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TMI Blog2018 (2) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of Ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 43,15,295/-. 2. The assessee company craves its right to add, amend or alter any of the grounds on before the hearing." 2. The assessee has debited the expenditure on account of advertisement and publicity expenditure of Rs. 37,08,645/-. Similarly an amount of Rs. 6,06,650/-was also incurred for advertisement paid to SGM communications. The AO noted that the assessee has not deducted TDS on these amounts and therefore, disallowed a total sum of Rs. 43,15,295/- u/s 40(a)(ia) of the Income Tax Act. The assessee challenged the action of the AO before the ld. CIT(A) and contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l evidence to show that the recipient of the amount have already considered the same as part of their total income offered to tax. He has relied upon the decision of Hon'ble Delhi High Court in case of CIT vs. Ansal Landmark township (P) Ltd (supra) as well as following decision of this Tribunal as under:- * Ved Prakash Samariya vs. ACIT in ITA No. 116/JP/2015 * M/s Morani Fourwheels Pvt. Ltd. vs. ACIT in ITA No. 175/JP/2016 * M/s G.B. Impex Vs. ITO in ITA No. 430/JP/2016 * Smt. Prem Lata Gupta vs. ACIT in ITA No. 56/JP2016 * Shri Rakesh Tak vs. ITO in ITA No. 888/JP2014 4. On the other hand, ld. DR has submitted that the ld. CIT(A) has relied upon the decision of Hon'ble Kerala High Court in case of Thomas George Muthoot vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- "9. It is 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 is to introduce a legal fiction where an Assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such Assessee is 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". 10. It is pointed out by learned counsel for the Revenue that the first proviso to Section 201(1) of the Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the second proviso to Section 40(a)(ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40(a)(ia) and Section 201(1) of the Act is that as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable" interpretation of law- as is the guidance from 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 non-deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of 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 lapses by the assessee. It is not, in our considered view, a penalty for tax withholding lapse but it is a sort of compensator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40(a)(ia) is declaratory and curative in nature and it has 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.' 14. The Court is 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 is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance." We further note that a similar has been taken by the other High Courts including Hon'ble Allahabad High Court in case of Allahabad Wholesale Central Coop. Store vs. Pr. CIT 248 Taxmann 302. Further, the Coordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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