TaxTMI 
TaxTMI 
2018 (12) TMI 1324
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....(NBFCs) U/s 40(a)(ia) of the Income Tax Act, 1961 (in short the Act) for want of TDS. The assessee has claimed interest expenditure of Rs. 37,15,215/- to NBFCs since no TDS was deducted by the assessee prior to the payment or credit of the said interest amount, the Assessing Officer invoked the provisions of Section 40(a)(ia) of the Act and made disallowance of the said amount of Rs. 37,15,215/-. 3. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and submitted that since the payment was made to the NBFCs, who have furnished the return of income and paid the tax, therefore, in view of proviso to Section 40(a)(ia) read with proviso to Section 201 of the Act, no disallowance is called for U/s 40(a)(ia) of the Act. The ld. CIT(A) did not accept this contention of the assessee on the ground that the assessee has not filed any certificate from the concerned persons to whom interest has been paid without deduction of tax at source. Accordingly, the addition made by the Assessing Officer was confirmed. 4. Before us, the ld AR of the assessee has submitted that the interest was paid to the NBFCs and since the NBFCs are regularly assessed to tax and filing....
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....is disturbed by Section 40(a)(ia) of the Act, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses as they have necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low G.P. rate and when expenditure which becomes subject-matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences as is apparent from the case of Naresh Kumar. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress. Nevertheless the Section 40(a)(ia) has to be given full play keeping in mind the object and purpose behind the section. At the same time, the provision can be and should be interpreted liberally and equitable so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. Case of Naresh Kumar is not one of rare cases, but one of several cases as we find that Section 40(a)(ia) is invoked in large number of cases. 27. One important consideration in constru....
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....able interpretation. It was elucidated: "12. In the case of Goodyear India Ltd. v. State of Haryana this Court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. 13. Therefore, in the well-known words of Judge Learned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B. Judha Mal Kuthiala v. CIT, this Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. 14. This view has been accepted by a number of High Courts. In the case of CIT v. Chandulal Venichand, the Gujarat Hig....
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....nt of the TDS on or before the due date of filing of the return under Section 139(1), the sum shall be allowed as an expense in computing the income of the previous year. The two provisions are akin and the provisos to Sections 40(a)(ia) and 43B are to the same effect and for the same purpose. 24. In Podar Cement (P.) Ltd. (supra), the Supreme Court considered whether term "owner" would include unregistered owners who had paid sale consideration and were covered by Section 53A of the Transfer of Property Act. The contention of the assessees was that the amendments made to the definition of term "owner" by Finance Bill, 1987 should be given retrospective effect. It was held that the amendments were retrospective in nature as they rationalise and clear the existing ambiguities and doubts. Reference was made to Crawford: "Statutory Construction" and "the principle of Declaratory Statutes", Francis Bennion: "Statutory Interpretation", Justice G.P. Singh's "Principles of Statutory Interpretation", it was observed that sometimes amendments are made to supply an obvious omission or to clear up doubts as to the meaning of the previous provision. The issue was accordingly decided hol....