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TMI Blog2015 (4) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... been conducted in the assessee's premises on 21.8.2006, wherein the assessee had admitted an additional income of Rs. 6 crores for the A.Y. 2005-06. Later, an assessment u/s. 143(3) was completed on 20.4.2007, determining the total income at Rs. 74,58,97,549 by adding back expenditure under the heads ESOP, deduction u/s. 80IA(4), in addition to the additional income offered during the course of survey. The additions so made were upheld by the CIT(A)-III, Hyderabad in his order dated 15.10.2007. However, the ITAT, vide their order dated 23.7.2008 in ITA No. 1114/Hyd/07, set aside the matter to the file of the Assessing Officer by relying on the decision of the Special Bench in assessee's own case for the A.Y. 2001-02. In terms of the order of ITAT, the Assessing Officer, vide his order dated 31.12.2009, reassessed the income at Rs. 74,58,97,549/-. The assessee's appeal against the said order was again dismissed by the CIT(A). The assessee had not filed any further appeal against the said order by the CIT(A), Hyderabad-I dated 10.6.2011 till the date of passing of the assessment order under section 153A read with section 143(3) of the Act. After the issue of notice u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. On verification of information submitted, however, the Assessing Officer noticed that the assessee company had made certain payments during the year under consideration on various dates, as tabulated above, and while making such payment/crediting the contractor's account, it was supposed to deduct TDS as applicable and remit such TDS to Govt. account on or before 7th day of the following month as per Rule-30 of IT Rules, as mentioned in the table given above. He felt that as per Sec. 40(a)(ia), such sum shall be allowed as deduction if TDS made during any other month other than the last month of the previous year is paid within the same year. Accordingly, he felt that the assessee ought to have remitted the TDS before 31st March, 2005. However, the assessee had paid TDS in the subsequent year, and therefore, the provisions of Sec. 40(a)(ia) were attracted in its case. 7. Since the assessee had failed to remit TDS in time, the proportionate expenditure of Rs. 101,19,00,000/- was added back to the assessee's income u/s. 40(a)(ia). While doing so, the AO noted that though in the original computation of income, the assessee had itself added back a sum of Rs. 8,10,73,231, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndments of section 40(a)(ia) by the Finance Act, 2010, deduction for expenses is to be allowed if the TDS is made and the amounts so deducted is paid to the Government account before the due date of filing of return of income u/s. 139(1) of the Act. In this regard, the CIT(A) observed that that the Hon'ble High Court of Calcutta in the case of CIT vs. Virgin Creations (ITA No. 302 of 2011 dt. 23-11-2011), have held that in the cases of Allied Motors (224 ITR 667) and Alom Extrusions (319 ITR 306), the Hon'ble Supreme Court have held that the amendments to the provisions of Sec. 43B have retrospective application. In the case of R.B. Jodha Mal Kuthiala (82 ITR 570) also they had held that provision which was inserted as a remedy to make a provision workable requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well. In view of the above said authoritative pronouncements of the Hon'ble Apex Court, Hon'ble High Court of Calcutta felt that the issue in respect of retrospective application of the amendment to Section 40(a)(ia) could not be decided otherwise. Therefore, in view of the decision of Hon'ble Calcut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it is held that since TDS has been deducted out of the payments to the sub-contracts during the year and the same was remitted to the Government account before the due date of filing of return of income, no disallowance u/s. 40(a)(ia) could have been made. Accordingly, the CIT(A) directed the AO to verify whether the tax of Rs. 1,05,79,973/- was deducted at source out of the amounts paid/credited by the assessee and if it is found that the assessee had duly deducted the tax at source out of the payments made by it in conformity with Chapter XVII-B of the Income Tax Act and had also deposited the same with the Government on or before the due date specified in sub-section (1) of section 139, no disallowance is required to be made u/s. 40(a)(ia) of the Act in terms of the judgment of the Hon'ble Calcutta High Court in the case of Virgin Creations (Supra). 