AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1631
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....ged the action of the AO before the ld. CIT(A) and submitted that as per second proviso to section 40(a)(ia) of the Act if recipient of the interest as included the said amount in the income offered to tax then, no disallowance is called u/s 40(a)(ia) of the Act. The assessee relied upon the decision of Hon'ble Delhi High Court in case of CIT vs. Ansal Land Mark Township (P) Ltd. 234 Taxman 825 as well as the decision of this Tribunal in case of Shri Rajesh Tak vs. ITO in case of ITA No. 888/JP/2014. The ld. CIT(A) has accepted the contention of the assessee and deleted the addition to the extent of Rs. 53,93,858/- and sustained the remaining disallowance of Rs. 69,364/- paid to M/s Magma Fincorp Ltd. for which the certificate was not filed. Aggrieved by the order of the ld. CIT(A) the Revenue has filed the present appeal. 3. We have heard the ld. DR as well as ld AR and considered the relevant material on record. The ld. DR has relied upon the decision of Hon'ble Kerala High Court in case of Thoms George Muthoot Vs. CIT 63 Taxman.com 99 and submitted that when the second proviso to section 40(i)(ia) of the Act was inserted w.e.f. 01.04.2013 then the proviso is applicable prospect....
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....hen, in such event, "it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso". 10. It is pointed out by learned counsel for the Revenue that the first proviso to Section 201(1) of the Act was inserted with effect from 1st July 2012. The said proviso reads as under: "Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income; And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed." 11. The first proviso to Section 201(1) of the Act has been inserted to benefit the Assessee. It also st....
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....r as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. 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 nondeduction 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 ....
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.... in nature and therefore, it has to be given retrospective effect. Though a divergent view is taken by the Hon'ble Kerala High Court in case of Thomas George Muthoot Vs. CIT however, to maintain the rule of consistency of this Tribunal has been taking a view on this issue by following the decision of Hon'ble Delhi High Court in case of CIT vs. Ansal Landmark Township Pvt. Ltd. (supra). Accordingly following the decision of Hon'ble Delhi High Court as well as decisions of the Coordinate Bench of this Tribunal as relied upon by the assessee we hold that the second proviso to section 40(a)(ia) is applicable with retrospective effect. Consequently if recipient of the amount has considered the same for computation its income offered to tax then no disallowance is called for u/s 40(a)(ia) of the Act." 6. We further note that the Hon'ble Supreme Court in case of CIT vs. M/s Calcutta Export Company (supra) has also considered the this issue and held in para 26 to 31 as under :- "26. TDS results in collection of tax and the deductor discharges dual responsibility of collection of tax and its deposition to the government. Strict compliance of Section 40(a)(ia) may be justified keeping in....
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....in such cases, will not wipe off the adverse effect and the financial stress. Such could not be the intention of the legislature. Hence, the amendment made by the Finance Act, 2010 being curative in nature required to be given retrospective operation i.e., from the date of insertion of the said provision. 29. Further, in Allied Motors (P) Limited (supra) , this Court while dealing with a similar question with regard to the retrospective effect of the amendment made in section 43-B of the Income Tax Act,1961 has 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. The aforesaid view has consistently been followed by this Court in the following cases, viz., Whirlpool of India Ltd., v. CIT, New Delhi [2000] 245 ITR 3, CIT v. Amrit Banaspati [2002] 255 ITR 117 and CIT v. Alom Enterprises Ltd. [2009] 319 ITR 306. 30. Hence, in light of the forgoing discussion and the binding effect of the judgment given in Allied Moter....