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TMI Blog2018 (11) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... ure was supported by the assessee with proper vouchers. Accordingly, in absence of any specific defect in the claim of the assessee except the self made vouchers for petty expenses, the ad hoc disallowance made by the Assessing Officer is not justified. Assessing Officer has not conducted any proper enquiry or has given a finding that the claim of the assessee is excessive or bogus. - Decided in favour of assessee. Disallowance made u/s 40(a)(ia) in respect of the interest paid to various Non-banking Financial Companies (NBFCs) - non deduction of tds - Held that:- Though the substitution in section 40 has been made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors as to whether the said parties have deposited the tax or not and further or restrict the addition to 30%. We are of the view the second proviso to section 40(a)(ia) of the Act would be effective retrospective as it was undisputedly inserted to removable the hardship faced by the assesses. Hence, we set aside this issue to the record of the Assessing Officer for limited purpose to verify the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative, however, subsequently there is a change of the authorized representative of the assessee, therefore, it is apparent that the order sent to the earlier authorized representative was not received. Consequently, we find that the assessee has explained the reasonable cause for not receiving the impugned order sent through speed post dated 16/6/2017 and finally the impugned order was given to the assessee as a certified copy issued on 08/5/2018. Accordingly, we admit the appeal of the assessee for adjudication on merits. 4. In the present appeal, the assessee has raised following grounds of appeal: 1. Under the facts and circumstances of the case, the ld. CIT(A) has erred in partially upholding the following disallowances made by the ld. A.O. on lump sum basis. S. No. Expenditure head Total expenses Expenses disallowed by A.O. Expenses allowed by the CIT(A) 1. Business promotion Expense 2,20,751/- 58,297(20%) 29,149(10%) 2. Office Expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly we reject the ground No. 1 of the assessee s appeal. 7. Ground No. 2 of the appeal is regarding the disallowance of ₹ 40,000/- on account of travelling expenses. 8. We have heard the ld AR as well as the ld DR and considered the relevant material on record. The Assessing Officer has made ad hoc disallowance of ₹ 40,000/- on account of travelling expenses on the ground that the claim is not fully supported with evidence and further the assessee could not furnish complete details and bills and vouchers as the vouchers produced by the assessee were self made in respect of some of the petty expenses. We find that the ld. CIT(A) has not adjudicated this issue as the issue of disallowance of 20% of the expenditure was adjudicated by the ld. CIT(A) which was restricted to 10%, however, despite a specific ground raised by the assessee, the same has not been adjudicated. The ld AR of the assessee has submitted that the Assessing Officer has made an ad hoc disallowance without any basis and further the assessee has produced all vouchers except the self made vouchers for petty expenses, therefore, ad hoc disallowance made by the Assessing Officer is not sustain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A). The ld. CIT(A) has accepted the fact that the amount of ₹ 20,000/- paid to Rashi Perepharals Pvt. Ltd. is subjected to TDS and therefore, the disallowance made by the Assessing Officer in respect of the said payment was deleted. As regards the payment to the other NBFCs, the ld. CIT(A) has confirmed the disallowances made by the Assessing Officer by rejecting the contention of the assessee that second proviso to Section 40(a)(ia) of the Act is prospective in nature and not retrospective. 13. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. The Assessing Officer has made disallowance of interest by invoking the provisions of Section 40(a)(ia) of the Act, details of the same are as under: Sl. No. Name of the NBFC Interest paid 1. Bajaj Auto Finance Ltd. 234064 2. Barclays Finance 162898 3. HDB Financial Services 64598 4. Tata Capital Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rospective or prospective is vexed and rigid rule can be applied universally. Various rules of interpretation have developed in order to determine whether or not, an amendment is retrospective or prospective. Fiscal statutes imposing liabilities are governed by normal presumption that they are not retrospective. The cardinal rule is that the law to be applied, is that which is in force on the first day of the assessment year, unless otherwise mandated expressly or provided by necessary implication. The aforesaid dictum is based upon the principle that a new provision creating a liability or an obligation, affecting or taking away vested rights or attaching new disability is presumed to be prospective. However, it is accepted that Legislatures have plenary power to make retrospective amendments, subject to Constitutional restrictions. 