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TMI Blog2018 (5) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... on (C) No. 24879 OF 2014 CIVIL APPEAL No. 4469 OF 2018 (Arising out of Special Leave Petition (C) No. 30611 OF 2014 CIVIL APPEAL No. 4453 OF 2018 (Arising out of Special Leave Petition (C) No. 24747 OF 2014 CIVIL APPEAL No. 4454 OF 2018 (Arising out of Special Leave Petition (C) No. 24748 OF 2014 CIVIL APPEAL No. 4459 OF 2018 (Arising out of Special Leave Petition (C) No. 26780 OF 2014 CIVIL APPEAL No. 4457 OF 2018 (Arising out of Special Leave Petition (C) No. 24750 OF 2014 CIVIL APPEAL No. 4456 OF 2018 (Arising out of Special Leave Petition (C) No. 24749 OF 2014 CIVIL APPEAL No. 4471 OF 2018 (Arising out of Special Leave Petition (C) No. 3512 OF 2015 CIVIL APPEAL No. 4624 OF 2018 (Arising out of Special Leave Petition (C) No. 19305 OF 2015 CIVIL APPEAL No. 4460 OF 2018 (Arising out of Special Leave Petition (C) No. 26781 OF 2014 CIVIL APPEAL No. 4462 OF 2018 (Arising out of Special Leave Petition (C) No. 29246 OF 2014 CIVIL APPEAL No. 4463 OF 2018 (Arising out of Special Leave Petition (C) No. 30639 OF 2014 CIVIL APPEAL No. 4466 OF 2018 (Arising out of Special Leave Petition (C) No. 36421 OF 2014 CIVIL APPEAL No. 4465 OF 2018 (Arising out of Special Leave Petition (C) No. 34200 O ..... 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Arising out of Special Leave Petition (C) No.11070 OF 2018 @ (DIARY No. 18542 OF 2017) CIVIL APPEAL No. 4489 OF 2018 (Arising out of Special Leave Petition (C) No.11069 OF 2018 @ (DIARY No. 18576 OF 2017) CIVIL APPEAL No. 4491 OF 2018 (Arising out of Special Leave Petition (C) No. 23488 OF 2017 CIVIL APPEAL No. 4492 OF 2018 (Arising out of Special Leave Petition (C) No. 19747 OF 2017 CIVIL APPEAL No. 4497 OF 2018 (Arising out of Special Leave Petition (C) No. 19751 OF 2017 CIVIL APPEAL No. 4498 OF 2018 (Arising out of Special Leave Petition (C) No. 19726 OF 2017 CIVIL APPEAL No. 4501 OF 2018 (Arising out of Special Leave Petition (C) No.11074 OF 2018 @ (DIARY No. 20508 OF 2017) CIVIL APPEAL No. 4515 OF 2018 (Arising out of Special Leave Petition (C) No. 23081 OF 2017 CIVIL APPEAL No. 4502 OF 2018 (Arising out of Special Leave Petition (C) No. 22584 OF 2017 CIVIL APPEAL No. 4503 OF 2018 (Arising out of Special Leave Petition (C) No. 23489 OF 2017 CIVIL APPEAL No. 4626 OF 2018 (Arising out of Special Leave Petition (C) No. 23054 OF 2017 CIVIL APPEAL No. 4504 OF 2018 (Arising out of Special Leave Petition (C) No. 29789 OF 2017 CIVIL APPEAL No. 4505 OF 2018 (Arising out of Special Leav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed to claim deduction of the commission amount from the total income. The Assessing Officer revised the total income to Rs. 4,58,99,999/- with the requirement to pay the additional tax amount of Rs. 23,88,832/- by the Respondent. (b) Being aggrieved by the order dated 12.10.2009, the Respondent preferred an appeal before the Commissioner of Income tax (Appeals). Learned CIT (Appeals), vide order dated 01.08.2011, allowed the appeal while holding that the commission amount is eligible for deduction under the said Assessment Year. (c) Being aggrieved, the Revenue preferred an appeal being ITA No. 1487/Kol/2011 before the Tribunal which came to be dismissed on 29.02.2012. (d) Being aggrieved by the order dated 29.02.2012, the Revenue preferred an appeal before the High Court. The High Court, vide judgment and order dated 03.09.2012, had dismissed the appeal. (e) Aggrieved by the judgment and order dated 03.09.2012, the Revenue has preferred this appeal before this Court. 4) Heard learned senior counsel for the parties and perused the factual matrix of the case. Point(s) for consideration:- 5) Whether the amendment made by the Finance Act, 2010 in Section 40(a)(ia) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Mark Township Pvt Ltd. in ITA No. 160/2015. 11) Learned senior counsel further submitted that the amendments of curative nature have to be applied retrospectively and hence the amendment made in 2010 to the existing provisions of Section 40(a)(ia) should be given retrospective effect from the date of insertion and in support of this contention learned senior counsel relied on a decision of this Court in Allied Motors (P.) Ltd etc. vs. CIT, Delhi - (1997) 224 ITR 677(SC). 12) Learned counsel for the Respondent finally submitted that the decision of the High Court is well within the parameters of law and requires no interference. Discussion:- 13) The dispute in the present case revolves around the fact that whether the amendment made by the Finance Act, 2010 to the provisions of Section 40 (a) (ia) of the IT Act is retrospective in nature so as to apply to the present case or not. If it is so, then the tax duly paid by the assessee on 01.08.2005 is well in accordance with law and the assessee is allowed to claim deduction for the tax deducted and paid to the government, in the previous year in which the tax was deducted. 