TaxTMI 
TaxTMI 
2019 (9) TMI 733
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....el for the appellant-revenue would submit that in view of the specific date prescribed for giving effect to the second proviso of Section 40(a)(ia) of the Act from 01.04.2013, no other interpretation is permissible to give retrospective effect, contrary to the intention of the legislature. Reliance is placed on the following judgements: 1. LAWS(KER) 2014 1 97 in the case of Prudential Logistics and Transports vs. Income Tax Officer, Kozhikode; 2. LAWS(KER) 2015 7 25 in the case of Thomas George Muthoot vs. The Commissioner of Income Tax; 3. Writ Petition No.3928/2018 (Karnataka High Court), in the case of Smt. Deeva Devi vs. The Principal Commissioner of Income Tax-5 and another. 4. Learned Senior counsel Sri A.Shankar appearing for the respondent - assessee would submit the payments made to the sub-contractors has been offered to tax in their respective returns of Income, uncontroverted by the authorities. There is no actual loss of revenue. The legislature having realised the shortcomings of Section 40(a)(ia) intended to cure the same in order to obviate the unintended hardships to the assessee by inserting the second proviso, a beneficial provision, which should be given r....
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....x in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, 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 provision." 7. The Hon'ble High Court of Delhi approving the reason of the Agra Bench of the Income Tax Appellate Tribunal as regards the rationale behind the insertion of the second proviso of Section 40(a)(ia) of the Act has held that, the said proviso is declaratory and curative in nature and has retrospective effect from April, 1, 2015. The reasons of the Agra Bench of the Income Tax Appellate Tribunal in the case of Rajeev Kumar Agarwal v. Addl. CIT ([2014] 34 ITR (Trib) 479) (Agra) reads thus: "On a conceptual note, the primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into not account in computation of taxable income in the hands of the recipients of the payments. Such a po....
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.... must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reason set out earlier, we cannot subscribe to the view that it could have been an 'intended 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 April 1, 2005, being the date from which sub10 clause (ia) of section 40(a) was inserted by the Finance (No.2) Act, 2004." 8. In the case of Perfect Circle India Pvt. Ltd. supra, the Hon'ble High Court of Bombay, placing reliance on the judgment of the Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township Pvt. Ltd. supra, and in view of several High Courts subscribing to the same has held that the second proviso has to be given retrospective effect. Reliance is also made on the judgment of the Hon'ble Ap....
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....pectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre ([1870] LR 6 QB 1, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule as was observed in the decision reported in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. ([1994] 1 AC 486 (HL)). Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on ....
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.... Allahabad High Court has observed that the Hon'ble Kerala High Court while deciding Thomas George Muthoot supra, did not have the benefit of authority of Constitution Bench in Vatika Township Private Ltd. (supra) and has respectfully expressed its opinion to disagree with the judgment of Hon'ble Kerala High Court. On the other hand, agreed with the decision of the Hon'ble Division Bench of the Delhi High Court in CIT v. Ansal Land Mark Township P. Ltd. supra. 11. The Hon'ble High Court of Kerala in Prudential Logistics and Transports supra, as well as in Thomas George Muthoot supra, observed that the mandate or requirement on the part of the payer to deduct tax at source is not so strict if they are able to show that the payee or the or the recipient of the amounts has paid tax in accordance with the provisions of Section 201(1) and the proviso. In both these judgments, as observed by the Hon'ble High Court of Allahabad, the judgment of the Hon'ble Apex Court in the case of CIT vs. Vatika Township Private Ltd. was not considered. 12. The judgment of this Court referred to by both the learned counsel for the parties in Writ Petition No.3928/2018 was rendered in the context....