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TMI Blog2018 (2) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... y allowed the appeal of the assessee only for the statistical purposes. 2. Counsel for the appellant has framed following substantial questions of law:- (A). Whether under the facts and circumstances and in law, the ld. ITAT has erred in confirming the disallowance u/s 40(a)(ia) of the Act of 1961 on account of non deduction of tax at source on interest paid to financial institutions even wen the appellant has paid the entire amount and no amount remains payable at the end of the year? (B) Whether the ld. ITAT has erred on facts and in law in confirming the disallowance of interest u/s 40(a)(ia) ignoring that in view of the amendment made in this w.e.f. 1.4.2015 which is to remove unintended hardship, only 30% of such amount should be disallowed as this amendment to the provision being curative in nature, its effect needs to be retrospective in operation? (C) Whether the ld. ITAT is correct in law in confirming the disallowance u/s 40(a)(ia) even when the receipt has included its income in its return and has paid tax thereon? (D) Whether under the facts and circumstances of the case and in law, the ld. ITAT was correct in confirming the order of CIT(A) confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Commissioner of Income-Tax v. Sri Jagannath Steel Corporation : [1991]191ITR676(Cal) , 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 in the above case held the amendment to be curative and explanatory and hence retrospective. The Patna High Court has also held the amendment inserting the First proviso to be explanatory in the case of Jamshedpur Motor Accessories Stores v. Union of India and Ors. : [1991]189ITR70(Patna) . It has held the amendment inserting first proviso to be retrospective. The special leave petition from this decision of the Patna High Court was dismissed. The view of the Delhi High Court, therefore that the first pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only with effect from 1st April, 2004, would become curative in nature, hence, it would apply retrospectively with effect from 1st April, 1988. Secondly, it may be noted that, in the case of Allied Motors (P) Limited v. Commissioner of Income Tax reported in MANU/SC/0317/1997 : [1997] 224 I.T.R. 677, the Scheme of Section 43B of the Act came to be examined. In that case, the question which arose for determination was, whether sales tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant Sales Tax law should be disallowed under Section 43B of the Act while computing the business income of the previous year? That was a case which related to Assessment Year 1984- 1985. The relevant accounting period ended on June 30, 1983. The Income Tax Officer disallowed the deduction claimed by the assessee which was on account of sales tax collected by the assessee for the last quarter of the relevant accounting year. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under Section 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore', operate from 1st April, 1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1st April, 2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003. 4.3 In Commissioner of Income Tax vs. Harish Chand Ahuja 125 DTR 0184 (Raj.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision i.e., 1st April 2005 therefore needs to be answered in affirmation. It can be seen that the amendment made by the Finance Act 2010 allows additional time upto the due date of filing of the return in respect of even those instances where TDS has been deducted during the first eleven months of the previous year. The additional time till the due date of filing of the return, in case of TDS made during the last month of the previous year was already available by the amendment made by Finance Act 2008. Thus, it is apparent that the relaxation made by the amendment made under the Finance Act, 2010 brings the law in parity with the aforementioned situation and accordingly, for the TDS deducted all throughout the year, time is extended from payment till the filing of return. It is thus apparent that when the amendment introduced by the Finance Act, 2008 of relaxing the time for deposit of TDS was made retrospective from the year 2005 [1st April 2005], the amendment by Finance Act 2010 with regard to other limb of time limit for payment of TDS has to be held retrospective not from 1st April 2010 only. If we recall at this stage the speech of Finance Minister while introducing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of February of the previous year, did not get such benefit of extended time and thus the same worked unreasonably for such assesses, and therefore, it can be safely held upholding the contention of the respondents that to cure such defect, amendment in the year 2010 has been brought and the benefit of extended time to avoid hardship was given to the assessee and therefore, amendment of 2010 is in continuation to the amendment of 2008, and therefore, curative in nature and the same has to be held retrospective i.e., with effect from 1st April 2005. 12. We find ourselves in absolute agreement with the reasoning given by the Hon'ble Division Bench of Gujarat High Court in the case of Commissioner of Income Tax, Ahmedabad vs. Om Prakash Choudhary and while adopting that we do not find any substantial question of law involved in this appeal. The same is, therefore, dismissed. 4.4 In Commissioner of Income Tax XIII vs. Naresh Kumar (2014) 326 ITR 0256 wherein it has been held as under:- 26. Principle of matching which is disturbed by Section 40(a)(ia) of the Act, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he true effect of such amendment needs to be discerned. 