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TMI Blog2016 (6) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005. During the course of hearing, the ld. DR has relied on the decision in the case of Prudential Logistics and Transports [ 2015 (2) TMI 847 - KERALA HIGH COURT] wherein the Hon ble Kerala High Court has taken a view that the application of second proviso to section 40(a)(ia) of the Act is only prospective. Since there exists two contradictory decisions, we are of the considered opinion that the Hon ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [ 1973 (1) TMI 1 - SUPREME COURT] has held that the decision favourable to the assessee have to be acted upon. Thus, respectfully following the decision of the Agra Benches of the Tribunal in the case of Rajeev Kumar Agarwal [ 2014 (6) TMI 79 - ITAT AGRA] which was duly affirmed by the Delhi Benches of the Tribunal in the case of Ansal Landmark Township Pvt. Ltd. v. Addl.CIT(supra) and subsequently confirmed by the Hon ble Delhi High Court, we find no infirmity in the order passed by the ld. CIT(A) on this issue and the ground raised by the Revenue is dismissed. - I.T.A. Nos. 20 and 21/Mds/2015 And I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 14A r.w. Rule 8D at ₹.54,824/-. 3.2 On being aggrieved, the assessee is in appeal before the Tribunal. 3.3 We have heard both sides, perused the materials on record and gone through the orders of authorities below. During the financial year 2009-10 relevant to the assessment year 2010-11 under consideration, the assessee earned exempt dividend income of ₹.18,960/-. However, the assessee has not admitted any expenses incurred for earning the above exempt income. After considering the investments made by the assessee and subsequently decreasing the investments during the financial year 2009-10, the Assessing Officer, by invoking provisions of section 14A r.w. Rule 8D worked out the disallowance towards expenditure for earning exempt income at ₹.16,08,075/-. The ld. CIT(A) restricted the disallowance at ₹.54,824/-. In similar facts and circumstances, the Hon ble Delhi High Court in case of Joint Investments Pvt. Ltd. v. CIT 372 ITR 694 decided the issue in favour of the assessee and the head-notes are as under: Income-Expenditure incurred in relation to income not includible in total income-Disallowance-Assessee was engaged in diverse inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee s appeal allowed. 3.4 In the present case, the assessee has earned exempt dividend income of ₹.18,960/-. The assessee has not admitted any expenses to earn the above dividend income. The Assessing Officer disallowed the expenses to the tune of ₹.16,08,075/- by invoking section 14A r.w.r. 8D. By taking into consideration of the facts and circumstances of the present case and keeping in view of the above decision of the Hon ble Delhi High Court, we are of the opinion that the Assessing Officer is not justified in making excessive disallowance. Therefore, we restrict the disallowance made by the Assessing Officer to the extent of exempt income earned by the assessee and ordered accordingly. 4. In the cross appeals for the assessment year 2010-11, the appeal of the Revenue is found to have been filed late by two days in filing the appeal before the Tribunal. At the time of hearing, the Bench has asked the ld. DR reason for not filing the petition for condonation of delay. The ld. DR has submitted that by oversight, the Department has not filed the petition for condonation of delay in time and pleaded for condoning the delay. When the Bench asked, the ld. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related TDS is deemed to have been deducted and paid on 30.09.2010 being the date of filing of return of income by M/s. United Breweries Ltd. (the deductee), the assessee has claimed deduction by virtue of section 40(a)(ia) of the Act, since 30.09.2010 was also the due date for the assessee for filing the return of income under section 139(1) of the Act. It is an admitted fact that both the assessee and the deductee have filed their returns of income on the due date of filing of return in terms of section 139(1) of the Act. The only dispute raised by the Department is that the second proviso to section 40(a)(ia) of the Act is not applicable for the assessment year 2010-11 since the said second proviso is only operative from 01.04.2013 as per the amendment made by the Finance Act, 2012. The above ground has raised by the assessee before the ld. CIT(A) as an additional ground. Accordingly, the ld. CIT(A) asked comments of the Assessing Officer on the allowability of sum of ₹.31.00 crores as deduction under the first proviso to section 40(a)(ia) of the Act read with second proviso thereto. In the remand report, the Assessing Officer has objected that the second proviso is only o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and 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 compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The penalty for tax withholding lapse per se is separately provided for in Section 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee s tax w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2972/Del/2012 for the assessment year 2008-09 and in I.T.A. No. 877/Del/2013 for the assessment year 2009-10. Against the decision of the Delhi Benches of the Tribunal in the case of Ansal Landmark Township Pvt. Ltd. v. Addl.CIT (supra), the Department went in appeal before the Hon ble Delhi High Court and vide its order dated 26.08.2015 by confirming the order of the Delhi Benches of the Tribunal, the Hon ble Delhi High Court has held that the second proviso to section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005. During the course of hearing, the ld. DR has relied on the decision in the case of Prudential Logistics and Transports v. ITO [2014] 364 ITR 689 (Ker.), wherein the Hon ble Kerala High Court has taken a view that the application of second proviso to section 40(a)(ia) of the Act is only prospective. Since there exists two contradictory decisions, we are of the considered opinion that the Hon ble Supreme Court in the case of CIT v. Vegetable Products Ltd. 88 ITR 192 has held that the decision favourable to the assessee have to be acted upon. 6.6 Thus, respectfully following the decision of the Agra Benches of the ..... 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