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TMI Blog2016 (8) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... our after having received from the assessee, which was not deducted by the assessee, in that eventuality benefit be extended to the assessee in terms of amended section 40(a)(ia) of the Act. Appeal of the assessee is allowed for statistical purposes only. - ITA No. 818/JP/2014 - - - Dated:- 22-8-2016 - Bhagchand (Accountant Member) And Laliet Kumar (Judicial Member) For the Assessee : G. M. Mehta (CA) For the Revenue : R. S. Dangur (Addl.CIT) ORDER Laliet Kumar (Judicial Member) This is an appeal filed by the assessee against the order dated 14/10/2014 passed by the ld CIT(A)-II, Jaipur for the A.Y. 2011-12. The sole ground taken by the assessee in appeal is as under:- 1 That the ld. CIT(A) has erred in law and on facts in sustaining addition of ₹ 8,36,376/- made U/s 40(a)(ia) of IT Act on account of actual interest payment to the financial institutions though provisions are applicable on the sums which remained payable at the end of the year. 2. The ld Assessing Officer while passing the assessment order has observed as under:- 4.1 During the course of assessment proceedings it was seen that the assessee had made the interest payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which had actually been paid during the previous year without deduction of tax at source. The order of the Special Bench has since been put under interim suspension by the Andhra Pradesh High Court. 3.3.3 The Hon'ble Calcutta High Court and Hon'ble Gujarat High Court in the case of Commissioner of Income-tax, KolkataXI v. Crescent Exports Syndicate [2013] 33 taxmann.com 250 (Calcutta) and Commissioner of Income-tax-IV v. Sikandarkhan N Tunvar [2013] 33 taxmann.com 133 (Gujarat) respectively, have held that section 40(a)(ia) of the Act would cover not only the amounts which are payable at the end of the previous year but also which are payable at any time during the year. 3.3.4 The Hon'ble High Courts have further held that the intention of the legislation was to disallow certain types of expense, subject to provisions of Chapter XVII-B which were payable at any time during the year but no tax was deducted at source or if deducted was not paid within the stipulated time. There is no such condition that amount should remain payable at the end of the year. 3.3.5 The Hon'ble Allahabad High Court in CIT v. Vector Shipping Service (P.) Ltd. [2013] 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. (2015) 377 ITR 635 (Del) has held that insertion of second proviso to section 40(a)(ia) is declaratory and curative in nature, which is effective from 01 st April, 2005. In view of which, it was submitted that since the creditors had already deposited the due tax, therefore, nothing is payable and the provision of Section 40(a)(ia) of the Act are attracted. 5. On the other hand, the ld DR has submitted written submissions to the following effects:- In a recent decision dated 29.04.2015, the Hon ble P H High court in the case of P.M.S Diesels vs CIT (2015) 277 CTR 0491 (P H) after considering the cases of CIT vs. M/s Vector Shipping Services (P) Ltd. (2013) 262 CTR (All) 545, V.M. Salgaocar Bros. (P) Ltd., etc. vs. CIT etc. (2000) 243 ITR 383 (SC), ACIT vs. Merilyn Shipping Transporters 136 ITD 23 (SB) (Vishakhapatnam), Tube investments of India Ltd. And another vs. ACIT, (TDS) and others, (2010) 325 ITR 610 (Mad) held that: The provision of section 40(a) (ia) of the Income Tax Act. 1961, are applicable not only to the amount which is shown as payable in the date of balance sheet, but it is applicable to such expenditure, which become payable at any time dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Calcutta High Court have dealt with issue in detail in the light of various judicial pronouncement and have categorically held that section 40(a)(ia) would cover not only to the amount which are payable as on 31 st March of a particular year but also which are payable at any time during the year. ITAT considered opinion that the view expressed or the ratio laid down by the special Bench of the Tribunal in the case of Merilyn shipping Transports has been overruled. Therefore, it cannot be said that since the Hon ble Jurisdictional High court has approved the view taken by the Special Bench of the Tribunal in the case of Merilyn shipping Transports, the same has to be followed by the Tribunal situated within the jurisdiction of Hon ble Allahabad High Court. The Hon ble Jurisdictional High Court has not examined the impugned issue at all and simple passing reference was made with regard to the order of the Special Bench of the Tribunal in the case of Merilyn Shipping Transports and the relief was granted to the Assessee on merit. Therefore, the ratio laid down in the case of Merilyn shipping Transports, which has been suspended by Hon ble Andhra Pradesh High Court, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivise not deducting tax at source, when such tax deductions are due but so far as the legal framework is concerned, this pro vision is not for the purpose of penalising for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivising a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a 'fair, just and equitable' interpretation of law as is the guidance from the Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an 'intended consequence' to disallow the expenditure, due to nondeduction of tax at source, even in a situation in which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said proviso is declaratory and curative and has retrospective effect from April 1, 2005, merits acceptance. 15. In that view of the matter, the court is unable to find any legal infirmity in the impugned order of the Income-tax Appellate Tribunal in adopting the ratio of the decision of the Agra Bench, Income-tax Appellate Tribunal in (Rajeev Kumar Agarwal v. Asst. CIT). 16. No substantial question of law arises in the facts and circumstances of the present case. The appeal is dismissed. Since the AR of the assessee has submitted that the amount of tax required to be deducted, has been paid by the creditor in view of 2 nd proviso of Section 40(a)(ia) of the Act. This issue should be decided in favour of the assessee. 6.1 We have also gone through judgment in the case of CIT Vs Ansal Plaza Mark Township P. Ltd. (supra), in fact the assessee has not raised this issue before the ld Assessing Officer as well as before the ld. CIT(A). This issue has a factual determination and verification, therefore, it will be in the interest of justice to remand the matter back to the file of the Assessing Officer to verify the truthfulness on the submission made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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