16. Based upon the aforesaid broad dictum, Judges and jurists have drawn distinction between procedural and substantive provisions. Substantive provisions deal with rights and the same are fundamental, while procedural law is concerned with the legal process involving actions and remedies. Amendments to substantive law are treated as prospective, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairly used in the aforesaid quotation is important and relevant, but for application of another rule of interpretation. G.P. Singh in Principles of Statutory Interpretation , 13th Edition, 2012 at page 538 under the sub-heading Recent statements of the rule against Retrospectivity has greatly emphasized the principle of fairness and observed that classification of statute either substantive or procedural does not necessarily determine whether the enactment or amendment has retrospective operation, e.g., law of limitation is procedural but its application to past cause of action may result of reviving or extinguishing a right, and such operation cannot be said to be procedural. Similarly, when requisites of an action under the new statute, draws from a time incident to its passing, rule against retrospectivity may not be applicable. 20. In the said text, reference has been made to formulation by Dixon, C.J. in Maxwell v. Murphy [1957] 96 CLR 261 holding:- The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purport of the legislation, but to apply it in such a case is a doctrine of fairness. When a new law is enacted for the benefit of the community as a whole, even in absence of a provision the statute may be held to be retrospective in nature. 24. In Allied Motors (P.) Ltd. v. CIT [1997] (224) ITR 677/91 Taxman 205 (SC) it was held that the new proviso to Section 43B should be given retrospective effect from the inception on the ground that the proviso was added to remedy unintended consequences and supply an obvious omission. The proviso ensured reasonable interpretation and retrospective effect would serve the object behind the enactment. 25. In State through C.B.I Delhi v. Gian Singh AIR 1999 SC 3450 extreme penalty of death was diluted to alternative option of imprisonment for life recording that the legislative benevolence could be extended to an accused, who awaits judicial verdicts against his sentence. Earlier in Rattan Lal v. State of Punjab AIR 1965 SC 444 reference was made to Section 6 of the Probation of Offenders Act, 1958 and it was observed that if the Act was not given retrospective operation, it would lead to anomalies and thus could not be the intenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y statutory liabilities but claimed deductions on the ground that the statutory liability had accrued. Section 43B states that the statutory liability would be allowed as a deduction or as an expense in the year in which the payment was made and would not be allowed, even in cases of mercantile system of accountancy, in the year of accrual. It was noticed that in some cases hardship would be caused to assessees, who paid the statutory dues within the prescribed period though the payments so made would not fall within the relevant previous year. Accordingly, a proviso was added by Finance Act, 1987 applicable with effect from 1st April, 1988. The proviso stipulated that when statutory dues covered by Section 43B were paid on or before the due date for furnishing of the return under Section 139(1), the deduction/expense, equal to the amount paid would be allowed. The Supreme Court noticed the purpose behind the proviso and the remedial nature of the insertion made. Of course, the Supreme Court also referred to Explanation 2 which was inserted by Finance Act, 1989 which was made retrospective and was to take effect from 1st April, 1984. Highlighting the object behind Section 43B, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear to be correct. As observed by G.P. Singh in his Principles of Statutory Interpretation, 4th Edn. At p. 291: It is well-settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. In fact the amendment would not serve its object in such a situation unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained. 23. Section 43B deals with statutory dues and stipulates that the year in which the payment is made the same would be allowed as a deduction even if the assessee is following the mercantile system of accountancy. The proviso, however, stipulates that deduction would be allowed where the statutory dues covered by Section 43B stand paid on or before the due date of filing of return of income. Section 40(a)(ia) is applicable to cases where an assessee is required to deduct tax at source and fails to deduct or does not make payment of the TDS before the due date, in such cases, notwithstanding Sections 30 to 38 of the Act, deduction is to be allowed as an expenditure in the year of payment unless a case is covered under the exceptions carved out. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not find any merit in the present appeals filed by the Revenue and they are dismissed. We further note that the Coordinate Bench of this Tribunal in case of Rajesh Yadav in ITA No. 895/JP/2012 vide order dated 29.01.2016 has held as under:- 6.1. Recently in the matter of P.M.S. Diesels 2015 ] 59 taxmann.com 100 (Punjab Haryana), Hon ble Punjab Haryana High Court had elaborately discussed the judgment passed by the Hon ble Calcutta High Court and Hon ble Gujarat High Court, Hon ble Allahabad High Court and other judgments as available and thereafter has come to the conclusion that the provisions of section 40(a)(ia) are mandatory in nature and non compliance/non deduction of tax attracts disallowance of the entire amount. Having said so, we will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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