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2022 (6) TMI 837 - AT - Income TaxDisallowance u/s 40(a)(ia) - scope of amendment - whether the second proviso to Section 40(a)(ia) would have retrospective effect? - HELD THAT - Matter is squarely covered by the decision of Jurisdictional High court in case of PCIT v/s Perfect Circle India Pvt.Ltd. 2019 (1) TMI 1532 - BOMBAY HIGH COURT held this proviso as beneficial to the assessee and curative in nature. The leading judgment on this point is in the case of CIT Vs. Ansal Land Mark Township P Ltd 2015 (9) TMI 79 - DELHI HIGH COURT as held that Section 40(a)(ia) is not a penalty and insertion of second proviso is declaratory and curative in nature and would have retrospective effect form 1.4.2005 i.e the date from the main proviso 40(a)(ia) itself was inserted. Several High Courts have adopted the same lines. We may also note that the Supreme Court in the case of Hindustan Coca Cola Beverages P Ltd Vs. CIT 2007 (8) TMI 12 - SUPREME COURT even in absence of second proviso to Section 40(a)(ia) had noticed that the payee had already paid the tax. Under such circumstances the Court held that the payer / deductor can at best be asked to pay the interest on delay in depositing tax We find that the issue is no more res integra and respectfully following the decision of Hon ble Jurisdictional High court in the decision referred (supra) both the appeals filed by the Revenue are dismissed.
Issues:
Appeals filed by Revenue against orders of CIT(A) for Assessment Years 2011-12 & 2012-13; Retrospective application of second proviso to section 40(a)(ia) of the Income Tax Act, 1961. Analysis: The appeals were filed by the Revenue against the orders of the CIT(A) for the Assessment Years 2011-12 & 2012-13. The key issue revolved around the retrospective application of the second proviso to section 40(a)(ia) of the Income Tax Act, 1961. The ld.CIT(A) had deleted the impugned additions made under section 40(a)(ia) for both assessment years based on the decision of the Hon'ble Delhi High Court in a specific case. The Revenue contended that the second proviso should not have retrospective effect from 01.04.2005, as argued by the ld.CIT(A) and instead should be effective from 01.04.2013, as per the legislature's intention. In response, the ld. AR argued that the matter was settled by the Jurisdictional High Court's decision in a different case, where it was held that the second proviso to section 40(a)(ia) should have retrospective effect. This proviso aimed to benefit the assessee and was seen as declaratory and curative in nature by various courts. The High Court's decision emphasized that the main proviso of section 40(a)(ia) itself was inserted on 1.4.2005, justifying the retrospective application of the second proviso. The Supreme Court had also previously ruled on a similar matter, indicating that the deductor could be asked to pay interest on delayed tax deposits even without the second proviso. After considering the arguments from both sides and reviewing the available material, the Tribunal found that the issue was no longer open to debate. The Tribunal, in line with the decision of the Jurisdictional High Court, dismissed both appeals filed by the Revenue. The judgment highlighted the settled nature of the issue based on previous judicial pronouncements, leading to the dismissal of the Revenue's appeals. In conclusion, the Tribunal's decision affirmed the retrospective application of the second proviso to section 40(a)(ia) of the Income Tax Act, 1961, based on established legal principles and previous court rulings, ultimately resulting in the dismissal of the Revenue's appeals.
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