14) For deciding as to the retrospective effect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndum that it came with a purpose to ensure tax compliance. The fact that the intention of the legislature was not to punish the assessee is further reflected from a bare reading of the provisions of Section 40(a)(ia) of the IT Act. It only results in shifting of the year in which the expenditure can be claimed as deduction. In a case where the tax deducted at source was duly deposited with the government within the prescribed time, the said amount can be claimed as a deduction from the income in the previous year in which the TDS was deducted. However, when the amount deducted in the form of TDS was deposited with the government after the expiry of period allowed for such deposit then the deductions can be claimed for such deposited TDS amount only in the previous year in which such payment was made to the government. 17) However, it has caused some genuine and apparent hardship to the assesses especially in respect of tax deducted at source in the last month of the previous year, the due date for payment of which as per the time specified in Section 200 (1) of IT Act was only on 7th of April in the next year. The assessee in such case, thus, had a period of only seven days to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was provided that in case of assessees falling under the first category, no disallowance under Section 40(a) (ia) of the IT Act shall be made if the tax deducted by them during the last month of the previous year has been paid on or before the last day of filing of return in accordance with the provisions of Section 139(1) of the IT Act for the said previous year. In case, the assessees are falling under the second category, no disallowance under Section 40(a)(ia) of IT Act where the tax was deducted before the last month of the previous year and the same was credited to the government before the expiry of the previous year. The net effect is that the assessee could not claim deduction for the TDS amount in the previous year in which the tax was deducted and the benefit of such deductions can be claimed in the next year only. 21) The amendment though has addressed the concerns of the assesses falling in the first category but with regard to the case falling in the second category, it was still resulting into unintended consequences and causing grave and genuine hardships to the assesses who had substantially complied with the relevant TDS provisions by deducting the tax at source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or to be applicable from the date of enforcement. 26) TDS results in collection of tax and the deductor discharges dual responsibility of collection of tax and its deposition to the government. Strict compliance of Section 40(a)(ia) may be justified keeping in view the legislative object and purpose behind the provision but a provision of such nature, the purpose of which is to ensure tax compliance and not to punish the tax payer, should not be allowed to be converted into an iron rod provision which metes out stern punishment and results in malevolent results, disproportionate to the offending act and aim of the legislation. Legislature can and do experiment and intervene from time to time when they feel and notice that the existing provision is causing and creating unintended and excessive hardships to citizens and subject or have resulted in great inconvenience and uncomfortable results. Obedience to law is mandatory and has to be enforced but the magnitude of punishment must not be disproportionate by what is required and necessary. The consequences and the injury caused, if disproportionate do and can result in amendments which have the effect of streamlining and correctin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India Ltd., vs. CIT, New Delhi (2000) 245 ITR 3, CIT vs. Amrit Banaspati (2002) 255 ITR 117 and CIT vs. Alom Enterprises Ltd. (2009) 319 ITR 306. 30) Hence, in light of the forgoing discussion and the binding effect of the judgment given in Allied Moters (supra), we are of the view that the amended provision of Sec 40(a)(ia) of the IT Act should be interpreted liberally and equitable and applies retrospectively from the date when Section 40(a)(ia) was inserted i.e., with effect from the Assessment Year 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. As the developments with regard to the Section recorded above shows that the amendment was curative in nature, it should be given retrospective operation as if the amended provision existed even at the time of its insertion. Since the assessee has filed its returns on 01.08.2005 i.e., in accordance with the due date under the provisions of Section 139 IT Act, hence, is allowed to claim the benefit of the amendment made by Finance Act, 2010 to the provisions of Section 40(a)(ia) of the IT Act. 31) In light of the forgoing discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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