ACCME (URVASHI PUMPS) ENGINEERS PVT. LTD., Jaipur V. ACIT, Jaipur

ITA 1111/JPR/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2198 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: RAJEEV SAGONI; ROHAN SAGONI
• Keywords: Business expenditure; Rule of consistency; Retrospective amendment; Question of law; Wholly owned subsidiary; Fair market value; Non compliance; Right to appeal; Commercial expediency
• Section: 43B; 201(1); 27; 37; 12; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK L NL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 561/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. A-407, ROAD NO. 14, VKI AREA, JAIPUR. CUKE VS. THE JCIT(OSD), CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCA5655R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 1111/JP/16 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. A-407, ROAD NO. 14, VKI AREA, JAIPUR. CUKE VS. THE ACIT, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCA5655R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 1112/JP/16 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. A-407, ROAD NO. 14, VKI AREA, JAIPUR. CUKE VS. THE JCIT, RANGE -4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCA5655R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 2 FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI RAJEEV SAGONI & SHRI ROHAN SAGONI (C. A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 16/01/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/01/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED AG AINST THREE SEPARATE ORDERS OF CIT(A) DATED 19.06.2014 & 19.09. 2016 FOR THE ASSESSMENT YEARS 2009-10 TO 2011-12 RESPECTIVELY. 2. FIRST WE TAKE UP THE APPEAL FOR THE ASSESSMENT Y EAR 2009-10 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GROUN DS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . AO IN DISALLOWING A SUM OF RS. 5,15,638/- U/S 40A(IA) OF INCOME TAX ACT, 1961 AS UNDER:- PARTICULARS (INTEREST PAID TO NBFCS) RELIANCE CAPITAL LIMITED 67,521/- BARCLAYS BANK 4,19,169/- CHOLAMANDALAM DBS FINANCE LIMITED 28,948/- TOTAL 5,15,638/ - THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIE D, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS. 5,15,638/-. ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 3 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . AO IN DISALLOWING A SUM OF RS. 8,00,969/- U/S 40A(2)(A) O F INCOME TAX ACT, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS. 8, 00,969/-. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . AO IN MAKING FOLLOWING DISALLOWANCE:- PARTICULARS AMOUNT ROC FEES 33,900/- FOREIGN TRAVELLING EXPENDITURE 94,200/ - TOTAL 1,28,100/- THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIE D, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS. 1,28,100/-. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . AO IN TQAXING INTEREST INCOME ON FDR AMOUNTING TO RS. 1,13,318/-. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRAR Y AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DELETING THE SAID ADDITION OF RS. 1,13,318/-. 5. THE ASSESSEE COMPANY CRAVES ITS RIGHTS TO ADD, A MEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 3. GROUND NO. 1 IS REGARDING DISALLOWANCE MADE BY T HE AO U/S 40(A)(IA) OF THE INCOME TAX ACT IN RESPECT OF INTER EST PAID TO NBFCS AND UPHELD BY THE LD. CIT(A). THE ASSESSEE PAID INT EREST TO THREE NBFCS NAMELY RELIANCE CAPITAL LIMITED, BARCLAYS BANK AND CHOLAMANDALAM ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 4 DBC FINANCE LIMITED TOTAL AMOUNTING TO RS. 5,51,638 /- WITHOUT DEDUCTION OF TDS ON THESE PAYMENTS. ACCORDINGLY, TH E AO DISALLOWANCE THE ABOVE SAID INTEREST PAYMENT U/S 40(A)(IA) OF TH E ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT( A) AND RAISED THE CONTENTIONS ON TWO FOLDS FIRSTLY THE AMOUNT OF INTE REST HAS BEEN PAID BY THE ASSESSEE DURING THE YEAR AND NOTHING WAS PAYABL E AT THE END OF THE YEAR ON 31.03.2009. THEREFORE, THE ASSESSEE CONTEND ED THAT THE PROVISIONS OF SECTION U/S 40(A)(IA) OF THE ACT ARE NOT APPLICABLE. IN SUPPORT OF HIS CONTENTION, THE ASSESSEE HAS RELIED UPON THE DECISION OF THE ALLAHABAD HIGH COURT IN CASE OF CIT VS. VECTOR SHIPPING SERVICE (P) LTD. 262CTR 545. THE SECOND LEG OF ARGUMENT ADVANC ED BY THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT VIDE FINANC E ACT, 2012 A PROVISO HAS BEEN INSERTED TO SECTION U/S 40(A)(IA) OF THE ACT, THEREFORE, WHEN THE RECIPIENT OF THE INTEREST HAVE INCLUDED TH IS AMOUNT IN THEIR R.O.C. FILED AND OFFER TO TAX THEN NO DISALLOWANCE IS CALLED FOR AS PER AMENDED PROVISIONS OF SECTION U/S 40(A)(IA) OF THE ACT. THE LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON BO TH ASPECT AND CONFIRMED THE DISALLOWANCE MADE BY THE AO. 4. BEFORE US, LD. AR OF THE ASSESSEE HAS NOT DISPUT ED THAT THE FIRST ASPECT OF THE ISSUED REGARDING PAID OR PAYABLE OF T HE AMOUNT AS ON ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 5 31.03.2009 IS NOW COVERED BY THE DECISION OF HONBL E SUPREME COURT IN CASE OF M/S PALAM GAS SERVICE VS. CIT 394 ITR 300. THE HONBLE SUPREME COURT HAS HELD IN PARAS 17 AND 18 AS UNDER: - 17. INSOFAR AS JUDGMENT OF THE ALLAHABAD HIGH COURT IS CONCERNED, READING THEREOF WOULD REFLECT THAT THE H IGH COURT, AFTER NOTICING THE FACT THAT SINCE THE AMOUNTS HAD ALREADY BEEN PAID, IT STRAIGHTAWAY CONCLUDED, WITHOUT ANY DISCUS SION, THAT SECTION 40(A)(IA) WOULD APPLY ONLY WHEN THE AMOUNT IS 'PAYABLE' AND DISMISSED THE APPEAL OF THE DEPART MENT STATING THAT THE QUESTION OF LAW FRAMED DID NOT ARISE FOR C ONSIDERATION. NO DOUBT, THE SPECIAL LEAVE PETITION THEREAGAINST W AS DISMISSED BY THIS COURT IN LIMINE. HOWEVER, THAT WOULD NOT AM OUNT TO CONFIRMING THE VIEW OF THE ALLAHABAD HIGH COURT (SE E V.M. SALGAOCAR & BROS. (P.) LTD. V. CIT [2000] 243 ITR 383/110 TAXMAN 67 (SC) AND SUPREME COURT EMPLOYEES WELFARE ASSOCIATION V. UNION OF INDIA [1989] 4 SCC 187 . 