TaxTMI 
TaxTMI 
2010 (12) TMI 172
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....ng the addition of Rs. 4,97,716/-u/s. 40A(2)(b) of the Income Tax Act, 1961." 3. At the outset, both the Ld. counsel for the assessee as well as Ld. SR-DR agreed that this issue is squarely covered by the Tribunal's decision in assessee's own case for assessment years 2003-04 and 2004-05 in ITA No.464/Ahd/2008 and 3883/Ahd/2007 both order dated 18-06-2010 respectively. We find that the Tribunal has dealt with the issue vide para-8 as under:- 8. We have heard both the sides at some length and also perused the orders of authorities below in the light of the compilation filed before us. Certain important points as raised before us for consideration were that the accounts being audited as prescribed u/s. 44AB of the Act. Therefore, there was no reason to disallow the claim of expenditure that the sub-contractors were separately assessed to tax by filing their respective returns. That the TDS was deducted on the said payment and the details were furnished before the AO. Finally, it was vehemently argued that the statute do not prescribed an ad hoc disallowance and for a disallowance the AO ought to have earmarked a particular payment as excessive or unreasonable. Regarding t....
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.... the order of CIT(A) confirming the addition made by Assessing Officer by invoking section 40a(ia) of the Act on account of non-payment of TDS deducted on labour payments within the due date prescribed under IT. Rules, 1962. For this, assessee has raised the following ground No.2:- "2. The Learned Commissioner of Income Tax (Appeals)-IV, Baroda has erred in law and on facts of the case by confirming the addition of Rs. 63,56,387/-u/s. 40a(ia) of the Income Tax Act, 1961." 6. The brief facts are that the assessee is a contractor and required to get work done through sub-contractors. During the course of assessment proceedings, the Assessing Officer required the assessee to produce the details of TDS deducted on sub-labour contract payments and paid. The assessee intimated as regards to inadmissibility with regard to non-deduction of TDS to the tune of Rs. 1,65,824/-. The assessee has filed the following details regarding TDS deducted and payment of TDS on labour contract payments as under:- DETAILS OF TAX DEDUCTED AT SOURCE AND PAYMENT OF TDS SECTION NATURE OF EXPENSE AMOUNT OF PAYMENT DATE OF CREDIT TDS RATE DATE OF TDS DEDUCTED TAX DEDUCTI....
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....worked out to Rs. 1,21,56,330/- but as payments have already been disallowed u/s.40A (2)(b) of the Act at Rs. 4,97,716/- and the balance Rs. 1,16,58,614/- was disallowed. Aggrieved, assessee preferred appeal before CIT(A). 7. The CIT(A) partly confirmed the disallowance at Rs. 63,56,387/- by stating in para-3.4 of his appellate order as under:- "3.4. I have considered the submissions of the A.R and the assessment order. The Assessing Officer merely followed the provisions of the unamended section 40(a)(ia). As per the said section, the disallowance is justified. However, the following payments i.e.: Nature of expenses Date of credit Amount of payment (Rs.) Sub-contract 9.03.2005 9,01,960 Sub-contract 15.03.2005 6,17,647 Sub-contract 31.03.2005 9,62,942 Labour Contract 31.03.2005 8,87,620 Labour Contract 31.03.2005 8,52,775 Labour Contract 31.03.2005 2,85,655 Labour Contract 31.03.2005 7,93,628 Total 53,02,227 Fall within the amended provisions of section 40(a)(ia) which state that if tax had been deducted in the month of March and deposited with the Government before submiss....
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....history of the provisions of section 40(a)(ia), which was substituted for sub-clause-1 by Finance (No. 2) Act, 2004 w.e.f. 1-4-2005 as under:- "Amount not deductible. 40. 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 professions",- (a) ... ... (ia) any interest, commission or brokerage, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200: Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-sect....
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....cted the tax or after deduction has not been paid on or before the due date specified in section 139(1) of the Act, will be disallowed while computing the income chargeable under the Head 'profits and gains of business or profession'. It means that the tax so deductible at source has been deducted and paid on or before the due date specified in section 139(1) of the Act, the expenses related to the same will be allowed while computing the income chargeable under the Head 'profits and gains of business or profession'. Prior to its amendment, this section was amended by the Finance Act, 2008, w.r.e.f. 1-4-2005 where the provision was made to disallow the payments on which tax is deductible at source and such tax has not been deducted or after deduction has not been paid:- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139; or (B) in any other case, on or before the last day of the previous years. From the above amendments in this provision of section 40(a)(ia) of the Act it is clear that the intention of the Legislature is to operates retr....
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.... accordingly, apply in relation to the assessment year 2010-11 and subsequent years." 11. In view of the above amendments brought out in section 40(a)(ia) on different times to remove the difficulties of taxpayers a remedial steps were taken by the Legislature. We are of the view that for modern purposes a declaratory amendment in section of the Act may be defined as an amendment to remove doubts existing as to the meaning or effect of any statute and such amendments are usually held to be retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act and this view has been held in Keshavlal Jethalal Shah v. Mohanalal Bhagwandas, AIR 1968 SC 1336, 1339]. Further Hon'ble apex court in the case of CIT v. Podar Cement Pvt. Ltd., (1997) 226 ITR 625, 652 (SC) settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. Further more in similar circumstances, Hon'ble apex court in the case of Allied Motors (P.) Ltd. v CIT (1977) 224 ITR 677,687 (SC) held that the amendment will not serve its object in such a situation unless it is construed ....
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.... the expiry of the accounting year in compliance with the relevant statute is entitled to deduction under section 43B. The High Court has held the amendment to be clarificatory and, therefore, retrospective. The Gujarat High Court in the above case held the amendment to be curative and explanatory and hence retrospective. The Patna High Court has also held the amendment inserting the first provisos to be explanatory in the case of Jamshedpur Motor Accessories Stores v. Union of India (1991) 189 ITR 70. It has held the amendment inserting first proviso to be retrospective. The special leave petition from this decision of the Patna High Court was dismissed (see [1991] 191 ITR (St.)8). The view of the Delhi High Court, therefore, that the first proviso to section 43B will be available only prospectively does not appear to be correct. As observed by G.P. Singh in his Principles of Statutory Interpretation, 43B will be available only prospectively does not appear to be correct. As observed by G.P. Singh in his Principles of Statutory Interpretation, 4^th Edn., page 291. "It is well settled that if a statute is curative or merely declaratory of the previous law, retrospective operation i....