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TMI Blog2015 (10) TMI 2046X X X X Extracts X X X X X X X X Extracts X X X X ..... - Held that:- There is a mistake in the direction of CIT(A) to give credit for the Security Transaction Tax as per the provisions of Section 88E. The Ld. CIT(A) failed to notice that vide sub-section 3 of Section 88E, no deduction under this section shall be allowed in or after the assessment year beginning on the first day of April, 2009. Since, the impugned assessment years are after that date, the direction of CIT(A) is not as per the provisions of law. Accordingly, the order of CIT(A) on this issue is set aside. The order of AO is therefore restored. - Decided in favour of revenue. - I.T.A. Nos. 703 & 704/HYD/2015 - - - Dated:- 11-9-2015 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Revenue : Shri Y. Sesha Srinivas, DR For The Assessee : Shri S. Rama Rao, AR ORDER PER B. RAMAKOTAIAH, A.M. : These two are Revenue appeals for the AYs. 2010-11 and 2011-12 against the orders of Commissioner of Income Tax (Appeals), Tirupati dated 29-01-2015 and 23-02-2015 in respective assessment years. Since common issue is involved in this, we heard these appeals together and decided by this common order. 2. At the outse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nkar Vs. ACIT Circle-I, Bijapur ITA No. 1832 (Bang) 2013. 5. Ld. CIT(A) after considering the submissions of assessee and relying on the principles laid down by various decisions, analysed the issue elaborately and concluded that the said provisions of Section 40(a)(ia) are not applicable to assessee as the payee has offered the amount. However, he directed the AO to verify whether the amounts are paid and subject to outcome of such verification, the grounds are treated as allowed. His detailed order is as under: 5.3 Gone through the observations of the Assessing Officer in the assessment order, the submissions of the appellant and the case laws relied upon by the appellant. Briefly stated, the facts of the case indicate that the appellant being a partner in a firm by name M/s.B.V.Reddy Sons, has overdrawn the amounts for which the liability for payment of interest to the extent of ₹ 159,16,750/- has arisen during the year under reference and shown to have paid the amounts to the firm for which TDS was not made. The Assessing Officer had applied the provisions of Section 40(a)(ia) for his failure to make the TDS and disallowed the claim of interest expenses of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.4 Coming to the issue of the payment of interest by the to the firm where he is a partner, without making TDS, are governed by the facts of the case laws relied upon by the assessee / appellant, wherein, the Hon ble Tribunal of Bangalore as well as ITAT, Delhi have categorically stated that the amended second proviso to Section 40(a)(ia), as effective from 01.04.2013 held to be given retrospective effect. The relevant portion of the decision of ITAT, Bangalore in the case of Shri G.Shankar Vs. ACIT (supra) runs as under: Earlier, we have held that second proviso to Section 40(a)(ia) of the Act is retrospective in operation w.e.f. 01.04.2005. As per this newly inserted proviso, the assessee is required to file Form No.26A as per rule 31ACB of the I. T. Rules, 1962, so as to not to be held as an assessee in default as per the proviso to Section 201 of the Act. As held in the decision of the co-ordinate Bench in the case of S.M. Anand Vs. ACIT(supra), since the assessee in the period under consideration i.e. A. Y. 2005-06 could not have contemplated that such a compliance was to be made, we also in the case on hand, remit the matter to the file of the A.O. Similar was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout corresponding income inclusion by the recipient. That is the clearly discernible bigger picture, and, unmistakably, a very pragmatic and fair policy approach to the issue-howsoever belated the realisation of unintended and undue hardships to the taxpayers may have been. It seems to proceed on the basis, and rightly so, that seeking tax deduction at source compliance is not an end in itself, so far as the scheme of this legal provision is concerned, but is only a means of recovering due taxes on income embedded in the payments made by the assessee. That is how, as we have seen a short while ago, the Hon ble Delhi High Court has visualised the scheme of things as evident from their Lordships reference to augmentation of recoveries in the context of loss of revenue and depriving the Government of the tax due and payable. (para 7 of the order) With the benefit of this guidance from the Hon ble Delhi High Court, in view of legislative amendments made from time to time, which throw light on what was actually sought to be achieved by this legal provision, and in the light of the above analysis of the scheme of the law, we are of the considered view that section 40(a)(ia) ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding tepses by the assessee. It is not, in our considered view, a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax witholding lapse. The penalty for tax withholding lapse per se is separately provided for in section 271C and section 40(a)(ia) does not add to the same. The provisions of section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee s tax withholding lapses did not result in any loss to the exchequer. Now that the Legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of CIT(A) as he has considered the legal principles established by the Co-ordinate Benches and accordingly, decided the issue. Therefore, the order of CIT(A) is upheld and Revenue s ground on this is rejected. In fact the Revenue s ground is that second proviso is effective only from 01-04-2013 and not for the impugned assessment years. Since this issue was already considered and decided that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 01-04-2005 from the date in which sub-clause i.e., section 40(a) was inserted by Finance Act. In view of this, we find no merit in the Revenue s contentions. Accordingly, ground No.1 in both the assessment years on this issue is rejected. 7. The next issue for consideration is ground No. 2 in AY. 2011-12. The issue contested is with reference to giving credit for Security Transactions Tax of ₹ 7,58,265/-. In the course of assessment proceedings, AO noticed that assessee paid Security Transaction Tax of ₹ 7,58,263/- and has debited the same in its P L A/c. While giving credit to the pre-paid taxes, the said Security Transaction Tax has been considered again. AO r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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