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TMI Blog2017 (6) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15. 4. On the facts and circumstances of the case and under the provisions of the law, the A.O erred in making the addition u/s 40(a)(ia) for the interest paid to NBFC's, where the second proviso to Section 40(a)(ia) is complied by the NBFC's by filing the return of income, declaring such interest and paying tax thereon. 5. For these and other reasons which may be adduced at the time of hearing, the appellant prays before Your Honour to delete the addition made by the A.O, which is bad in law. 6. Appellant Craves Leaves to add, to alter, to amend and to delete any of the other grounds at the time of hearing." 2. The only issue arises in the appeal of the assessee is whether in the facts and circumstances of the case the authorities below have erred in disallowing the interest payment to Non Banking Financial Corporations (NBFCs) u/s. 40(a)(ia). 3. In the course of assessment proceedings the AO made a disallowance of Rs. 17,79,823/- on account of interest payment made by the assessee to NBFCs without deduction of tax at source by invoking the provisions of section 40(a)(ia). The assessee challenged the action of the AO before the CIT(A) and contented that Non Banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when expenditure which becomes subject-matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences as is apparent from the case of Naresh Kumar. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress. Nevertheless the Section 40(a)(ia) has to be given full play keeping in mind the object and purpose behind the section. At the same time, the provision can be and should be interpreted liberally and equitable so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. Case of Naresh Kumar is not one of rare cases, but one of several cases as we find that Section 40(a)(ia) is invoked in large number of cases. 27. One important consideration in construing a machinery section is that it must be so construed so as to effectuate the liability imposed by the charging section and to make the machinery workable. However, when the machinery section results in unintended or harsh consequences which were not intended, the remedial or correction action taken is not to be disregarded but given due regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B. Judha Mal Kuthiala v. CIT, this Court said that one should apply the rule of reasonable 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. 14. This view has been accepted by a number of High Courts. In the case of CIT v. Chandulal Venichand, the Gujarat High Court has held that the first proviso to Section 43-B 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 1985-85. The Calcutta High Court in the case of CIT v. Sri Jagannath Steel Corpn. has taken a similar view holding that the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered whether term "owner" would include unregistered owners who had paid sale consideration and were covered by Section 53A of the Transfer of Property Act. The contention of the assessees was that the amendments made to the definition of term "owner" by Finance Bill, 1987 should be given retrospective effect. It was held that the amendments were retrospective in nature as they rationalise and clear the existing ambiguities and doubts. Reference was made to Crawford: "Statutory Construction" and "the principle of Declaratory Statutes", Francis Bennion: "Statutory Interpretation", Justice G.P. Singh's "Principles of Statutory Interpretation", it was observed that sometimes amendments are made to supply an obvious omission or to clear up doubts as to the meaning of the previous provision. The issue was accordingly decided holding that in such cases the amendments were retrospective though it was noticed that as per Transfer of Property Act, Registration Act, etc. a legal owner must have a registered document. 25. In view of the aforesaid discussion in paras 18,19 and 20, it is apparent that the respondent assessee did not violate the unamended section 40(a)(ia) of the act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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