18. IN VIEW OF THE AFORESAID DISCUSSION, WE HOLD THAT THE VIEW TAKEN BY THE HIGH COURTS OF PUNJAB & HARYANA, MADRA S AND CALCUTTA IS THE CORRECT VIEW AND THE JUDGMENT OF TH E ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD. (SU PRA) DID NOT DECIDE THE QUESTION OF LAW CORRECTLY. THUS, INSOFAR AS THE JUDGMENT OF THE ALLAHABAD HIGH COURT IS CONCERNED, WE OVERRULE THE SAME. CONSEQUENCES OF THE AFORESAID DISCUSSION WILL BE TO ANSWER THE QUESTION AGAINST THE APPELLANT/ASSESSEE THEREBY APPROVING THE VIEW TAKEN BY THE HIGH COURT. ACCORDINGLY, IN VIEW OF THE ABOVE DECISION OF HONB LE SUPREME COURT IN CASE OF M/S PALAM GAS SERVICE VS. CIT (SUPRA), WE D O NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDERS OF THE LD CIT( A) TO THE EXTENT OF REJECTING THE CONTENTION OF THE ASSESSEE. ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 6 5. AS REGARDS THE SECOND PROVISO TO SECTION 40(A)(I A) OF THE ACT IS RESPECTIVELY APPLICABLE THE LD. AR OF THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS . VATIKA TOWNSHIP PVT. LTD. 109DTR 33 AND SUBMITTED THAT AS PER THE F INANCE ACT, 2014 THE PROVISO HAS BEEN INSERTED TO REMOVE UNINTENDED AND UNDUE HARDSHIP AND THEREFORE, THIS AMENDMENT SHOULD BE GI VEN RETROSPECTIVE EFFECT. THE LD. AR HAS ALSO RELIED UPON THE DECISIO N OF THIS TRIBUNAL DATED 29.01.2016 IN CASE OF RAJENDRA YADAV IN ITA N O. 895/JP/2012 AS WELL AS DECISION OF HONBLE DELHI HIGH COURT IN CAS E OF CIT VS. NARESH KUMAR 362 ITR 256. 6. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT THE SAID PROVISO TO SECTION 40(A)(IA) OF THE ACT WAS INTRODUCED W.E.F. 01.04.2013 AND IS ONLY PROSPECTIVE. ONCE THE ASSESSEE HAS FAILED TO D EDUCT TAX ON INTEREST PAID BY IT THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT ARE AUTOMATICALLY ATTRACTED. EVEN IF THE RECIPIENT HAS SUBSEQUENTLY P AID TAX THE SAME WOULD NOT ABSOLVE THE ASSESSEE FROM CONSEQUENCE OF DISALLOWANCE. HE HAS RELIED UPON THE DECISION OF THE HONBLE KERALA HIGH COURT IN CASE OF THOMAS GEORGE MUTHOOT VS. CIT235 TAXMAN 246. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE CONTENDED BEFORE T HE LD. CIT(A) THAT ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 7 THE INTEREST PAID TO 3 NBFCS NAMELY RELIANCE CAPITA L LIMITED, BARCLAYS BANK AND CHOLAMANDALAM DBC FINANCE LIMITED WAS INCL UDED IN THE RETURN OF INCOME FILED BY THESE NON BANKING FINANC IAL COMPANIES THEREFORE, IN VIEW OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT NO DISALLOWANCE IS CALLED FOR IN RESPECT OF THIS AM OUNT ON WHICH THE RECIPIENT HAVE PAID THE TAXES. THE ASSESSEE URGED T HAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS REMEDIAL IN NATURE AND THEREFORE, THE SAID AMENDMENT WILL HAVE RETROSPECTIVE EFFECT. WE FIND T HAT HONBLE DELHI HIGH COURT IN CASE OF CIT VS. NARESH KUMAR (SUPRA) WHILE DEALING WITH AN IDENTICAL ISSUE HAS HELD IN PARA 15 TO 29 AS UND ER:- 15. QUESTION WHETHER THE AMENDMENT IS RETROSPECTIVE OR PROSPECTIVE IS VEXED AND RIGID RULE CAN BE APPLIED UNIVERSALLY. VARIOUS RULES OF INTERPRETATION HAVE DEVELOPED IN O RDER TO DETERMINE WHETHER OR NOT, AN AMENDMENT IS RETROSPEC TIVE OR PROSPECTIVE. FISCAL STATUTES IMPOSING LIABILITIES A RE GOVERNED BY NORMAL PRESUMPTION THAT THEY ARE NOT RETROSPECTIVE. THE CARDINAL RULE IS THAT THE LAW TO BE APPLIED, IS THAT WHICH I S IN FORCE ON THE FIRST DAY OF THE ASSESSMENT YEAR, UNLESS OTHERWISE MANDATED EXPRESSLY OR PROVIDED BY NECESSARY IMPLICATION. THE AFORESAID DICTUM IS BASED UPON THE PRINCIPLE THAT A NEW PROVI SION CREATING A LIABILITY OR AN OBLIGATION, AFFECTING OR TAKING AWA Y VESTED RIGHTS OR ATTACHING NEW DISABILITY IS PRESUMED TO BE PROSPECT IVE. HOWEVER, IT IS ACCEPTED THAT LEGISLATURES HAVE PLENARY POWER TO MAKE RETROSPECTIVE AMENDMENTS, SUBJECT TO CONSTITUTIONAL RESTRICTIONS. 16. BASED UPON THE AFORESAID BROAD DICTUM, JUDGES AND JURISTS HAVE DRAWN DISTINCTION BETWEEN PROCEDURAL AND SUBST ANTIVE PROVISIONS. SUBSTANTIVE PROVISIONS DEAL WITH RIGHTS AND THE SAME ARE FUNDAMENTAL, WHILE PROCEDURAL LAW IS CONCERNED WITH THE LEGAL PROCESS INVOLVING ACTIONS AND REMEDIES. AMENDMENTS TO ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 8 SUBSTANTIVE LAW ARE TREATED AS PROSPECTIVE, WHILE A MENDMENTS TO PROCEDURAL LAW ARE TREATED AS RETROSPECTIVE. THIS D ISTINCTION ITSELF IS NOT FREE FROM DIFFICULTIES AS RIGHT TO APPEAL HA S BEEN HELD TO BE A SUBSTANTIVE LAW, BUT LAW OF LIMITATION IS REGARDE D AS PROCEDURAL. THERE IS AN INTERPLAY AND INTERCONNECT BETWEEN WHAT CAN BE REGARDED AS SUBSTANTIVE AND PROCEDURAL LAW [SEE CIT V. SHRAWAN KUMAR SWARUP & SONS [1998] 232 ITR 123(ALL.) ]. 17. THERE ARE DECISIONS, WHICH HOLD THAT PROCESS OF LI TIGATION OR ENFORCEMENT OF LAW IS PROCEDURAL. SIMILARLY, MACHIN ERY PROVISION FOR COLLECTION OF TAX, RATHER THAN TAX ITSELF IS PR OCEDURAL. READ IN THIS CONTEXT, IT CAN BE STRONGLY ARGUED THAT SECTIO N 40(A)(IA) AT LEAST TO THE EXTENT OF THE AMENDMENT IS PROCEDURAL AS BY ENACTING SECTION 40(A)(IA) THE LEGISLATURE DID NOT WANT TO IMPOSE A NEW TAX BUT WANTED TO ENSURE COLLECTION OF TDS AN D THE AMENDMENTS MADE STREAMLINE AND REMEDY THE ANOMALIES NOTICED IN THE SAID PROCEDURE BY ALLOWING DEDUCTION IN THE YEAR WHEN THE EXPENDITURE IS INCURRED PROVIDED TDS IS PAID BEFORE THE DUE DATE FOR FILING OF THE RETURN. REMEDIAL STATUTES ARE NOR MALLY NOT RETROSPECTIVE, ON THE GROUND THAT THEY MAY AFFECT V ESTED RIGHTS. BUT THESE STATUTES ARE CONSTRUED LIBERALLY WHEN JUS TIFIED AND RULE AGAINST RETROSPECTIVITY MAY BE APPLIED WITH LESS RE SISTANCE [SEE BHARAT SINGH V. MANAGEMENT OF NEW DELHI TUBERC ULOSIS CENTRE [1986] 2 SCC 614 AND WORKMEN FIRESTONE TYRE & RUBBER CO. OF INDIA (P.) LTD. V. MANAGEMENT AIR 1973 SC 12 27. 18. IT IS INTERESTING TO NOTE THAT EARLIER ENGLISH DEC ISIONS HAVE HELD THAT AN ENACTMENT FIXING A PENALTY OR MAXIMUM PENAL TY FOR OFFENCE IS MERELY PROCEDURAL FOR THE PURPOSE OF DETERMINING RETROSPECTIVITY [SEE DPP V. LAMB [1941] 2 KB 89) AND R V. OLIVER [1 944] 29 CR. APP. 137. THIS VIEW, HOWEVER, HAS BEEN CRITICIZED I N REHERD ATHLUMNEY, IN RE [1898] 2 QB 547 ON THE GROUND THAT HIGHER OR GREATER PUNISHMENT IMPAIRS EXISTING RIGHTS OR OBLIG ATION; 'NO RULE OF CONSTRUCTION IS MORE FIRMLY ESTABLISHED THAN THIS; THAT A RETROSPECTIVE OPERATION IS NOT TO BE GIVEN TO A STA TUTE SO AS TO IMPAIR AN EXISTING RIGHT OR OBLIGATION, OTHERWISE T HAN AS REGARDS MATTERS OF PROCEDURE, UNLESS THAT EFFECT CANNOT BE AVOIDED WITHOUT DOING VIOLENCE TO THE LANGUAGE OF THE ENACTMENT. IF THE ENACTMENT IS EXPRESSED IN LANGUAGE WHICH IS FAIRLY CAPABLE OF EITHER INTERPRETATION, IT OUGHT TO BE CONSTRUED AS PROSPEC TIVE ONLY.' ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 9 19. THE WORD 'FAIRLY' USED IN THE AFORESAID QUOTATION IS IMPORTANT AND RELEVANT, BUT FOR APPLICATION OF ANOTHER RULE O F INTERPRETATION. G.P. SINGH IN 'PRINCIPLES OF STATUT ORY INTERPRETATION', 13TH EDITION, 2012 AT PAGE 538 UNDER THE SUB-HEADIN G 'RECENT STATEMENTS OF THE RULE AGAINST RETROSPECTIVITY' HAS GREATLY EMPHASIZED THE PRINCIPLE OF FAIRNESS AND OBSERVED T HAT CLASSIFICATION OF STATUTE EITHER SUBSTANTIVE OR PROCEDURAL DOES NO T NECESSARILY DETERMINE WHETHER THE ENACTMENT OR AMENDMENT HAS RE TROSPECTIVE OPERATION, E.G., LAW OF LIMITATION IS PROCEDURAL BU T ITS APPLICATION TO PAST CAUSE OF ACTION MAY RESULT OF REVIVING OR EXTI NGUISHING A RIGHT, AND SUCH OPERATION CANNOT BE SAID TO BE PROCEDURAL. SIMILARLY, WHEN REQUISITES OF AN ACTION UNDER THE NEW STATUTE, DRAW S FROM A TIME INCIDENT TO ITS PASSING, RULE AGAINST RETROSPECTIVI TY MAY NOT BE APPLICABLE. 20. IN THE SAID TEXT, REFERENCE HAS BEEN MADE TO FORMU LATION BY DIXON, C.J. IN MAXWELL V. MURPHY [1957] 96 CLR 261 HOLDING: 'THE GENERAL RULE OF THE COMMON LAW IS THAT A STATU TE CHANGING THE LAW OUGHT NOT, UNLESS THE INTENTION APPEARS WITH RE ASONABLE CERTAINTY, TO BE UNDERSTOOD AS APPLYING TO FACTS OR EVENTS THAT HAVE ALREADY OCCURRED IN SUCH A WAY AS TO CONFER OR IMPO SE OR OTHERWISE AFFECT THE RIGHTS OR LIABILITIES WHICH THE LAW HAD DEFINED BE REFERENCE TO THE PAST EVENTS. BUT GIVEN THE RIGHTS AND LIABIL ITIES FIXED BY REFERENCE TO THE PAST FACTS, MATTERS OR EVENTS, THE LAW APPOINTING OR REGULATING THE MANNER IN WHICH THEY ARE TO BE ENFOR CED OR THEIR ENJOYMENT IS TO BE SECURED BY JUDICIAL REMEDY IS NO T WITHIN THE APPLICATION OF SUCH A PRESUMPTION'. 21. IDENTICALLY, IN SECRETARY OF STATE FOR SOCIAL SECURITY V. TUNNICLIFFE [1991] 2 ALL ER 712 (CA), S TAUGHTON, L.J. HAS EXPRESSED THE SAID PRINCIPLE IN THE FOLLOWING WORDS : 'THE TRUE PRINCIPLE IS THAT PARLIAMENT IS PRESUMED NOT TO HAVE INTENDED TO ALTER THE LAW APPLICABLE TO PAST EVENTS AND TRANSACTIONS IN A MANNER WHICH IS UNFAIR TO THOSE CONCERNED IN T HEM UNLESS A CONTRARY INTENTION APPEARS. IT IS NOT SIMPLY A QUES TION OF CLASSIFYING AN ENACTMENT AS RETROSPECTIVE OR NOT RETROSPECTIVE. RATHER IT MAY WELL BE A MATTER OF DEGREE- THE GREATER THE UNFAIRN ESS, THE MORE IT IS TO BE EXPECTED THAT PARLIAMENT WILL MAKE IT CLEA R IF THAT IS INTENDED'. ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 10 22. HOUSE OF LORDS IN L' OFFICE CHERIFIEN DES PHOSPHATES V. YAMASHITA SHINNIHON STEAMSHIP CO. LTD . [1994] 1 ALL ER 20 HAS SAID THE QUESTION OF FAIRNESS HAS TO BE A NSWERED BY TAKING INTO ACCOUNT VARIOUS FACTORS, VIZ., VALUE OF THE RIGHTS WHICH THE STATUTE AFFECTS; EXTENT TO WHICH THAT VALUE IS DIMINISHED OR EXTINGUISHED BY THE SUGGESTED RETROSPECTIVE EFFECT OF THE STATUTE; UNFAIRNESS OF ADVERSELY AFFECTING THE RIGHTS; CLARI TY OF THE LANGUAGE USED BY PARLIAMENT AND THE CIRCUMSTANCES IN WHICH T HE LEGISLATION WAS CREATED. THESE FACTORS HAVE TO BE WEIGHED TOGET HER TO PROVIDE AN ANSWER WHETHER THE CONSEQUENCES OF READING THE S TATUTE WITH SUGGESTED DEGREE OF RETROSPECTIVITY IS UNFAIR; THAT THE WORDS USED BY THE PARLIAMENT COULD NOT HAVE BEEN INTENDED TO M EAN WHAT THEY MIGHT APPEAR TO SAY. THIS PRINCIPLE WAS APPLIED WHI LE INTERPRETING A NEW PROVISION IN ARBITRATION ACT IN THIS CASE OBSER VING THAT THE DELAY ATTRIBUTABLE TO THE CLAIMANT IN PURSUING A CLAIM BE FORE ENACTMENT OF THE NEW PROVISION, COULD BE TAKEN INTO CONSIDERATIO N FOR DISMISSAL. 23. PRINCIPLE OF 'FAIRNESS' HAS NOT LEFT US UNTOUCHED AND WAS APPLIED BY THE SUPREME COURT IN VIJAY V. STATE OF MAHARASHTRA [2006] 6 SCC 289 IN THE FOLLOWING WORDS : 'THE NEGOTIATION IS NOT A RIGID RULE AND VARIES WI TH THE INTENTION AND PURPORT OF THE LEGISLATION, BUT TO APPLY IT IN SUCH A CASE IS A DOCTRINE OF FAIRNESS. WHEN A NEW LAW IS ENACTED FOR THE BENEFIT OF THE COMMUNITY AS A WHOLE, EVEN IN ABSENCE OF A PROV ISION THE STATUTE MAY BE HELD TO BE RETROSPECTIVE IN NATURE.' 24. IN ALLIED MOTORS (P.) LTD. V. CIT [1997] (224) ITR 677/91 TAXMAN 205 (SC) IT WAS HELD THAT THE NEW PROVISO TO SECTION 43B SHOULD BE GIVEN RETROSPECTIVE EFFECT FROM THE INCEP TION ON THE GROUND THAT THE PROVISO WAS ADDED TO REMEDY UNINTEN DED CONSEQUENCES AND SUPPLY AN OBVIOUS OMISSION. THE PR OVISO ENSURED REASONABLE INTERPRETATION AND RETROSPECTIVE EFFECT WOULD SERVE THE OBJECT BEHIND THE ENACTMENT. 25. IN STATE THROUGH C.B.I DELHI V. GIAN SINGH AIR 199 9 SC 3450 EXTREME PENALTY OF DEATH WAS DILUTED TO ALTERNATIVE OPTION OF IMPRISONMENT FOR LIFE RECORDING THAT THE LEGISLATIV E BENEVOLENCE COULD BE EXTENDED TO AN ACCUSED, WHO AWAITS JUDICIA L VERDICTS AGAINST HIS SENTENCE. EARLIER IN RATTAN LAL V. STAT E OF PUNJAB AIR 1965 SC 444 REFERENCE WAS MADE TO SECTION 6 OF THE PROBATION OF OFFENDERS ACT, 1958 AND IT WAS OBSERVED THAT IF THE ACT WAS NOT ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 11 GIVEN RETROSPECTIVE OPERATION, IT WOULD LEAD TO ANO MALIES AND THUS COULD NOT BE THE INTENTION OF THE LEGISLATURE. 26. PRINCIPLE OF MATCHING WHICH IS DISTURBED BY SECTIO N 40(A)(IA) OF THE ACT, MAY NOT MATERIALLY BE OF CONSEQUENCE TO TH E REVENUE WHEN THE TAX RATES ARE STABLE AND UNIFORM OR IN CAS ES OF BIG ASSESSEES HAVING SUBSTANTIAL TURNOVER AND EQUALLY H UGE EXPENSES AS THEY HAVE NECESSARY CUSHION TO ABSORB THE EFFECT. H OWEVER, 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 Y EAR, 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 INTERPRETE D LIBERALLY AND EQUITABLE SO THAT AN ASSESSEE SHOULD NOT SUFFER UNI NTENDED 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 SEC TION 40(A)(IA) IS INVOKED IN LARGE NUMBER OF CASES. 27. ONE IMPORTANT CONSIDERATION IN CONSTRUING A MACHIN ERY SECTION IS THAT IT MUST BE SO CONSTRUED SO AS TO EFFECTUATE THE LIABILITY IMPOSED BY THE CHARGING SECTION AND TO MAKE THE MAC HINERY WORKABLE. HOWEVER, WHEN THE MACHINERY SECTION RESULTS IN UNIN TENDED OR HARSH CONSEQUENCES WHICH WERE NOT INTENDED, THE REM EDIAL OR CORRECTION ACTION TAKEN IS NOT TO BE DISREGARDED BU T GIVEN DUE REGARD. 