14. The CIT(A) observed that in view of the request of the assessee, the Assessing Officer had passed an order u/s, 154 of the Act for the assessment year 2006-07 on 23.2.2012, allowing expenditure of Rs. 93,08,26,769/-, which was disallowed in the assessment year 2005-06, in the assessment year 2006-07, as the TDS of Rs. 1,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the instant case, assessee did not comply with the legal requirement; therefore, the Assessing Authority was justified in making the disallowance, but on the date the appeal was filed, the section came to be amended, giving retrospective benefit. Therefore, the appellate authority extended the benefit of the amended provision and held that the disallowance is paid and the order has been upheld by the Tribunal. By Finance Act, 2008 which is given retrospective effect from 1.4.2005, the benefit of that provision had been extended to the assessee, though no fault was found with the assessment order passed initially. With change of law, when the effect of the amendment is to give benefit to the assessee, the appellate authority and the Tribunal were justified in extending the said benefit. Thus, order passed by the Tribunal is in accordance with law and does not call for interference. Therefore, the substantial question of law is answered in favour of the assessee and against the revenue." 6. Further, the Gujarat High Court in the case of CIT vs. M/s. J.K. Construction Co. in Tax Appeal No. 706 of 2010 held as follows: "Plainly speaking, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Act by the CIT on this issue is not justified. Accordingly, the grounds raised by the assessee are allowed." 18. Further he submitted that at the time of delivering of Special Bench order in the case of Bharti Ship Yard on 12.9.2011 there is no occasion to the Tribunal to consider the following judgements which were delivered subsequent to that date: a) CIT vs. Virgin Creations (GA No. 3200/2011) (Cal.) dated 23.11.2011 b) PEC Electricals (ITTA No. 263 of 2013) (AP) dated 12.7.2013 c) Rajinder Kumar in ITA No. 65/2013 (Delhi) dated 1.7.2013. d) Naresh Kumar & M/s. Tal Bros (P) Ltd. in ITA Nos. 24/2013 and 218/2013 (Delhi) dated 6.9.2013. e) ITO vs. Anil Kumar & Co. (354 ITR 170) (Kar.) f) CIT vs. M/s. JK Construction Co. in Tax Appeal No. 706 of 2010 (Guj). g) Meil Ratna JV in ITA No. 20/Hyd/2013 dated 21.8.2013. (Tribunal Hyderabad Bench) h) RV Chakrapani vs. ACIT in ITA No. 894/Hyd/2013 dated 1.10.2013 (Tribunal Hyderabad Bench) i) Rajamahendri Shipping Ltd. vs. ACIT (51 SOT 242) (Tribunal Vis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Piyush C Mehta Vs ACIT (52 SOT 27) discussed as to which of the judgements, whether that in the case of Bharti Shipyard Ltd or of Calcutta High Court judgement in Virgin Creations should be followed and held that any High Court decision is higher in precedence value over a Special Bench decision. 22. He further submitted that from the foregoing that there is a difference of opinion between the Special Bench and the latter decisions of the Delhi High Court, Calcutta High Court, Gujarat High Court and Andhra Pradesh High Court in regard to the prospective / retrospective nature of the amendment by Finance Act 2010. Where there is ambiguity in the interpretation of a provision, the Hon'ble Supreme Court held in the case of Vegetable Products Limited (88 ITR 192), that the interpretation favourable to the assessee must be followed. The Andhra Pradesh High Court, in the case of Commercial Tax Officer Vs State of Andhra Pradesh (169 ITR 564, 571-2), has pointed out to a decision of the Bombay High Court in this regard and held that where there are conflicting views of the High Courts and there is no decision of the Jurisdictional High Court on the issue, interpretation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature. Same view has been taken by the jurisdictional High Court in the case of CIT vs. PEC Electricals Pvt. Ltd., in ITA No. 263 of 2013 dated 12.7.2013. The assessee in present case paid the TDS to the Central Government account before f iling the return of income and the same is to be allowed as held by the above judgements. Accordingly, we do not f ind any inf irmity in the action of the CIT(A) in directing the Assessing Off icer to delete the addition made u/s 40(a)(ia) of the Act and, therefore, the order of the CIT(A) is hereby upheld on this count. The grounds raised by the Revenue in this regard are dismissed." 25. Considering the consistent view taken by the Tribunal, we are inclined to hold that when the assessee, though deducted TDS before 31st March, 2005, relevant to A.Y. 2005-06, relating to expenditure claimed for the assessment year under consideration and paid the said amount to the Central Government before the due date of filing the return of income for A.Y. 2005-06, that expenditure cannot be disallowed u/s. 40(a)(ia) of the Act. If it is so, the CIT(A) is justified in allowing claim of the assessee. 26. In the result, appeal of the Revenue is dismissed. Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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