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TMI Blog2017 (10) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... e is directed against the order of the learned Commissioner of Income-tax(A) - 1, Hyderabad, dated 12-09-2016 for AY 2011-12. 2. Briefly the facts of the case are that the Assessee Company is engaged in the business of construction and sale of flats/villas, filed its return of income for the A.Y. 2011-12 on 30.09.2011 declaring total income of ₹ 86,61,520/-. Subsequently, the case was selected under CASS and notices u/s 143(2) 142(1) were issued. The Assessing Officer had completed scrutiny Assessment u/s.143(3) on 25.03.2013 determining the total income ₹ 3,93,11,974/-. 2.1 During the course of assessment proceedings, the Assessing Officer noticed that the assessee had borrowed amounts and paid interest. The interest expenditure debited to P L a/c was ₹ 4,68,79,147/- which consists of payment to following finance companies:. M/s. Diwan Housing Finance Ltd (DHFL) : Rs.2,80,91,495/- India Bulls Financial Services Ltd : ₹ 19,05,659/- HDFC Bank : Rs.1,64,74,479/- Corporation Bank CC A/c : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person responsible for deduction and payment of tax at source. (ii) Ld. CIT(Appeals) ought to have appreciated that the details of principal component and interest component in each EMI are always made available either at the time of sanction of the loan or at the request of the borrower later and therefore it is the assessee borrower who is responsible for deduction of TDS from interest payment credit and its remittance to the Government account on or before the due date. (iii) Ld. CIT(Appeals) erred in deleting the addition made by the assessing officer on account of disallowance of interest claimed by the assessee by relying on the decision of the Special Bench in the case of Merilyn Shipping and Transporters wherein it was held that if interest amount was already paid during the relevant year provisions of sec. 40(a)(ia) are not applicable. (iv) While taking such a view of the matter, Ld. CIT (Appeals) failed to consider circular No. 10/DV/2013 dated 16-12-2013 issued by the CBDT wherein it is clarified in no uncertain terms that provisions of section are applicable not only to the amounts payable as on 31st March of the relevant year but also to the amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on record and further relied on the decision of the Hon ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd., [2015] 61 Taxmann.com 45 (Delhi), wherein the Hon ble Court has dealt with the issue of applicability of second proviso retrospectively. 9. Considered the rival submissions and perused the material facts on record as well as the decisions cited. In the case of Ansal Land Mark Township (P) Ltd., (supra), the Hon ble Delhi High Court has held as under: It was seen that the second proviso to Section 40(a) (ia) was inserted by the Finance Act 2012 with effect from 1st April 2013. The effect of the said proviso was to introduce a legal fiction where an assessee failed to deduct tax in accordance with the provisions of Chapter XVII B. Where such assessee was deemed not to be an assessee in default in terms of the first proviso to sub-Section (1) of Section 201 of the Act, then, in such event, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso . The first proviso to s 210 (1) had been inserted to benefit the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me embedded in such expenditure had remained untaxed due to tax withholding lapses by the assessee. It was not a penalty for tax withholding lapse but it was a sort of compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The penalty for tax withholding lapse per se was separately provided for in s 271 C, and, s 40(a)(ia) did not add to the same. It could not have been an intended consequence to punish the assessees for non deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income was duly brought to tax. Accordingly, High Court held that the insertion of second proviso to s 40(a)(ia) was declaratory and curative in nature and it had retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. The Court was of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso was declaratory and curative and had retrospective effect from 1st April 2005, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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