28. IT IS, IN THIS CONTEXT, THAT WE HAD IN RAJINDER KU MAR'S CASE (SUPRA) OBSERVED AS UNDER: '22. NOW, WE REFER TO THE AMENDMENTS WHICH HAVE BEE N MADE BY THE FINANCE ACT, 2010 AND THE EFFECT THEREOF. WE HA VE ALREADY QUOTED THE DECISION OF THE CALCUTTA HIGH COURT IN V IRGIN CREATIONS (SUPRA). THE SAID DECISION REFERS TO THE EARLIER DECISION OF THE SUPREME COURT IN THE CASE OF ALLIED MOTORS (P.) LTD(SUPRA) AND COMMISSIONER OF INCOME TAX V. ALOM EXTRUSIONS L TD, [2009] ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 12 319 ITR 306 (SC) . IN THE CASE OF ALLIED MOTORS (P.) LTD. (SUPRA), T HE SUPREME COURT WAS EXAMINING THE FIRST PROVISO TO SE CTION 43B AND WHETHER IT WAS RETROSPECTIVE. SECTION 43B WAS INSER TED IN THE ACT WITH EFFECT FROM 1ST APRIL 1984 FOR CURBING CLAIMS OF TAXPAYERS WHO DID NOT DISCHARGE OR PAY STATUTORY LIABILITIES BUT CLAIMED DEDUCTIONS ON THE GROUND THAT THE STATUTORY LIABILITY HAD ACCR UED. SECTION 43B STATES THAT THE STATUTORY LIABILITY WOULD BE ALLOWE D AS A DEDUCTION OR AS AN EXPENSE IN THE YEAR IN WHICH THE PAYMENT WAS MADE AND WOULD NOT BE ALLOWED, EVEN IN CASES OF MERCANTILE S YSTEM OF ACCOUNTANCY, IN THE YEAR OF ACCRUAL. IT WAS NOTICED THAT IN SOME CASES HARDSHIP WOULD BE CAUSED TO ASSESSEES, WHO PA ID THE STATUTORY DUES WITHIN THE PRESCRIBED PERIOD THOUGH THE PAYMENTS SO MADE WOULD NOT FALL WITHIN THE RELEVANT PREVIOUS YE AR. ACCORDINGLY, A PROVISO WAS ADDED BY FINANCE ACT, 1987 APPLICABLE WITH EFFECT FROM 1ST APRIL, 1988. THE PROVISO STIPULATED THAT W HEN STATUTORY DUES COVERED BY SECTION 43B WERE PAID ON OR BEFORE THE DUE DATE FOR FURNISHING OF THE RETURN UNDER SECTION 139(1), THE DEDUCTION/EXPENSE, EQUAL TO THE AMOUNT PAID WOULD B E ALLOWED. THE SUPREME COURT NOTICED THE PURPOSE BEHIND THE PR OVISO AND THE REMEDIAL NATURE OF THE INSERTION MADE. OF COURSE, T HE SUPREME COURT ALSO REFERRED TO EXPLANATION 2 WHICH WAS INSE RTED BY FINANCE ACT, 1989 WHICH WAS MADE RETROSPECTIVE AND WAS TO T AKE EFFECT FROM 1ST APRIL, 1984. HIGHLIGHTING THE OBJECT BEHIN D SECTION 43B, IT WAS OBSERVED THAT THE PROVISO MAKES THE PROVISION W ORKABLE, GIVES IT A REASONABLE 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 SH OULD BE AVOIDED IF IT DEFEATS THE MANIFEST OBJECT AND PURPOSE OF THE A CT. 13. THEREFORE, IN THE WELL-KNOWN WORDS OF JUDGE LEA RNED HAND, ONE CANNOT MAKE A FORTRESS OUT OF THE DICTIONARY; AND S HOULD REMEMBER THAT STATUTES HAVE SOME PURPOSE AND OBJECT TO ACCOM PLISH 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 I NTERPRETATION. A PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONS EQUENCES AND TO MAKE THE PROVISION WORKABLE, A PROVISO WHICH SUP PLIES AN OBVIOUS OMISSION IN THE SECTION AND IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SECTION A REASONABLE INTERPRETA TION, REQUIRES TO ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 13 BE TREATED AS RETROSPECTIVE IN OPERATION SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTION AS A WHO LE. 14. THIS VIEW HAS BEEN ACCEPTED BY A NUMBER OF HIGH COURTS. IN THE CASE OF CIT V. CHANDULAL VENICHAND, THE GUJARAT HIGH COURT HAS HELD THAT THE FIRST PROVISO TO SECTION 43-B IS RETR OSPECTIVE AND SALES TAX FOR THE LAST QUARTER PAID BEFORE THE FILING OF THE RETURN FOR THE ASSESSMENT YEAR IS DEDUCTIBLE. THIS DECISION DEALS WITH ASSESSMENT YEAR 1985-85. THE CALCUTTA HIGH COURT IN THE CASE O F CIT V. SRI JAGANNATH STEEL CORPN. HAS TAKEN A SIMILAR VIEW HOL DING THAT THE STATUTORY LIABILITY FOR SALES TAX ACTUALLY DISCHARG ED AFTER THE EXPIRY OF THE ACCOUNTING YEAR IN COMPLIANCE WITH THE RELEVANT STATUTE IS ENTITLED TO DEDUCTION UNDER SECTION 43-B. THE HIGH COURT HAS HELD THE AMENDMENT TO BE CLARIFICATORY AND, THEREFORE, R ETROSPECTIVE. THE GUJARAT HIGH COURT IN THE ABOVE CASE HELD THE AMEND MENT TO BE CURATIVE AND EXPLANATORY AND HENCE RETROSPECTIVE. T HE PATNA HIGH COURT HAS ALSO HELD THE AMENDMENT INSERTING THE FIR ST PROVISO TO BE EXPLANATORY IN THE CASE OF JAMSHEDPUR MOTOR ACCESSO RIES STORES V. UNION OF INDIA. THE SPECIAL LEAVE PETITIO N FROM THIS DECISION OF THE PATNA HIGH COURT WAS DISMISSED. THE VIEW OF THE DELHI HIGH COURT, THEREFORE, THAT THE FIRST PROVISO TO SECTION 43-B WILL BE AVAILABLE ONLY PROSPECTIVELY DOES NOT APPEA R TO BE CORRECT. AS OBSERVED BY G.P. SINGH IN HIS PRINCIPLES OF STAT UTORY INTERPRETATION, 4TH EDN. AT P. 291: 'IT IS WELL-SET TLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS L AW RETROSPECTIVE OPERATION IS GENERALLY INTENDED.' IN FACT THE AMEND MENT WOULD NOT SERVE ITS OBJECT IN SUCH A SITUATION UNLESS IT IS C ONSTRUED AS RETROSPECTIVE. THE VIEW, THEREFORE, TAKEN BY THE DE LHI HIGH COURT CANNOT BE SUSTAINED.' 23. SECTION 43B DEALS WITH STATUTORY DUES AND STIPU LATES THAT THE YEAR IN WHICH THE PAYMENT IS MADE THE SAME WOULD BE ALLOWED AS A DEDUCTION EVEN IF THE ASSESSEE IS FOLLOWING THE MER CANTILE SYSTEM OF ACCOUNTANCY. THE PROVISO, HOWEVER, STIPULATES THAT DEDUCTION WOULD BE ALLOWED WHERE THE STATUTORY DUES COVERED BY SECT ION 43B STAND PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. SECTION 40(A)(IA) IS APPLICABLE TO CASES WHERE AN ASSESSEE IS REQUIRED TO DEDUCT TAX AT SOURCE AND FAILS TO DEDUCT OR DOES NO T MAKE PAYMENT OF THE TDS BEFORE THE DUE DATE, IN SUCH CASES, NOTW ITHSTANDING SECTIONS 30 TO 38 OF THE ACT, DEDUCTION IS TO BE AL LOWED AS AN EXPENDITURE IN THE YEAR OF PAYMENT UNLESS A CASE IS COVERED UNDER ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 14 THE EXCEPTIONS CARVED OUT. THE AMENDED PROVISO AS I NSERTED BY FINANCE ACT, 2010 STATES WHERE AN ASSESSEE HAS MADE PAYMENT 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 EXPE NSE 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 UNREG ISTERED OWNERS WHO HAD PAID SALE CONSIDERATION AND WERE COV ERED BY SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THE CO NTENTION OF THE ASSESSEES WAS THAT THE AMENDMENTS MADE TO THE DEFIN ITION OF TERM 'OWNER' BY FINANCE BILL, 1987 SHOULD BE GIVEN RETRO SPECTIVE 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 CONSTRUC TION' AND 'THE PRINCIPLE OF DECLARATORY STATUTES', FRANCIS BENNION : 'STATUTORY INTERPRETATION', JUSTICE G.P. SINGH'S 'PRINCIPLES O F STATUTORY INTERPRETATION', IT WAS OBSERVED THAT SOMETIMES AME NDMENTS ARE MADE TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP D OUBTS AS TO THE MEANING OF THE PREVIOUS PROVISION. THE ISSUE WAS AC CORDINGLY DECIDED HOLDING THAT IN SUCH CASES THE AMENDMENTS W ERE RETROSPECTIVE THOUGH IT WAS NOTICED THAT AS PER TRA NSFER OF PROPERTY ACT, REGISTRATION ACT, ETC. A LEGAL OWNER MUST HAVE A REGISTERED DOCUMENT. 