TaxTMI 
TaxTMI 
2018 (7) TMI 1850
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....ted 26.05.2017, Annexure A.3, passed by the Income Tax Appellate Tribunal, Chandigarh (in short, "the Tribunal") in I.T.A. No.224/Chd/2017, for the assessment year 2012-13, claiming following substantial question of law:- "Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in deleting the addition of Rs. 95,31,276/- made under Section 40(1)(ia) for non deduction of TDS on payment made for job works by holding that the second proviso to Section 40(a)(ia) has a retrospective effect and is applicable to the applicant for the relevant assessment year whereas the said provisions of Section 40(a)(ia) are prospective in operation w.e.f. 01.04.2013 as also held by the Hon'ble Kerala High Court ....
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....ii) above was deleted whereas the additions mentioned at Sr. Nos. (i) and (iii) to (v) were confirmed. Not satisfied with the order, the appellant-revenue filed an appeal before the Tribunal, with reference to the addition mentioned at Sr. No. (ii) above. Vide order dated 26.05.2017, Annexure A.3, the Tribunal dismissed the appeal filed by the revenue. Hence, the instant appeal by the appellant-revenue. 3. We have heard the learned counsel for the parties. 4. The issue raised by the revenue before the Tribunal pertained to the retrospectivity of the second proviso to Section 40(a)(ia) of the Act. The said provision reads thus:- "Provided further that where an assessee failed to deduct the whole or any part of tax in accordanc....
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.... 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." 6. The purpose of insertion of the first Proviso to Section 201(1) of the Act is to benefit the assessee. It stipulates that where a person who has failed to deduct tax at source on the sum paid to a resident or....
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....econd Proviso to Section 40(a)(ia) of the Act, it is discernible that according to both the provisos, where the payee/resident has filed its return of income disclosing the payment received by it or receivable by it, and has also paid tax on such income, the assessee would not be treated to be a person in default and presumption would arise in his favour as noted above. 9. Now the question that would require an answer is whether the insertion of Second Proviso to Section 40(a)(ia) of the Act with effect from Ist April 2013 will apply to assessment year 2012-13 being retrospective. 10. Similar issue regarding second Proviso to Section 40(a)(ia) of the Act is prospective or retrospective in nature, came up for consideration before Delhi....
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....e 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 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 a....
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....ded consequence" to punish the assessees for non deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to 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." 11. We are in agreement with the view of the Delhi High Court in Ansal Land Mark Township Pvt. Limited's case (supra) approving the reasoning of the Agra Bench of the ITAT whereby holding the rationale behi....