16.1 : It is demonstrated before us that the TDS provision caused unintended inexplicable situation whereby the assessee who deducted the tax at source from the payments made by it for and on behalf of the Government and then if misses out the time limit of depositing the same with the Treasury within the time prescribed, the amount spent for its business purposes on account of the late deposit of such tax would result into disallowance of entire expenditure under Section 40[a](ia). The said proviso thereby caused immense hardship. The amendment under consideration made by the Finance Act 2010 relaxes the rigors of such provision by permitting payment of Tax till the filing of return as provided under sub- section (1) of Section 139 of the Act. 16.2 : One can notice that the object of bringing about provision of Section 40(a)(ia) in the year 2005 - 06 was to augment compliance of TDS provision. TDS either not deducted or deducted but not paid in respect of payment of interest, commission or brokerage etc., before the expiry of time prescribed under sub-section (1) of Section 200 and in accordance with the other provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the other side that various representations were made to the Finance Minister to bring about suitable amendment as the assessee otherwise was losing genuine deduction of expenditure on this count as also reflected in the speech of Finance Minister so also in the memorandum explaining the provision of the Finance Bill. 16.7 : Giving plain or natural meaning to the amendment as contended by the Department, if is likely to create a situation enhancing the hardship and advance discrimination, purposive and reasonable interpretation is required to be given by the Court. When plain interpretation frustrates the very legislative intent, the Court is expected to bear in mind the legislative intent from the language used in the statue with the help of permissible tools of interpretation of statute. 17: The core issue as to whether the amendment made by the Finance Act 2010 to Section 40[a](ia) of the Act is retrospective from the date of insertion of the provision i.e., 1st April 2005 therefore needs to be answered in affirmation. It can be seen that the amendment made by the Finance Act 2010 allows additional time upto the due date of filing of the return in respect of even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the possibility cannot be ruled out of business of the tax payer getting closed down permanently, if there is absence of any scope of claiming any expenses in the next year. 7. Similar is the view expressed by the Delhi High Court in the cases of CIT Vs. Oracle Software India Limited reported in 293 ITR page 253, H.S.Mohindra Traders Vs. I.T.O., Ward 39 (2), New Delhi and Calcutta High Court in the case of CIT Vs. Virgin Creations. 8. We are in the respectful agreement with the view expressed by the Gujarat High Court in giving retrospective operation to the said amendment notwithstanding that the parliament has expressly stated that it comes into effect from 01.04.2010. The said amendment is curative in nature. The tribunal committed an error in holding it as prospective. The substantial questions of law is answered in favour of the assesse and against the revenue. 4.6 In Commissioner of Income Tax-1 vs. Ansal Land Mark Township (P) Ltd. (2015) 377 ITR 635 wherein it has been held as 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut it to the counsel for the appellant as to whether any notice was issued by the Assessing Officer to the Airport Authority of India (AAI), so that there is no double taxation, the counsel for the appellant stated that this was not clear from the file. Similarly, the counsel in reply to the court query also said that there is nothing on record suggests that any proceedings have been initiated against Airport Authority of India for not paying its taxes. 5. Another issue which was urged by counsel for the appellant was that the interest which has been ordered by the ITAT is only till the due date of filing of the return of the Airport Authority of India (AAI) wherein it should have been till the date of actual payment of tax by the Airport Authority of India. The ITAT in our opinion has rightly held that since Airport Authority of India is a Government undertaking, the taxes may be presumed to have been paid lastly by the due date of filing of the return of income and, therefore, the liability of the assessee to pay interest on the amount which was to be deducted as TDS ends with the due date of filing of the return by the Airport Authority of India. 4.8 In Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d paid. The object of introduction of Section 40(a)(ia) is to ensure that TDS provisions are scrupulously implemented without default in order to augment recoveries. It is not to penalise an assessee when payment has been made within the time stated. Failure to deduct TDS or deposit TDS results in loss of revenue and may deprive the Government of the tax due and payable. The provision should be interpreted in a fair, just and equitable manner. It should not be interpreted in a manner which results in injustice and creates tax liabilities when TDS has been deposited/paid and the respondent who is following cash system of accountancy has made actual payment to the third party for services rendered. If the said object and purpose is kept in view, we do not think the Assessing Officer was justified in disallowing and in invoking Section 40(a)(ia) in the present case. The question of law is accordingly answered in negative, i.e., in favour of the respondent-assessee and against the Revenue. The appeal is accordingly disposed of. No costs. 4.9 In Commissioner of Income Tax, Ajmer vs. Asian Construction Company DBITA 26/2012 decided on 30.08.2017 wherein it has been held as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. Therefore even in a case it is held that the disallowance u/s 40(a)(ia) is warranted, same should be restricted to only 30% of the amount of interest paid. Reliance is placed on the following cases where it is held that any amendment made in the Act, which is intended to remove unintended and undue hardship should be given retrospective effect:- Shri Rajendra Yadav vs. ITO (Jaipur Trib) ITA No. 895/JP/2012 pronounced on 29.01.2016 Allied Motors Pvt. Ltd. vs. CIT 224 ITR 677 (SC) CIT vs. Alom Extrusions Ltd. 319 ITR 306 (SC) In view of the above, even if it is held that Section 40(a)(ia) is attracted, the disallowance of interest payments to Religare Finvest Limited and Fullertron India Limited be restricted to 30% of the interest paid. 4.5 In respect of the payments made to Shri Gaurav Agrawal, it is submitted that the payment is made towards processing charges of bank loan as per the standing instructions of the Bank. This payment is not a payment of legal expense and therefore, Section 194J is not applicable. This is also evident from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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