25. IN VIEW OF THE AFORESAID DISCUSSION IN PARAS 18 ,19 AND 20, IT IS APPARENT THAT THE RESPONDENT ASSESSEE DID NOT VIOLA TE THE UNAMENDED SECTION 40(A)(IA) OF THE ACT. WE HAVE NOT ED THE AMBIGUITY AND REFERRED THEIR CONTENTION OF REVENUE AND REJECTED THE INTERPRETATION PLACED BY THEM. THE AMENDED PROV ISIONS ARE CLEAR AND FREE FROM ANY AMBIGUITY AND DOUBT. THEY W ILL HELP CURTAIL LITIGATION. THE AMENDED PROVISION CLEARLY SUPPORT V IEW TAKEN IN PARAGRAPHS 17 - 20 THAT THE EXPRESSION 'SAID DUE DA TE' USED IN CLAUSE A OF PROVISO TO UNAMENDED SECTION REFERS TO TIME SPECIFIED IN SECTION 139(1) OF THE ACT. THE AMENDED SECTION 40(A )(IA) EXPANDS AND FURTHER LIBERALISES THE STATUTE WHEN IT STIPULA TES THAT DEDUCTIONS MADE IN THE FIRST ELEVEN MONTHS OF THE PREVIOUS YEA R BUT PAID BEFORE THE DUE DATE OF FILING OF THE RETURN, WILL C ONSTITUTE SUFFICIENT COMPLIANCE.' ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 15 29. IN VIEW OF THE AFORESAID DISCUSSION, WE DO NOT FIN D ANY MERIT IN THE PRESENT APPEALS FILED BY THE REVENUE AND THEY A RE DISMISSED. WE FURTHER NOTE THAT THE COORDINATE BENCH OF THIS T RIBUNAL IN CASE OF RAJESH YADAV IN ITA NO. 895/JP/2012 VIDE ORDER DAT ED 29.01.2016 HAS HELD AS UNDER:- 6.1. RECENTLY IN THE MATTER OF P.M.S. DIESELS 2015 ] 59 TAXMANN.COM 100 (PUNJAB & HARYANA), HONBLE PUNJAB & HARYANA HIGH COURT HAD ELABORATELY DISCUSSED THE JUDGMENT P ASSED BY THE HONBLE CALCUTTA HIGH COURT AND HONBLE GUJARAT HIG H COURT, HONBLE ALLAHABAD HIGH COURT AND OTHER JUDGMENTS AS AVAILABLE AND THEREAFTER HAS COME TO THE CONCLUSION THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE MANDATORY IN NATURE AND NON COMPLIANCE/NON DEDUCTION OF TAX ATTRACTS DISALLOWAN CE OF THE ENTIRE AMOUNT. HAVING SAID SO, WE WILL BE FAILING I N OUR DUTY IF WE DO NOT DISCUSS THE AMENDMENT BROUGHT IN BY THE FINA NCE (NO. 2) ACT 2014 WITH EFFECT FROM 1.4.2015 BY VIRTUE OF WHI CH PROVISO TO SECTION 40(A)(IA) HAS BEEN INSERTED, WHICH PROVIDES THAT IF ANY SUCH SUM TAXED 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 13 9, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF PREVIOUS YEAR, AND FURTHER, SECTION 40(A)(IA) HAS B EEN SUBSTITUTED WHEREIN THE 30% OF ANY SUM PAYABLE TO A RESIDENT HA S BEEN SUBSTITUTED. IN THE PRESENT CASE, THE AUTHORITIES B ELOW HAS ADDED THE ENTIRE SUM OF RS. 7,51,322/- BY DISALLOWING THE WHOLE OF THE AMOUNT. THOUGH THE SUBSTITUTION IN SECTION 40 HAS B EEN MADE EFFECTIVE WITH EFFECTIVE FROM 1.4.2015, IN OUR VIEW THE BENEFIT OF THE AMENDMENT SHOULD BE GIVEN TO THE ASSESSEE EITHE R BY DIRECTING THE AO TO CONFIRM FROM THE CONTRACTORS, N AMELY, M/S. GARVIT STONEX, M/S. CHANDA MARBLES AND M/S. NIDHI G RANITES AS TO WHETHER THE SAID PARTIES HAVE DEPOSITED THE TAX OR NOT AND FURTHER OR RESTRICT THE ADDITION TO 30% OF RS. 11 I TA NO. ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 16 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. IT O AJMER. 7,51,322/-. IN OUR VIEW, IT WILL BE TIED OF JUSTICE IF THE DISALLOWANCE IS ONLY RESTRICTED TO 30% OF RS. 7,51, 322/-. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED IN THE ABOVE SAID MANNER. FURTHER THIS TRIBUNAL HAS TAKEN A SIMILAR VIEW ON T HIS ISSUE BY FOLLOWING THE ABOVE DECISIONS AND THEREFORE EVEN IF THERE IS DIVERGENT VIEW TAKEN BY THE HONBLE KERALA HIGH COURT THE VIEW TAKEN IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL BY FOLLOWING THE VARIOUS DECISIONS ARE TO BE FOLLOWED TO MAINTAIN THE RULE OF CONSISTENCY. ACCOR DINGLY, WE ARE OF THE VIEW THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT WOULD BE EFFECTIVE RETROSPECTIVE AS IT WAS UNDISPUTEDLY INSE RTED TO REMOVABLE THE HARDSHIP FACED BY THE ASSESSES. HENCE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR LIMITED PURPOSE TO VERIFY THE FACT THAT THE INTEREST INCOME RECEIVED BY THESE NBFCS HAVE BE EN INCLUDED IN THE RETURN OF INCOME AND OFFERED TO TAX AND THEN DECIDE THIS ISSUE IN LIGHT OF ABOVE OBSERVATION. 8. GROUND NO. 2 IS REGARDING DISALLOWANCE MADE U/S 40A(2)(A) OF THE INCOME TAX ACT. DURING THE YEAR UNDER CONSIDERA TION, THE ASSESSEE HAS ALLOWED DISCOUNT OF RS. 8,00,969/- TO ITS 100% SUBSIDIARY M/S VRC ENTERPRISES PVT. LTD. THE AO NOTED THAT THE ASSESSE E HAS NOT ALLOWED ANY DISCOUNT TO THE OTHER PARTIES AND ALLOWED THE D ISCOUNT ONLY TO THE ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 17 GROUP CONCERN OF THE ASSESSEE AND ACCORDINGLY THE A O DISALLOWED THE SAID AMOUNT OF RS. 8,00,969/- U/S 40A(2)(A) OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) B UT COULD NOT SUCCEED. 9. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT TRADE DISCOUNT IS NOT A PAYMENT AND THEREFORE, DOES NOT F ALL IN THE AMBIT OF SECTION 40A(2)(A) OF THE ACT. THE ASSESSEE HAS GRAN TED DISCOUNT FROM THE SALE PRICE AND MERE FACT THAT IT WAS CLAIM SEPA RATELY RATHER THAN THE REDUCING FROM THE SALE VALUE WILL NOT CHANGE ITS TR UE NATURE. THUS, THE AR HAS SUBMITTED THAT WHEN THE AMOUNT IN QUESTION ALLOWED AS DISCOUNT IS NOT A PAYMENT OF EXPENDITURE THEN THE S AME CANNOT BE DISALLOWED U/S 40A(2)(A) OF THE ACT. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COUR T IN CASE OF UNITED EXPORTS VS. CIT 330 ITR 549 . 10. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE CIT(A) HAS CONSIDERED THIS ISSUE AND CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE COMMERCIAL EXPEDIENCY F OR ALLOWING THE DISCOUNT ONLY TO THE SISTER CONCERN AND NOT TO THE OTHER PARTIES WHOSE TURNOVER WITH THE ASSESSEE IS MORE THAN THE SISTER S CONCERN. ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 18 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. WE FIND THAT THE LD. CIT(A) HAS ACCEPTED THIS CONTENTION OF THE ASSESSEE THAT DISCOUNT ALLOWED BY THE ASSESSEE IS NOT AN EXPENDITURE IN RESPECT OF WHICH PAYMENT IS TO BE MADE IN PARA 3.3 AS UNDER:- 3.3 I HAVE EXAMINED THE FACTS OF THE CASE, THE ASS ESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE PROVISION S OF SECTION 40A(2)9A) PERTAINS TO DISALLOWANCE OF AN EXPENDITUR E IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR IS TO BE MADE. A TRADE DISCOUNT IS NOT AN EXPENDITURE IN RESPECT OF WHICH PAYMENT IS TO BE MADE. THE JUDGMENT OF THE DELHI HIGH COURT IN TH E CASE OF UNITED EXPORTS VS CIT [2009] 185 TAXMAN 374 (DELHI) IS APPLICABLE TO THE FACTS OF THIS CASE THAT A TRADE D ISCOUNT IS NOT AN EXPENDITURE AND THEREFORE THE QUESTION OF APPLICABI LITY OF SECTION 40A(2)(A) DOES NOT ARISE. HOWEVER, THE LD. CIT(A) HAS PROCEEDED FURTHER AND D ISALLOWED THE CLAIM ON THE GROUND OF JUSTIFICATION AND COMMERCIAL EXPED IENCY. WE FIND THAT WHEN THERE IS NO ACTUAL OUT GO FROM THE ASSESSEE TO ITS SUBSIDIARY BUT THE ASSESSEE HAS ALLOWED DISCOUNT TO THE SUBSIDIARY ON SALE MADE TO THE SUBSIDIARY. THEREFORE, EVEN IF THE SAID DISCOUNT WA S NOT ALLOWED TO THE OTHER PARTIES AND IT IS ALLOWED TO THE RELATED PART IES, IN THE ABSENCE OF ANY PROVISIONS U/S 40A(2)(A) OR U/S 37 OF THE INCOM E TAX ACT, THE SAME CANNOT BE DISALLOWED. IT IS PERTINENT TO NOTE THAT THE TRANSACTION MAY BE FALLING UNDER THE CATEGORY OF DOMESTIC TRANSFER PRI CING HOWEVER, WHEN ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 19 THE SAID PROVISION IS NOT APPLICABLE FOR THE YEAR U NDER CONSIDERATION AND THE AO HAS NOT APPLIED THE SAME THEN, IT CANNOT BE DISALLOWED. THE HONBLE DELHI HIGH COURT IN CASE OF UNITED EXPORTS VS. CIT(SUPRA) WHILE CONSIDERING THIS ISSUE HAS HELD IN PARA 11 AS UNDER :- 11. LASTLY, WE FAIL TO UNDERSTAND HOW THE PROVISIONS O F SECTION 40A(2)(B) ARE, AT ALL, APPLICABLE IN THE FACTS OF T HE PRESENT CASE. SECTION 40A(2)(A) RUNS AS UNDER : '(2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE I N RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERS ON REFERRED TO IN CLAUSE (B) OF THIS SUB-SECTION, AND THE ASSESSIN G OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREA SONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVI CES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS O F THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVE D BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION.' THIS PROVISION IN THE ACT PERTAINS TO DISALLOWANCE TO AN EXPENDITURE WHICH IS MADE BY THE ASSESSEE I.E., AN AMOUNT ACTUA LLY SPENT BY THE ASSESSEE AS AN EXPENDITURE. THE EXPRESSION USED IN THIS PROVISION IS 'INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON' [EMPHASIS SUPPLIED]. THE EMPHASIZED WORDS CLEARLY SHOW THAT ACTUAL PAYMENT MUST BE MADE AND THERE HAS TO BE AN EXPENDITURE INCURRED BEFORE THE PROVIS ION CAN BE SAID TO BE APPLICABLE. A TRADE DISCOUNT, AND ADMITTEDLY IT IS NOT IN DISPUTE THAT THE SUBJECT-MATTER OF THE CLAIM IS A TRADE DIS COUNT, AND NOT AN EXPENDITURE, CLEARLY THEREFORE THERE DOES NOT ARISE THE QUESTION OF APPLICABILITY OF SECTION 40A(2)(B). HENCE, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF TH E CASE WHEN THE TRADE DISALLOWANCE IS NOT AN EXPENDITURE PAID OR PA YABLE AS PER THE ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 20 PROVISIONS OF SECTION 40A(2)(A) OF THE ACT THEN THE SAME CANNOT BE DISALLOWED FOR WANT OF ANY PROHIBITORY PROVISION IN THE INCOME TAX ACT. 12. GROUND NO. 3 IS REGARDING DISALLOWANCE OF REGIS TRAR OF COMPANY FEES AND FOREIGN TRAVELLING EXPENDITURE. DURING THE COURSE OF ASSESSEE PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS INCR EASED THE AUTHORIZED CAPITAL FROM RS. 40 LACS TO RS. 60 LACS AND INCURRED ROC FEE OF RS. 33,990/- WHICH IS DEBITED UNDER THE HEAD OF REGISTRATION FEE. ON ENQUIRY FROM THE AO THE ASSESSEE STATED THAT THE EX PENSIVE WAS INCURRED TO INCREASE THE AUTHORIZED CAPITAL. THE AO DISALLOWED THE CLAIM OF THE ASSESEE ON THE GROUND THAT IT IS A CAPITAL E XPENDITURE AND NOT ALLOWABLE UNDER THE PROVISIONS OF THE ACT. SIMILARL Y THE ASSESSEE HAS DEBITED RS. 1,88,400/- ON ACCOUNT OF THE FOREIGN TR AVEL MADE BY EXECUTIVE MANAGER OF THE COMPANY ALONG WITH HIS WIF E. THE ASSESSING OFFICER HAS DISALLOWED THE 50%OF THE EXPENSES ATTRI BUTABLE TO THE FOREIGN TRAVEL OF THE WIFE OF THE EXECUTIVE MANAGER . THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT( A) ON BOTH DISALLOWANCE MADE IN RESPECT OF ROC, FEES EXPENSES AND 50% FOREIGN TRAVEL EXPENSES HOWEVER, THE LD. CIT(A) HAS CONFIR MED THE DISALLOWANCE MADE BY THE AO. ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 21 13. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMI TTED THAT THE EXPENDITURE INCURRED FOR INCREASE OF AUTHORIZED CAP ITAL IS AN ALLOWABLE CLAIM AS THE AMOUNT WAS TO BE USED FOR WORKING CAPI TAL PURPOSE. AS REGARDS THE FOREIGN TRAVEL EXPENSES THE LD. AR OF T HE ASSESSEE HAS SUBMITTED THAT THE SAID FOREIGN VISIT WAS UNDERTAKI NG BY THE EXECUTIVE MANAGER FOR THE PURPOSE OF GROWTH OF THE BUSINESS O F THE ASSESSEE BY MEETING THE PROSPECTIVE CLIENTS AND TECHNOLOGICAL U P-GRADATION. THE ASSESSING OFFICER HAS ALLOWED THE FOREIGN TRAVEL EX PENSES IN RESPECT OF THE EXECUTIVE MANAGER AND THEREFORE TO THE EXTENT O F THE EXPENDITURE OF EXECUTIVE MANAGER THE AO ACCEPTED THE SAME AS BUSIN ESS EXPENDITURE. HOWEVER IT IS CUSTOMARY FOR THE SPOUSE OF BUSINESSM EN TO ACCOMPANY THEM TO FORMAL BUSINESS GATHERING. IT IS NECESSARY TO FULFILL SOCIAL OBLIGATIONS IN ORDER TO FORM FIRM BUSINESS RELATION S. THEREFORE, THE EXPENDITURE INCURRED FOR FOREIGN TRAVEL OF WIFE OF THE EXECUTIVE MANAGER SHOULD BE ALLOWED AS BUSINESS EXPENDITURE. IN SUPP ORT OF HIS CONTENTION, HE HAS RELIED UPON THE THIRD MEMBER DEC ISION (JABALPUR BENCH OF THIS TRIBUNAL IN THIS CASE VINDHYA TELELIN K LTD. V. JCIT 119 TTJ (JAB.) TM 433 AS WELL AS THE DECISION OF THE MUMBAI SPECIAL BENCH IN CASE OF GLAXO LABORATORIES (INDIA) LTD. V. ITO 18 ITD 226 (BOM.)(SB). ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 22 14. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE O RDERS OF THE AUTHORITY BELOW AND SUBMITTED THAT WHEN THE WIFE OF THE EXECUTIVE MANAGER IS NOT AN EMPLOYEE OF THE ASSESSEE THEN, TH E EXPENDITURE INCURRED ON THE FOREIGN TRAVEL OF THE WIFE CANNOT B E ALLOWED AS BUSINESS EXPENDITURE. