TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 53
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....ay, 2009 to July, 2009 only and the AO did not make any disallowance u/s. 40(a)(ia). The AO subsequently passed an order u/s. 143(3) read with section 263 disallowing a sum of Rs.7,49,20,296 u/s. 40(a)(ia). 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A). The assessee submitted before the CIT(A) that the amount of tax deducted at source is deposited before the due date for filing the return of income and therefore has complied with the provisions of section 40(a)(ia) as amended by the Finance Act, 2010 which inserted the words "has not been paid on or before the due date specified in sub-section (1) of section 139". The assessee also submitted that though the amendment made effective from 01.04.2010 it is retrospectively applicable as it is curative in nature. The CIT(A) did not agree with the contention of the assessee and accordingly upheld the disallowance by relying on the decision of the jurisdictional High Court in the case of Thomas George Muthoot [2015] 63 taxmann.com 99 (Ker). Aggrieved, the assessee is in appeal before the Tribunal. 4. The assessee raised the following grounds and additional ground:- "1. That the order of the Ld....
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....s. Additional CIT [(2012) 16 ITR(Trib.) 1 (SB) (Vishakhapatnam)] affirmed in CIT vs. Vector Shipping Services (P) Ltd. [(2013) 357 ITR 642(All)]. 6. That the CIT (A) is unjustified in not accepting the judgements in the case of a. Assistant Commissioner of Income Tax Vs. Shri M.K. Gurumurthy (ITAT Bangalore) dated 10/ 05 /2012 relating to Assessment Year 2008-09. b. IN THE ITAT BANGALORE BENCH 'B' -Deputy Commissioner of Income-tax, Circle 1, Udupi Vs. Ananda Marakala* [ASSESSMENT YEAR 2005-06] dated SEPTEMBER 13, 2013 c. Hon'ble SC in the case of Allied Motors P Ltd, Extrusions Ltd d. Supreme Court in the case of CIT v. Vegetable Products Ltd. [1993] 88 ITR 192 (SC). e. Apex Court judgment in Hindustan Coca Cola Beverage (P.) Ltd. v. CIT [2007] 293 ITR 226/163 Taxman 355, in its proper perspective. 7. The CIT(A) has relied solely on the case law Thomas George Muthoot (2015) 63 taxman.com 99 (Ker) and failed to consider the legality that the Judgement of the Supreme Court prevails over the judgement of the Jurisdictional high court. 8. The appellant further submits that applying the judgment of the Supreme Court in Hindustan Coco Cola Beverages Pvt. Ltd ....
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.... of Income Tax Calcutta, Vs Calcutta Export Company reported in (2018) (2016) SCC 686. F. That since the amendments made to Sec 40 (a) (ia) of Finance Act 2010 has retrospective affect, the Appellant is also entitled to the benefit of the amended provision and no disallowances can be made as the TDS deducted has been paid on or before the due date for filing the tax returns u/s 139 (1)." 5. In the application along with affidavit for admission of additional grounds, the assessee has stated that the additional grounds are raised on the advice of the counsel for proper adjudication of the issues involved which were not raised in the original grounds and hence the same may be admitted for adjudication. 6. After hearing both the parties, we are of the opinion that the additional grounds raised do not involve fresh investigation into facts and are legal grounds, therefore following the Hon'ble Supreme Court judgment in the case of M/s National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383 (SC), the additional grounds are admitted for adjudication. 7. During the course of hearing, the ld. AR submitted that the contention raised through additional ground stating that the amendment made....
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....he following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession,- (a) in the case of any assessee- (i) *** (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVIIB and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under subsection( 1) of section 200; Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted during the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid." 15. The purpose of bringing the said amendment to the existing provision of Section ....
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.... not be deducted in computing the income chargeable under the head "profit and gains of business or profession (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contactor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or after deduction has not been paid- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139; or (B) in any other case, on or before the last day of the previous year; Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted (A) during the last month of the previous year but paid after the said due date; or (B) during any other month of the previous year but paid after the end of the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such ta....
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....ent Year. 22. In order to remedy this position and to remove hardships which were being caused to the assessees belonging to such second category, amendments have been made in the provisions of Section 40(a) (ia) by the Finance Act, 2010. 23. Section 40(a)(ia), as amended by Finance Act, 2010, with effect from 01.04.2010 and now reads as under: "40(a)(ia)- any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or; after deduction, has not paid on or before the due date specified in sub-section (1) of Section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deducted in computing the income of the previous year in which such tax has been paid." 24. Thus, ....
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....uired to be read into the Section to give the Section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the Section as a whole. 28. The purpose of the amendment made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, 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 and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes subject matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, 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....