2016 (3) TMI 922

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n law and on the facts in upholding the action of the AO in disallowing a sum of Rs. 2,08,953/- being interest u/s 40a(ia) of the Act. 2. That having regard to the facts and circumstances of the case, the ld. CIT(A) has erred in law and on the facts in confirming the action of the AO in passing the impugned assessment order without giving adequate opportunity of being heard. 3. That in any case and in any view of the matter action of the ld. CIT(A) has erred in law and on the facts in making the impugned addition is bad in law and against the facts and circumstances of the case." 3. Briefly stated, the facts of the case are that during the course of assessment proceedings, it came to the notice of the AO that the assessee has debite....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....10. As per the provisions of section 40a(ia) which were applicable to the A.Y 2009-10 the interest payment in respect of which tax was not deducted at source is to be disallowed. Hence, the AO rightly made the addition of Rs. 2,08,953/- u/s 40a(ia) of the Act. Ground no. 5 of the appeal is thus dismissed." 5. The ld. AR submitted that the assessee had submitted all details of expenses at the time of appellate proceedings which were submitted before the AO and explained how these expenses were incurred in relation to its business. Per contra the ld. DR supported the orders of the authorities below. 6. We have heard the arguments of both the sides and carefully perused the relevant material placed on record before us. We find that the deci....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....notations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a "fair, just 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....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....o tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004." 14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance. 15. In that view of the matter, the Court is unable to find any legal i....