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS INCURRED THE E XPENDITURE ON FOREIGN TOUR OF THE EXECUTIVE MANAGER ALONG WITH HI S WIFE. IT IS SETTLED PROPOSITION OF LAW THAT AT AS PER THE PROVISIONS OF SECTION 37 OF THE IT ACT AN EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS CAN BE ALLOWED. IN THE CASE IN HAND TH E ASSESSEE IS NOT HAVING ANY BUSINESS OUTSIDE INDIA NEITHER, THE ASSE SSEE IS EXPORTING ANY GOODS OR ARTICLES NOR IMPORTING. THEREFORE, IN THE ABSENCE OF THE SPECIFIC PURPOSE OF THE FOREIGN TRIP OF THE EXECUTIVE MANAGE R, THE EXPENDITURE INCURRED ON THE FOREIGN TRIP OF THE EXECUTIVE MANGE R CANNOT BE CONSIDERED AS AN EXPENDITURE INCURRED WHOLLY AND EX CLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. THE DECISION RELIED UPON THE ASSESSEE ARE BASED ON THE PECULIAR FACTS OF THOSE CASE AS THE AS SESSEE WE ARE HAVING SUBSTANTIAL BUSINESS WITH THE FOREIGN COUNTRY AND T HEREFORE THE FOREIGN TRIP IN CONNECTION WITH THE BUSINESS OF THE ASSESSE E AND PARTICULARLY IN ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 23 THE BUSINESS OF CONFERENCE, SEMINAR OR OTHER BUSINE SS GATHERINGS CAN BE CONSIDERED AS EXPENDITURE FOR THE PURPOSE OF BUS INESS OF THE ASSESSEE. WHERE THERE IS NO SPECIFIC PURPOSE HAS BE EN EXPLAINED FOR THE VISIT OF THE EXECUTIVE MANAGER THEN THE DISALLOWANC E MADE BY THE AO AND UPHELD BY THE LD. CIT(A) IN RESPECT OF THE FORE IGN TRIP EXPENSES OF THE WIFE OF THE EXECUTIVE MANAGER IS JUSTIFIED AND PROPER. 16. AS REGARDS DISALLOWANCE OF ROC FEES WE FIND TH AT THE EXPENDITURE WAS INCURRED BY THE ASSESEE FOR INCREAS ING THE AUTHORIZED SHARE CAPITAL AND THEREFORE, THE AUTHORITIES BELOW HAVE RIGHTLY CONSIDERED THE SAID EXPENDITURE AS CAPITAL IN NATUR E. THE ASSESSEE HAS FAILED TO SHOW THAT HOW THE SAID EXPENDITURE IS REV ENUE IN NATURE WHEN THE SAME IS INCURRED FOR INCREASE OF AUTHORIZED CAP ITAL EXCEPT THE CONTENTION THAT IT WOULD BE USED FOR WORKING CAPITA L. HENCE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE. ACCORDINGLY THIS GROUND OF T HE ASSESSEES APPEAL IS REJECTED. 17. GROUND NO. 4 IS REGARDING THE ADDITION MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN THE INTEREST ON FDRS AS PE R 26AS AND THE INTEREST INCOME RECOGNIZED BY THE ASSESSEE IN THE B OOKS OF ACCOUNTS. THE AO NOTED THAT DURING THE YEAR UNDER CONSIDERATI ON THE ASSESSEE ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 24 HAD ACCOUNT FOR INTEREST ON FDR OF RS. 5,44,352/- H OWEVER, AS PER 26AS THE SAID INTEREST WAS RS. 6,57,670/-. THE AO ADDED THE DIFFERENCE OF RS. 1,13,318/- TO THE INCOME OF THE ASSESSEE. THE ASSES SEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND SUBMITTE D THAT THE ASSESSEE COMPANY MAINTAINS ITS ACCOUNT ON ACCRUAL BASIS. IT REQUIRES ESTIMATING THE ACCRUED INCOME BY WAY OF INTEREST ON UN-MATURED FIXED DEPOSIT. THIS ESTIMATION CAN BE VARIANCE WITH THE WORKING OF THE BANK HOWEVER, SUCH VARIANCE, OVER A TOTAL PERIOD OF MATURITY OF F IXED DEPOSIT WILL GET NEUTRALIZED. THE LD. CIT(A) DID NOT ACCEPT THESE CO NTENTION OF THE ASSESSEE UPHELD THE ADDITION MADE BY THE AO. 18. BEFORE US, LD. AR OF THE ASSESSEE SUBMITTED THA T DUE TO THE METHOD OF ACCOUNTING THERE WAS DIFFERENCE BETWEEN T HE INTEREST ACCOUNTED BY THE ASSESSEE ON FDRS AND THE INTEREST SHOWN AS PER 26AS HOWEVER, THE SAID DIFFERENCE IS REVENUE NEUTRAL WHE N THE ASSESSEE IS REPORTING THE TOTAL INTEREST AMOUNT OVER THE PERIOD OF MATURITY. 19. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE BANK HAS C ORRECTLY GIVEN THE FIGURE OF INTEREST INCOME AS AVAILABLE IN THE FORM NO. 26AS, THEREFORE, WHEN THE EXACT FIGURE PROVIDED BY THE BANK CANNOT B E QUESTIONED THEN THE ESTIMATED FIGURE OF THE ASSESSEE CANNOT BE TAKE N AS THE INCOME. ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 25 20. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT AS PER FORM 26AS, THE SBI HAS GIVEN THE AMOUNT OF INTEREST ACCRUED ON FDRS DURING THE Y EAR UNDER CONSIDERATION AT RS. 6,57,670/- WHEREAS THE ASSESSE E HAS ACCOUNTED THE INTEREST INCOME OF RS. 5,44,352/- WHICH IS LES S THAN THE AMOUNT REPORTED BY THE STATE BANK OF INDIA AS PER FORM 26 AS. THE ASSESSEE HAS NOT DISPUTED THE CORRECTNESS OF THE INCOME REPO RT IN 26AS BUT HAS CONTENDED THAT THE INTEREST INCOME ACCOUNTED BY THE ASSESSEE IS BASED ON ESTIMATED ACCRUAL INTEREST AND THE DIFFERENCE IN THE ACCOUNTED INCOME IS REVENUE NEUTRAL. WE DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE SIMPLY ON THE REASON THAT WHEN THE CORRECT AMOUNT OF INCOME IS AVAILABLE AS PER FORM 26AS THEN, THE INCOME OF T HE ASSESSEE IS REQUIRED TO BE ASSESSED ON CORRECT FIGURES AND FACT S INSTEAD OF ESTIMATED FIGURES ACCOUNTED BY THE ASSESSEE. FURTHE R, WHEN THE CORRESPONDING TDS CREDIT IS AVAILABLE TO THE ASSESS EE FOR THE YEAR UNDER CONSIDERATION AGAINST THE INCOME REPORTED IN 26AS T HEN THE SAID CREDIT CANNOT BE ALLOWED AGAINST LESS INCOME DECLARED BY T HE ASSESSEE ON THIS ACCOUNT. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR I LLEGALITY IN THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW QUA THIS I SSUE. ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 26 21. NOW WE TAKE UP TWO APPEAL FOR THE ASSESSMENT YE AR 2010-11 AND 2011-12 IN WHICH THE ASSESSEE HAS RAISED COMMON GRO UNDS. THE GROUNDS RAISED FOR THE ASSESSMENT YEAR 2010-11 ARE REPRODUCED AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . AO IN DISALLOWING A SUM OF RS. 82,618/- OUT OF THE TOTAL SUM OF RS. 1,59,252/- DISALLOWED BY LD. AO UNDER SECTION 40(A) (IA) OF INCOME TAX ACT, 1961. THE ACTION OF LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS. 82 ,618/- UNDER SECTION 40(A)(IA) OF INCOME TAX ACT, 1961. 2. THE ASSESSEE COMPANY CRAVES ITS RIGHT TO ADD, AM END OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 22. THIS ISSUE RAISED BY THE ASSESSEE IN RESPECT OF DISALLOWANCE MADE BY THE AO UNDER SECTION 40(A)(IA) OF INCOME TAX ACT , 1961 IS COMMON AS RAISED FOR THE ASSESSMENT YEAR 2009-10. HOWEVER, THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF THE INTEREST PAID TO ONE OF THE NBFCS WHICH HAS FILED RETURN OF INCOME W ITHIN THE DUE DATE AS PROVIDED U/S 139(1) OF THE ACT AND DISALLOWED TH E CLAIM IN RESPECT OF OTHER NBFCS WHO HAVE FILED THEIR RETURN OF INCOME B ELATEDLY. THE LD. CIT(A) HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE SECOND ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 27 PROVISO TO SECTION 40(A)(IA) IS APPLICABLE WITH RET ROSPECTIVE EFFECT IN PARAS 2.4 AND 2.5 AS UNDER:- 2.4 IN THE CASE OF SH. GIRDHARI LAI BARGOTI (SUPRA ) IT WAS FURTHER INDICATED THAT ONCE THE I.T. RETURNS ARE FILED BY T HE RECIPIENT NBFC, INCLUDING THEREIN THE INTEREST RECEIPTS FROM THE ASSESSEE THEN THE ASSESSEE WOULD NOT BE DEEMED TO BE IN DEFA ULT. IT IS SEEN THAT THE CORRESPONDING PROVISIONS ARE IN 1 ST PROVISO TO SECTION 201(1) WHICH PROVIDES THAT THE ASSESSEE SHA LL NOT BE DEEMED TO BE IN DEFAULT IF THE RECIPIENT OR LIABLE DEDUCTEE HAS FILED HIS RETURN TAKING INTO ACCOUNT THE AMOUNTS ON WHICH TDS WAS NOT DEDUCTED BY THE ASSESSEE AND PAYS DUE TAXES AND THE ASSESSEE FURNISHES THE REPORT OF C.A. IN THE SPECIF IED FORMAT TO THE ABOVE EFFECT. IF THE ASSESSEE FURNISHES SUCH RE PORT OF C.A., THE ASSESSEE SHALL BE DEEMED TO HAVE DEDUCTED AND P AID THE TAX ON THE DATE OF FURNISHING OF RETURN BY THE ABOVESTA TED RECIPIENT, IN TERMS OF 2 ND PROVISO TO SEC. 40(A)(IA). THE SAID PROVISO IS INSERTED BY FINANCE ACT,2012 W.E.F. 1.4.2013. HOWEV ER, SEVERAL COURTS HAVE HELD THE SAME TO BE RETROSPECTIVE IN OP ERATION. IN THE CASE CLT VS. ANSAL LAND MARK TOWNSHIP P. LTD. (2015) 377 ITR 635 (DEL.), HONBLE DELHI HIGH COURT HAS HELD THAT THE INSERTION OF SECOND PROVISO TO SEC. 40(A)(IA) IS DE CLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE AFFECT FRO M 1.4.2005. 