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TMI Blog2010 (12) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... plication - Appeal is allowed No additional ground having been raised in terms of the residuary ground, accordingly, this ground is dismissed - In the result, appeal is partly allowed X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember-04 388582 3966 29/06/2005 17. Pratap Singh December-04 64148 655 29/06/2005 18. Jagtar Singh December-04 256480 2614 29/06/2005 19. Parshansingh December-04 202255 2064 29/06/2005 20. Hira Roadlines December-04 79780 813 29/06/2005 21. Indo TradingCo. December-04 95399 972 29/06/2005 22. Savinder Singh December-04 218084 2223 29/06/2005 23. Chanan Singh December-04 19181 196 29/06/2005 24. Gurdish Signh December-04 15986 163 29/06/2005 25. Nagra Roadlines December-04 15980 163 29/06/2005 26. Capital Road Carrier December-04 15541 158 29/06/2005 27. Balbir Kaur January-05 175555 1790 29/06/2005 28. Balwant Singh January-05 293922 2997 29/06/2005 29. Gurprit Singh January-05 279210 2845 29/06/2005 30. Pratap Singh January-05 100819 1029 29/06/2005 31. Jagtar Singh January-05 285956 2917 29/06/2005 32. Parshansingh January-05 200437 2045 29/06/2005 33. Indo TradingCo. January-05 15798.1 1610 29/06/2005 34. Savinder Singh January-05 200018 2042 29/06/2005 35. Chanan Singh January-05 38278 391 29/06/2005 36. Gurdish Signh January-05 15921 162 29/06/2005 37. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 304 ITR 308(SC) and CIT v. Shelly Products and another (2003), 261 ITR 367 (SC), the ld. AR pointed out that in similar circumstances, amendments to provisions of section 43B, Explanation 4 to section 271(1)(c), levy of surcharge in block assessments and provisions of section 240(b) of the Act had respectively been held to be clarificatory and consequently, retrospective in application. Therefore, the assessee may not be denied deduction u/s 40(a)(ia) of the Act, the ld. AR argued. 5. On the other hand, the learned DR supported the order of the ld. CIT(A) and contended in his written submissions as under : "Section 40(a)(ia) starts with non obstante clause and it operates overriding the deductions mentioned in sections 30 to 38. It is a specific provision brought on the statute with a specific purpose of enforcing the compliance to TDS provisions and also to get the tax into the exchequer at the earliest. There is no ambiguity in the wording of the section. The hardship if any caused to the assessees in implementation is well 'thought over' and intended as a deterrent by the Parliament while enacting the section. 2. Section 40(a)(ia) was amended by the Finance Act, 2008, rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended. To alleviate this hardship, the Hon'ble Court held that in the facts and circumstances of that section that the amendment by way of omission of second proviso has to be read retrospectively. However in the case of section 40(a)(ia) the hardship is conscious and intended. Therefore the decision of the Apex Court where the hardship was not intended cannot be applied in the present case. 5. Further in the case of CIT v. Alom Extrusions Ltd. 319 ITR 306 (SC), on the issue of section 43B, the Apex Court took an example (para 15) and came to the conclusion that deduction, if the amount was not allowed based on payment before the due date of filing of the return, the deduction will be denied to the assessee for all the times u/s 43B. In other words, the assessee will lose the benefit of deduction even in the year of account in which it pays the contributions to the welfare fund. In the circumstances the apex court said the amendment to section 43B was curative in nature and applicable retrospectively. Here in the case of section 40(a)(ia), there is no such hardship or loss of deduction for all times. The section itself provides that the expenditure will be allowed as deduction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in 1999 to have effect from the AY 1999-2000 could not be treated as declaratory of the existing law, so as to apply for an earlier year. It rarely happens that a provision of the IT Act is declaratory of the law. This Act is one of the most categoric branches of law and its intent is mostly to be gathered from the express words employed to further the current fiscal policy of the Government. CIT v. Berger Paints (India) Ltd. (No. 2) 254 ITR 503 (Cal.) No ambiguity in the provisions of the statute - Provisions cannot be interpreted to confer benefit to the assessee IPCA laboratory Ltd v. Dy. CIT (SC) 266 ITR 521" 6. We have heard both the parties and gone through the facts of the case as also the decisions relied upon on by the respective parties. The only dispute before us is as to whether the amendments made in the provisions of section 40(a)(ia) of the Act are applicable w.e.f. 1.4.2010 or with retrospective effect from 1.4.2005. Indisputably, the assessee deposited tax deducted at source from the payments on account of transportation charges for the months of October, 2004 & November, 2004 only on 30.4.2005 while for the months of December, 2004 to March, 2005 on 29.6.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-section (1) of section 200 and in accordance with the other provisions of Chapter XVII-B. It is also proposed to provide that where in respect of payment of any sum, tax has been deducted under Chapter XVII-B or paid in any subsequent year, the sum of payment shall be allowed in computing the income of the previous year in which such tax has been paid. The proposed amendment will take effect from 1st day of April 2005 and will, accordingly, apply in relation to the assessment year 2005-06 and subsequent years." 