AI Drafter 
TaxTMI 
TaxTMI 
2019 (1) TMI 640
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....the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: "1. The order of the Learned Commissioner of Income-tax (Appeals)-5, Hyderabad ['CIT(A)'] dated 30 January 2017 confirming the addition made by the Learned Deputy Commissioner of Income-tax, Circle - 17(2), Hyderabad ('Assessing officer' or 'AO') in disallowing the interest of Rs. 31,15,190/- paid to Tata Capital Limited under section 40(a)(ia) of the Income-tax Act, 1961 ('Act') for the subject AY is unsustainable both on facts and on law. 2. The order of the CIT(A) in holding that the amendment made to the provisions of section 40(a)(ia) by the Finance Act section 2012 w.e.f 1.4.2013 is prospective in operation by solely relying on the decision of the Hon'ble Kerala High Court in the case of Thomas George Muthoot vs. CIT [63 Taxmann.com 99] which is against the assessee and ignoring the decision of the Hon'ble Delhi High Court in the case of CIT vs. Ansal Landmark Townships Pvt. Ltd [377 ITR 635] which is in favor of the assessee is wholly unsustainable in law. 3. The CIT(A) erred in not following the recognized rule ....
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....icer of a company - (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of Section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: 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 pre....
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....ing in view the purpose behind the proviso inserted by the Finance Act, 2012 in section 40(a)(ia) of the Act, it can be said to be declaratory and curative in nature and therefore, should be given 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. In CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 (SC), the Hon'ble Supreme Court had to deal with the question, whether omission (deletion) of the second proviso to s. 43B of the IT Act, 1961, by the Finance Act, 2003, operated w.e.f. 1st April, 2004, or whether it operated retrospectively w.e.f. 1st April, 1988? Prior to Finance Act, 2003, the second proviso to s. 43B of the IT Act, 1961 (for short, "the Act") restricted the deduction in respect of any sum payable by an employer by way of contribution to provident fund/superannuation fund or any other fund for the welfare of employees, unless it stood paid within the specified due date. According to the second proviso, the payment made by the employer towards contribution to provident fund or any other welfare fund was allowable as deduction, if paid before the date for f....
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....underlying object being to disallow deductions claimed merely by making a book entry based on mercantile system of accounting. At the same time, s. 43B (main section) made it mandatory for the Department to grant deduction in computing the income under s. 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act (octroi) and other tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the return under the IT Act (due date), the assessee(s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the wel....
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....in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P.) Ltd. etc. (supra), held that the first proviso was curative in nature, hence, retrospective in operation w.e.f. 1st April, 1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis- a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgment in Allied Motors (P) Ltd. etc. (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003, will operate retrospectively w.e.f. 1st April, 1988 (when the first proviso stood inserted). Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example - in the present case, the r....
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.... merit in this batch of civil appeals filed by the Department which are hereby dismissed with no order as to costs.' 26. We are of the view that the reasoning of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra) will equally to the amendment to Sec.40(a)(ia) of the Act whereby a second proviso was inserted in sub-clause (ia) of clause (a) of Section 40 by the Finance Act, 2012, w.e.f. 1-4-2013. The provisions are intended to remove hardship. It was argued on behalf of the revenue that the existing provisions allow deduction in the year of payment and to that extent there is no hardship. We are of the view that the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year. To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. 12.1. Respectfully following the same, we hold the issue in favour of assessee. A.O. is directed to delete the addition. Grounds are allowed." We respectfully follow the above findings of the Co-ordinate bench of this Tribunal. At the same time, we notice that ld. DR relied on Thom....