2020 (9) TMI 859 - AT - Income Tax

Disallowance u/s.40(a)(ia) - Failure to deduct TDS - Scope of amendment - whether the said amendment is having the retrospective effect or not? - HELD THAT - We find that the issue involved in the present appeal has already been decided by the coordinate bench of the Tribunal in the case of Om Sri Nilamadhab Builders Pvt. Ltd 2019 (11) TMI 1373 - ITAT CUTTACK wherein it is held that if a statute is curative of the previous law, retrospective operation is generally intended. The fact remains that this taxpayer has not tendered any details of the actual nature of expenditure. We therefore find no reason to disagree with the lower authorities' conclusion quoting assessee's failure in filing the relevant details. Coupled with this, the fact also remains that the legislature has itself amended Section 40(a)(ia) vide the Finance Act, 2014 w.e.f. 01.04.2015 restricting a disallowance made u/s 40(a)(ia) from 100% to 30% only. This tribunal's order in Dipak Parui vs. JCIT 2018 (7) TMI 2066 - ITAT KOLKATA holds the above proviso inserted in the Act to be a curative one having retrospective effect. We therefore, direct the Assessing Officer to restrict the impugned disallowance to the extent of 30% only We direct the AO to restrict the 100% disallowance confirmed by the CIT(A) to the extent of 30% only taking into account the actual claim of the assessee in its profit and loss account. We order accordingly. Thus, the sole ground of appeal of the assessee is partly allowed.

Summary

Issues Involved:
Appeal against CIT(A) order for assessment year 2011-2012 on grounds of quashing assessment order, illegal notice u/s 143(2), addition u/s 36(1)(viia)(a), disallowance u/s 40(a)(ia), and retrospective effect of amendment to Section 40(a)(ia) of the Act.

Analysis:

1. The appellant raised multiple grounds in the appeal, including challenging the assessment order, illegal notice, and disallowances. The Assessee withdrew the first three grounds during the hearing, focusing solely on the disallowance u/s.40(a)(ia) of the Act.

2. The only remaining ground, related to the disallowance u/s.40(a)(ia), was extensively argued by both parties. The AR relied on a Tribunal case where disallowance was restricted to 30%, contrasting the original 100% disallowance. The DR, however, supported the lower authorities' decisions.

3. After thorough examination of the case, the Tribunal found that the disallowance made by the AO was based on expenses claimed by the Assessee but not reflected in the profit and loss account. The Tribunal upheld the 100% disallowance but considered the retrospective effect of the amendment to Section 40(a)(ia) from 01.04.2015.

4. Citing various Tribunal decisions and the Hon'ble Supreme Court's judgment, the Tribunal concluded that the amendment to Section 40(a)(ia) was curative in nature, aiming to reduce hardships for taxpayers. Therefore, the Tribunal directed the AO to restrict the disallowance to 30%, considering the actual claim in the profit and loss account.

5. Relying on legal principles and previous judgments, the Tribunal emphasized the need for a reasonable and sympathetic interpretation of statutes to achieve their intended purpose. The Tribunal's decision aligned with the retrospective application of amendments to provide relief to the Assessee.

6. Ultimately, the Tribunal partially allowed the Assessee's appeal, directing the AO to restrict the disallowance u/s.40(a)(ia) to 30% in line with the retrospective effect of the amendment. The decision was based on legal precedents and the objective of curative amendments to tax laws.

7. The Tribunal's detailed analysis and reliance on legal interpretations ensured a fair and just outcome for the Assessee, highlighting the importance of considering the legislative intent and practical implications of tax laws in resolving disputes effectively.