6.2 On appeal, the ld. CIT(A) while upholding the findings of the AO directed the AO to allow the claim in the AY 2006-07 in terms of the aforesaid proviso to section 40(a)(ia) of the Act, the tax having been deposited in the subsequent year. 6.3 Since it is necessary to spell out the degree of retrospectivity from the language of the relevant provisions itself, close attention has to be paid to the provisions of the said section. As is apparent from the aforesaid memorandum explaining the provisions, section 40(a)(ia) was brought on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any other month of the previous year but paid after the end of the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] 6.4 In terms of the aforesaid amended provisions, no disallowance u/s 40(a)(ia) could be made in respect of the expenditure incurred in the month of March if the tax deducted at source from such expenditure had been paid before the due date of filing of the return. While proposing this amendment, it was explained by the Hon'ble Finance Minister that the taxpayers will now get a time period of six months for depositing the tax deducted at source in respect of expenditure incurred in the month of March so as to escape the disallowance of the said expenditure u/s 40(a)(ia) of the Act. It was clarified that the said amendment would be applicable with retrospective effect from 1.4.2005. In nutshell, the assessees deducting the tax during the last month of the previous year were permitted to deposit TDS on or before the due date of filing of the return specified under section 139(1) of the Act while those deducting tax in the first eleven months of the previous year were permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional tax liability comes to 33.99% of the sum which is further increased by levy of interest under sections 234B and 234C. In most of the cases the total tax and interest liability comes to somewhere between 44% to 46% of the amount in question. It will be appreciated that such disproportionate burden on the assessees for not collecting the tax from a third party (which is essentially a job of the Government) is undoubtedly unreasonable. It is more so in almost all such cases payments are through banking channels and are fully amenable to verification and there are hardly any reason to doubt that those receipts are not disclosed by the recipients. The argument is also no consolation to the businessman whose business in subsequent year is not good enough to absorb the deduction of expenses disallowed in earlier year under section (a)(ia). True the deduction can be allowed but if the computation of income results in loss in subsequent year, he does not benefit from such deduction. To sum up this aspect, it is clear that allowances of the deduction in subsequent year may not in all cases give full relief in subsequent year and secondly, there will be no relief whatsoever in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid." 6.7 In his budget speech, while proposing the aforesaid amendments to section 40(a)(ia) of the Act, Hon'ble Finance Minister in para 137 observed as under : "Relaxing the current provisions on disallowance of expenditure, I propose to allow deduction of such expenditure, if tax has been deducted at any time during the financial year and paid before the due date of filing the return. This will allow most deductors additional time up to September of the next financial year. At the same time, I propose to increase the interest charged on tax deducted but not deposited by the specified date from 12 per cent to 18 per cent per annum". 6.8 As is evident from the various representations by the industry in their pre-budget Memoranda and the budget speech of the Hon'ble Finance Minister while presenting the budget for the FY 2010-11, the rigour of the extant provisions of section 40(a)(ia) of the Act was relaxed and consequently amendments were made to remov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well-settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' or 'shall be deemed never to have included' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the Legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the Legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the Legislature contemplated. The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right." 6.11 Hon'ble Jammu and Kashmir High Court in the case of Fairdeal Motors v. CIT 101 ITR 687 held that though section 271(4A) of the Act came into force in 1965 after the close of the assessment year 1964-65, the section would apply to the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that promotes the purpose of the legislation should be preferred to a literal construction. In the instant case, we find that the intention of the Legislature in enacting section 40(a)(ia) was to augment compliance of provisions relating to TDS under chapter XVII-B of the Act and no more. Hence, we are of the opinion that the amendment by the Finance Act, 2010 in the provisions of section 40(a)(ia), being admittedly beneficial and only in relaxation of the provisions originally enacted, as was the case with the earlier amendment by the Finance Act, 2008, is curative in nature and thus, has also to be given retrospective effect w.e.f. 1.4.2005. Where a section of a statute