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TMI Blog2022 (3) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 40(a)(ia) by the Finance Act, 2008 and the said amendments were consciously made with retrospective effect from 1-4-2005 keeping in view that the same were made with a view to mitigating the hardships caused to the assessee. The amendments made again to the provisions of section 40(a)(ia) by the Finance Act, 2010 to tone down the rigour of law with the same intention, however, are made with effect from 1-4-2010. This proviso will come to the rescue of the assessee, only when the expenditure was claimed by the assessee as a deduction in the earlier assessment year which was disallowed by the AO by invoking the provisions of section 40(a)(ia) of the Act on the reason of non-deduction of tax at source or remitting the same to the Government after deduction. But in this case, the assessee has not claimed this expenditure as deduction in the earlier assessment year on account of nondeduction of tax by invoking the provisions of section 40(a)(ia) of the Act. Being so, when it was not allowed disallowed by the AO in the earlier assessment year by invoking the provisions of section 40(a)(ia), the assessee in the subsequent assessment year cannot claim it as a deduction on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee before this Tribunal, it is incumbent for the assessee to bring these documents as additional evidence. The failure to produce these documents before the lower authorities was neither wilful nor deliberate and that these evidence are very essential for proper appreciation of the facts of the case. 3. We have heard both the parties on the admission of additional evidence. In our opinion, the assessee has explained the reasons for nonproduction of the same on the earlier occasion by good and sufficient reasons and hence they are admitted for adjudication. 4. The facts of the issue are that the AO examined the invoices for repairs and maintenance and noted that certain amounts pertained to prior or subsequent assessment year. He therefore disallowed a sum of ₹ 14,84,965/-. The assessee submitted that it had bought windmills from Suzlon Limited for which annual maintenance contract (AMC) was also signed. The breakdowns in one of the windmills during August to January 2012, were attended to Suzlon, but it charged the breakdown charges as well as AMC. Aggrieved, the assessee refused to accept the bills. However Suzlon agreed to cancel a few bills and an amount w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Supra), the CIT(A) was of the view that the date of crystallization of the liability is 29.04.2009 and the expenditure is therefore not allowable in the year under consideration. 9. The contention of the ld. AR before us is that these two expenditure were actually incurred by the assessee in the assessment year under consideration as this expenditure crystallised in the year under consideration and the same has to be allowed in view of the proviso to section 40(a)(ia) of the Act. 10. The ld. DR relied on the orders of the lower authorities. 11. We have heard both the parties and perused the material on record. It may be pertinent to note that section 40(a)(ia) was inserted in the Income-tax Act by the Finance (No. 2) Act, 2004 with effect from 1-4-2005. The provisions of the said section as inserted originally with effect from 1-4- 2005 read as under:- Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- "(ia)any interest, commission or brokerage, fees for professional services or fees for technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year in which such tax has been paid. The proposed amendment will take effect from 1st day of April, 2005 and will, accordingly, apply in relation to the assessment year 2005-06 and subsequent years." [Emphasis supplied] 13. Section 40(a)(ia) thus was introduced in the statute with a view to augment the compliance of TDS provisions and a provision therefore was made therein to disallow the expenses for which tax was not deducted at source and/or the tax having been deducted at source was not paid to the credit of the Central Government within the time prescribed in section 200(1). It was also provided that if a deduction is subsequently made towards tax and paid after the time-limit, the assessee would be entitled to claim deduction in the year in which payment is actually made. This created a genuine and apparent hardship to the assessees 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) was lying only on 7th of April in the next year. The assessee in such case thus had a period of only seven days to pay the tax deducted at source from the expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; one those who have deducted the tax during the last month of the previous year and two; those who have deducted tax in the remaining eleven months of the previous year. It was provided that in case of assessees falling under the first category, no disallowance under section 40(a)(ia) shall be made if the tax deducted by him during the last month of the previous year has been paid on or before the due date of filing the return as specified in section 139(1). In the cases of assessees falling under second category, no disallowance under section 40(a)(ia) shall be made if the tax deducted at source in the first element months of the previous year has been paid on or before the last day of the said previous year. 16. The amendment made by the Finance Act, 2008 to the provisions of section 40(a)(ia) with retrospective effect from 1-4-2005 still left several assessees with grave hardships and un-intending consequences. Consequently, various representations were made to the Finance Minister with a request to tone down the rigour of law which was causing harsh and unintended consequences. In one of such representations made in the form of a pre-Budget memorandum for the year 2010, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s essentially a job of the Government) is undoubtedly unreasonable. It is more so in almost all such cases payments are through banking channels and are fully amenable to verification and there are hardly any reason to doubt that those receipts are not disclosed by the recipients. The argument is also no consolation to the businessman whose business in subsequent year is not good enough to absorb the deduction of expenses disallowed in earlier year under section 40(a)(ia). True the deduction can be allowed but if the computation of income results in loss in subsequent year, he does not benefit from such deduction. To sum up this aspect, it is clear that allowances of the deduction in subsequent year may not in all cases give full relief in subsequent year and secondly, there will be no relief whatsoever in respect of interest charged under sections 234B and 234C in the year of its disallowance. The ratio of the additional tax burden on the assessees to the alleged loss of tax, or its delay is preposterous. There are remedial provisions contained under Chapter XVII of the Income-tax Act for recovering of TDS amount interest and penalty thereon and therefore having provisions u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the next financial year. At the same time, I propose to increase the interest charged on tax deducted but not deposited by the specified date from 12 per cent to 18 per cent per annum." 20. The Memorandum explaining the provisions in the Finance Bill, 2010 as reported in 321 ITR (St.) 119 also gave the following justification for the amendments proposed in section 40(a)(ia) :- "It is proposed to amend the said section to provide that no disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139." 21. As is clearly evident from the representations made by the industry in the form of pre-Budget Memorandum, the speech of the Hon'ble Finance Minister while presenting the Budget for the year 2010-11 as well as the Memorandum explaining the amendments proposed in section 40(a)(ia), the amendments to section 40(a)(ia) are made to alleviate the genuine hardships and unnecessary financial liabilities imposed on the taxpayers by refusing to give deductions of bona fide expenditure only for the reason of technical non-compliance o ..... 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