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TMI Blog2021 (9) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has moved an application under Rule 29 of the ITAT Rules, 1963 for placing on record the documents by way of additional evidences vide application dated 01/4/2021. The additional evidences submitted by the assessee at this stage are the first time and are necessary for deciding the appeal, therefore, considering the totality of facts and circumstances of the case as well as law prevailing in this regard, we admit the additional evidences filed by the assessee. Though we have restored the matter back to the file of the A.O. for reconsideration - we further direct the assessee to submit required documents in respect of both the NBFCs i.e. Barclays Investment Loan (India) Ltd. and Future Capital relating to the year under consideration and further the A.O. is also directed that being the adjudicator as well as investigator, the A.O. should invoke necessary provisions of the Income Tax Act for calling the records from the concerned NBFCs i.e. i.e. Barclays Investment Loan (India) Ltd. and Future Capital to ascertain that the amount paid by the assessee has been included as income in their total taxable income and if from the documents, the A.O. is satisfied regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 W.e.f. 01/04/2015 in section 40(a)(ai) which is retrospective. 4. NBFCs ITR is Subject to Verification:- That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in not directing the AO to verify the fact that the interest income received by these NBFCs have been included in the return of income and offered to tax. 5. That the learned AO has grossly erred both in law and facts in levying interest u/s. 234A, 234B, 234C. 6. That the appellant reserves his rights to add amend or alter the grounds of appeal on or before date of appeal hearing. 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. Brief facts of the case are that the assessee is a firm and engaged in the business of trading and manufacturing of copper wires. It filed its return of income on 24/9/2012 declaring total income of ₹ 23,70,240/-. The A.O. completed the assessment U/s 143(3) of the Income tax Act, 1961 (in short, the Act) determining total income of ₹ 41,44,010/- by disallowing ₹ 17,73,769/- U/s 40(a)(ia) of the Act. 4. Being aggrieved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by Bangalore Bench in case of Sh. G. Shankar Vs. ACIT in ITA No. 1832/Bang/2013 Dt. 10.10.2014, Agra Bench in case of Rajeev Kumar Agarwal Vs. ACIT (2010) 34 ITR (Trib). 479, Delhi Bench in case of ITO Vs. Dr. Jaideep Kumar Sharma: (2014) 34 ITR (Trib.) 565, Bangalore Bench in case of DCIT Vs. Ananda Marakala (2014) 150 ITD 323 as the amendment was made to remove the undue hardship. This in accordance with second provision to Section 40 (a) (ia) no disallowance could be made in the hands of assessee u/s. 40 (a) (ia) so the disallowance of ₹ 17,73,769/- made by Ld. A.O. by invoking provisions of Section 40 (a) (ia) deserves to be deleted. Without prejudice to above the legislative intent for introducing section 40 (a) (ia) is explained in CBDT Circular No. 5/2005 Dt. 15.07.2005 reported at 269 ITR 101 (Statute). In the present case there is no dispute as to the fact that Interest to NBFCs has actually been paid to payees and as on 31.03.2012 no amount of interest was payable. The Special Bench of IT AT in case of Merilyn Shipping Transport Vs. ACIT 16 ITR (Trib) 1 (PB 62-63) has held that section 40 (a) (ia) cannot be invoked in respect of amounts actually pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal issued has held in Para 15 to 29 as under.:- 15. Question whether the amendment is retrospective 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 principal 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 been drawn distinction between procedural and substantive provisions, Substantive provisions deal with rights and the same are fundamental, while procedural law is concerned with the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of either interpretation, it ought to be construed as prospective only. The word fairly used in the aforesaid quotation is important and relevant, but for applicant 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 Retrospectively 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 in procedural but it application to past cause of action may result or 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 retrospectively 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 certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Maharashtra [2006] 6 SCC 289 in the following words:- The negotiation is not a rigid rule and varies with the intention and 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rospective. Section 43B was inserted in the Act with effect from 1st April 1984 for curbing claims of taxpayers who did not discharge or pay 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 assesses, 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/expenses, equal to the amount paid would be allowed. The Supreme Court notices 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 inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Patna High Court was dismissed. The view of the Delhi High Court, therefore, that the first proviso to Section 43-B will be available only prospectively does not 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 43-B 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 43-B 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst eleven months of the previous year but paid before the due date of filing of the return, will constitute sufficient compliance. 29. In view of the aforesaid discussion, we do 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 judgment 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 49 (a) (ia) has been inserted, which provides that if any such sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presently made. The purpose of this amendment was explained in the memorandum as under:- The disallowance of whole of the amount of expenditure result into undue hardship and therefore in order to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40 (a) (ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed. The Finance Minister while introducing the amendment in Para 207 of the Budget Speech has stated as under:- 207. Currently, where an assessee fails to deduct and pay tax on specified payments to resident, 100 percent of such payments are not allowed as deduction while computing his income. This has caused undue hardship to tax payers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed. From the above it can be noted that amendment made by FA (No. 2) Act, 2014 w.e.f. 01.04.2015 is to remove unintended and undue hardship and therefore this amendment should be give retrospective effect as per the various decisions stated ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that second proviso to Section 40(a)(ia) of the Act inserted by the Finance Act 2012 w.e.f. 01/04/2013 has provided that where an assessee fails to deduct tax on the sum paid to the resident but such resident payee has furnished the return, taken into account such sum for computing income and has paid the tax due on the income declared by him then in that eventuality it will be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return by the resident payee and therefore, provisions of Section 40(a)(ia) of the Act in that case would become inapplicable. 9. We have also gone through the second proviso to Section 40(a)(ia) of the Act which was inserted w.e.f. 01/04/2013, however, the Coordinate Benches of ITAT Bangalore Bench in the case of Shri G. Shankar Vs ACIT in ITA No. 1832/Bang/2013 order dated 10/10/2014, DCIT Vs Ananda Marakala (2014) 150 ITD 323, Agra Bench of the Tribunal in the case of Rajeev Kumar Agarwal Vs ACIT (2010) 34 ITR (Trib) 479 and Delhi Benches in the case of ITO Vs Dr. Jaideep Kumar Sharma (2014) 34 ITR (Trib) 565 has held that the amendment was made to remove the undue hardship and it was held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e followed by the Income tax return as submitted under section 139 after depositing due Income Tax, such Certificate is being enclosed (Page No. 1-8). 11. On the other hand, the ld. DR contested the present application on the ground that the said application is not maintainable. 12. Having considered the rival contentions and carefully perused the material available on record. From perusal of record, we observed that Section 254 of the Income Tax Act, 1961 (in short, the Act) read with Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 states about power to admit additional evidences, whether mere fact that evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at appellate stage, especially when evidence was available to party at initial state and had not been produced at that time. Rule 46A of the Rules speaks about production of additional evidence before the [Deputy Commissioner (Appeals)] [and Commissioner (Appeals)]. The additional evidences submitted by the assessee at this stage are the first time and are necessary for deciding the appeal, therefore, considering the totality of facts and circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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