is amended, the original ceases to exist and the new section supersedes it and becomes part of the law just as if the amendment has always been there. (Vide Crawford on Statutory Construction-Interpretation of Laws, pages 110-111). "An amending Act is not regarded as an independent statute. The statute in its old form is superseded by the statute in its amended form, the amended section of the statute taking the place of the original section for all intents and purposes as if the amendment had always been the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid amendments by contending that the same operated retrospectively w.e.f. 1.4.1988. Hon'ble Supreme Court in this context took note of their earlier decision in the case of Allied Motors (P) Ltd., 224 ITR 677 wherein it was held that when a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso supplying an obvious omission therein is required to be read retrospectively in order to give effect to the section as a whole. The first proviso to section 43B of the Act having been held to be curative in nature and hence retrospective in operation w.e.f. 1st April, 1988, the Hon'ble Supreme Court observed that the judgment in the case of Allied Motors (P.) Ltd. (supra) being a binding precedent, amendment to section 43B of the Finance Act, 2003 w.e.f. 1.4.2004 was retrospective in operation. The ld. DR repeatedly mentioned in their written submissions that the said decisions in Alom Extrusions Ltd. (supra) and Allied Motors (P.) Ltd. (supra), having been rendered in the context of provisions of section 43B of the Act are not applicable to the facts of the instant case, since there is no such hardship or loss of deduction for all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation of provisions of sections 10(13) & 17(3)(ii) of the Act was considered while in Padmasundrarao (decd.) (supra) the provisions of section 4(1), section 6(1) prov. (i) Expln. 1 of the Land Acquisition Act, 1894 were required to be interpreted. Likewise in Prakashnath Khanna (supra), the issue relating to interpretation of provisions of section 80, section 139(1), section 139(2), section 139(4), section 276CC was considered while in IPCA Laboratory (supra) the question of interpretation of provisions of section 80HHC was involved. In none of these decisions, the question of retrospective applicability of the relevant provisions was considered. The ld. DR has not explained as to how these decisions come to the rescue of the Revenue in the instant case. 6.14.1 As regards decision in Zam Zam Tanners (supra) relied on by the ld. DR , the view taken in the said decision regarding applicability of Explanation 4 to section 271(1)(c) of the Act with prospective effect has been reversed by the Hon'ble Apex Court in CIT v. Gold Coin Health Food (P.) Ltd., holding that even during the period between April 1, 1976 and April 1, 2003, the position was that the penalty was leviable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he object sought to be achieved and the mischief sought to be eradicated by the enactment. After all, the goal of every rule of interpretation is to ascertain and give effect to the intention of the Legislature. The amendment concerned herein to provisions of section 40(a)(ia) of the Act is remedial and curative in nature. Even otherwise, the aforesaid view which we have taken, is supported by two recent decisions of co-ordinate Benches of the ITAT. First such decision dated 22.9.2010 is in the case of Bansal Parivahan (India) (P.) Ltd. v. ITO in ITA No. 2355/Mum/2010 for the AY 2006-07and the other dated 3.12.2010 in the case of Shri Kanubhai Ramjibhai Makwana in ITA No.3983/Ahd./2008 for the AY 2005-06. It may be pointed out that Revenue have not placed before us any contrary decision. In the light of aforesaid discussion, particularly when in the case before us, indisputably tax deducted at source from the payments on account of transportation charges for the FY ending 31.3.2005 has been paid to the credit of Government before the due date of filing of return, disallowance upheld by the ld. CIT(A) is deleted. That being the position, ground Nos. 1 & 2 in the appeal are allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided against mere initiation of penalty proceedings, accordingly, this ground is dismissed. 16. Ground No. 6 relates to levy of interest u/ss 234B, 234C and 234D of the Act. The ld. AR on behalf of the assessee did not make any submissions on this ground. The levy of interest u/ss 234B & 234C of the Act being mandatory [CIT v. Anjum M.H. Ghaswala & Others 252 ITR 1(SC), affirmed by Hon'ble Apex Court in the case of CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449(SC) and in the case of CIT v. Sant Ram Mangat Ram Jewellers [2003] 264 ITR 564 (SC)], these grounds are dismissed. However, the AO may allow consequential relief, if any, while giving effect to this order. As regards the issue of charging of interest u/s 234D of the Act, we find that this issue is squarely covered by the decision of the ITAT Special Bench in the case of ITO v Ekta Promoters (P.) Ltd. [2008] 113 ITD 719 (Delhi) (SB), in which the Special Bench of this Tribunal has clearly held that section 234D which has been brought on the statute from 01-06-2003 cannot be applied to the Assessment Year 2003-04 and earlier years but it will have application only with effect from Assessment Year 2004-05. In the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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