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TMI Blog2011 (6) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance to be made if the TDS is deposited before the due date of filing of the return. The ITAT B Bench in the case of Shri Kanubhai Ramjibhai Vs. ITO, in ITA No.3983/Ahd/2008 order dated 3-12-2010 has held the amendment to be retrospective. He therefore submitted that in view of the above decision of the ITAT, no disallowance is to be made in respect of the amount for which the TDS is deposited before the due date of filing of the return. The learned DR, on the other hand, relied upon the orders of the authorities below. 4. We have heard both the parties and perused the material placed before us. We find that the B Bench of the ITAT in the case of Shri Kanubhai Ramjibhai (supra) considered the identical issue and after detailed examination came to the conclusion that the amendment in the section 40(a)(ia) by the Finance Act, 2010 is retrospective in nature. The relevant findings of the ITAT read as under: 9. Now the question arises is, whether the amendment brought out by the Finance Act, 2010 w.e.f 1-4-2010 in Section 40(a)(ia) of the Act is clarificatory in nature or not. To decide this issue, now we have to go to the history of the provisions of Section 40(a)(ia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139: or (B) in any other case, on or before the lat day of the previous year And finally by the Finance Act, 2010 w.e.f. 1-4-2010 sub-clause (ia) is as under: (ia) any interest, commission or brokerage, rent royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of Section 139: 10. We find from the above provision of Section 40(a)(ia) of the Act, amended by Finance Act, 2010, that the payment of expenses as specified in this provision, on which tax is deductible at source under Chapter XVII-B of the Act and the assessee has not deducted the tax or after deduction has not been paid on or before the due date specified in Section 139(1) of the Act, will be disallowed while computing the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment was explained in Memorandum Explaining the provision in Finance Bill, 2010 as under: Disallowance expenditure on account of non-compliance with TDS provisions, The existing provisions of section 40(a)(ia) of the Incometax Act provide for the disallowance of expenditure like interest, commission,, brokerage, pro fessional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid during the previous year. However, in case the deduction of tax is made during the last month of the previous year, no disallowance is made if the tax is deposited on or before the due date of filing of return. It is proposed to amend the said section to provide that no disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of income specified in subsection(1) of section 139. This amendment is proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years. 11. In view of the above amendments brought out in Section 40(a)(ia) on different times to remove the difficulties of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole. This view has been accepted by a number of High Courts. In the case of CIT v. Chandulal Venichand (1984) 209 ITR 7, the Gujarat High Court has held that the first proviso to section 43B is retrospective and sales tax for the last quarter paid before the filing of the return for the assessment year is deductible. This decision deals with assessment year 1984- 85. The Calcutta High Court in the case of CIT v. Sri Jagannath Steel Corporation (1991) 191 ITR 676, has taken a similar view holding that the statutory liability for sales tax actually discharged after the expiry of the accounting year in compliance with the relevant statute is entitled to deduction under section 43B. The High Court has held the amendment to be clarificatory and, therefore, retrospective. The Gujarat High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd (supra), it has been held that the provisions of the first proviso, which has newly been inserted by the Finance Act, 1987, with effect from 1st April, 1988 to section 43B is remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the assessee and which made the provision unworkable or unjust in a specific situation, and is of clarificatory nature and, therefore, has to be treated as retrospective with effect from 1st April, 1984, the date on which section 43B has newly been inserted by the Finance Act, 1983. In taking this view, the Supreme Court has approved Jamshedpur Motor Accessories Stores v. Union of India [(1991) 189 ITR 70 (Pat), special leave petition dismissed b the Supreme Court : (1991) 191 ITR (St.) 8 (SC)], CIT v. Sri Jagannath Steel Corporation [(1991) 191 ITR 676 (Cal)], and CIT v. Chandulal Venichand [(1992) 197 ITR 718, 720 (Cal)] and CIT v. Pyarilal Kasam Manji Co. [(1992) 1 98 IGTR 110 (On)]. 13. In view of the above discussion, following the case laws of Hon ble apex court and of Hon ble High Courts cited above, we are of the view that the provisions of Section 40(a)(ia) as amended by the Finance Act, 2010 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly rejected. 7. The Ground No.2 of he Revenue s appeal reads as under: 2. The ld.CIT(A) has erred in law and on facts in deleing the addition of ₹ 1214189/- made after rejecting the assessee s books of accounts. 8. We have heard both the parties and perused the material placed before us. It was pointed out by the learned counsel that the assessee is a developer and it is following project completion method in respect of each unit. During the year under consideration, the project for construction of offices and shops was in progress and advance against sale of some of the offices/shops was received. Therefore, the same was disclosed as advance and expenditure for construction was also capitalized. The same was offered as income in the year in which project was completed and the same was assessed as such. That the AO has estimated the profit at 11% on the advance received during the year under consideration. It was pointed out by the learned counsel that the project is completed in the subsequent year in which the income was offered by the assessee and the same is assessed in that year. It was also pointed out by the learned counsel that in the preceding as well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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