulfillment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction. 18. The aforesaid principles and interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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