2.5 THE JURISDICTIONAL ITAT, IN THE CASE OF SHRI R AKESH TAK VS. ITO IN ITA NO. 888/JP/2014, HAS REITERATED THE DECISION OF DELHI HIGH COURT SUPRA). BE THAT AS IT MAY, THE MOOT POINT IS WHETHER THE ASSESSEE HAS FURNISHED THE SAID CERT IFICATE OF C.A. IN TERMS OF 1 ST PROVISO TO SEC. 201(1). THE APPELLANT HAS SUBMITTED THE SAID CERTIFICATES IN RESPECT OF PAYME NT MADE TO VARIOUS PARTIES AS UNDER:- S. N. NAME OF THE PARTIES DISALLOWANCE U/S 40(A)(IA) CERTIFICATE U/S 201(1) SUBMITTED OF RS. DATE OF FILING AS AGAINST DUE DATE ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 28 15/10/2010 1. BAJAJ AUTO FINANCE 39,020/ - 39,020 30.03.2012 2. CHOLAMANDALAM DBC 43,598 41,913/ - 30.03.2012 3. RELIANCE CAPITAL 76,634/ - 77,885/ - 12.10.2010 THE DUE DATE OF FILING OF RETURN BY THE SAID PAYEES WAS 15.10.2010 AS PER S. 139(1). THEREFORE ONLY ONE OF THE ABOVE PAYEES I.E. RELIANCE CAPITAL LTD. HAS SUBMITTED ITS RETURN BEFORE THE SAID DUE DATE. THUS THE ASSESSEE IS DEEMED TO H AVE DEDUCTED TDS ON THE AMOUNT OF RS. 76,634/-. ACCORDINGLY, THE NET RELIEF ON THIS GROUND COMES TO RS. 76,634/-. DISALLOWANCE IN RESPECT OF THE BALANCE AMOUNT OF RS. 82,618/- IS UPHELD. THUS, IT IS CLEAR THAT THE RETURN OF INCOME FILED B Y RELIANCE CAPITAL ON 12.10.2010 WAS CONSIDERED BY THE LD. CIT(A) AS F ILED WITHIN A DUE DATE AS PER SECTION 139(1). ACCORDINGLY, DISALL OWANCE MADE BY THE AO IN RESPECT OF INTEREST PAYMENT TO RELIANC E CAPITAL WAS DELETED BY THE LD. CIT(A) WHEREAS, THE DISALLOWANCE IN RESPECT OF THE INTEREST PAID OTHER TO NBFCS WAS SUSTAINED ON T HE GROUND THAT THEY HAVE NOT FILED THEIR RETURN OF INCOME WITHIN D UE DATE AS PER SECTION 139(1) OF THE ACT. 23. THE LD. AR OF THE ASSESSEE HAS CONTENDED THAT T HE PROVISO TO SECTION 201(1) DOES NOT PROVIDE DUE DATE OF RETU RN AS PER SECTION 139(1) BUT IT CONTEMPLATES THAT IF THE RECI PIENT HAS INCLUDED THE AMOUNT IN THE RETURN OF INCOME FILED U /S 139(1) OF THE ACT THEN, THE ASSESSEE CANNOT BE HELD AS ASSESS EE IN DEFAULT AND ACCORDING, IN VIEW OF SECOND PROVISO TO SECTION 40(A)(IA) NO ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 29 DISALLOWANCE IS CALLED FOR. 24. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RE LEVANT PROVISIONS OF THE ACT. IF A CASE IS FOLLOWING UNDER THE FIRST PROVISO TO SECTION 201(1) THEN FOR THE PURPOSE OF SECTION 4 0(A)(IA) WHAT IS REQUIRED TO BE CONSIDERED IS THE RECIPIENT HAS INCL UDED AND PAID TAX ON THIS AMOUNT IN RETURNED INCOME THE SAME. THE REQUIREMENT OF FURNISHING THE RETURN OF INCOME BY THE RECIPIENT IS REFERRED INTO FIRST PROVISO TO SECTION 201(1) OF THE ACT. THUS AS PER THE FIRST PROVISO TO SECTION 201(1) IF THE RECIPIENT HAS FURN ISHED HIS RETURN OF INCOME U/S 139 THEN THE ASSESSEE THOUGH HAS NOT DEDUCTED TAX AT SOURCE SHALL NOT TO BE DEEMED TO THE ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX. FOR READY REFERENCE, WE QUOTE THE FIRST PROVISO TO SECTION 201(1):- 201. 48 [(1) WHERE ANY PERSON, INCLUDING THE PRINCIPAL OFFI CER OF A COMPANY, (A ) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WIT H 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 DEDUC TING FAILS TO PAY, THE WHOLE OR ANY PART OF THE TAX, AS REQUIRED BY OR UNDER THIS ACT, ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 30 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: 49 [ PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER O F A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER ON T HE 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 O F SUCH TAX IF SUCH RESIDENT (I ) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 ; (II ) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOM E 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 EFFE CT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED 50 :] THE LD. CIT(A) HAS NOT DISPUTED THE FACT THAT ALL T HE THREE NBFCS HAS FILED THEIR RETURN OF INCOME WITHIN A TIME PERIOD A LLOWED U/S 139 AND PARTICULARLY U/S 139(4) OF THE ACT. THE FIRST PROVI SO TO SECTION 201(1) SPECIFICALLY REQUIRES THE FURNISHING OF RETURN OF I NCOME U/S 139 WITHOUT SPECIFYING ANY SUB-SECTION, THEREFORE, THE TIME LIM IT PROVIDED UNDER ANY OF THE SUB-SECTION OF SECTION 139 WILL BE CONSIDERE D FOR THE PURPOSE OF ALLOWING THE BENEFIT AS PER THE FIRST PROVISO. ONCE , THE RETURN OF INCOME WERE FILED BY THE RECIPIENT, AS PER THE PROVISIONS OF SECTION 139 SPECIFICALLY UNDER SUB-SECTION (4) THEN HAVING ACCE PTED THE APPLICABILITY ITA NO. 561/JP/2014, 1111 &1112/JP/16 M/S ACCME (URVASHI PUMPS) ENG. PVT. LTD. JCIT 31 OF THE SECOND PROVISO TO SECTION 40(A)(IA) RESPECTI VE EFFECT NO DISALLOWANCE IS CALLED FOR IN RESPECT OF THE INTERE ST PAID TO THE NBFCS. ACCORDINGLY, WE DELETE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DELETE THE DISALLOWANCE MADE BY THE AO. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED AND APPEALS FOR THE ASSES SMENT YEARS 2010- 11 & 2011-12 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/01/2018 SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/01/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S ACCME (URVASHI PUMPS) ENG PVT. LTD., JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- JCIT (OSD)/ACIT/ JCIT. CIRCLE-4, J AIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 561/JP/2014, 1111&1112/JP/16} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR