PRIYUSH C. MEHTA, MUMBAI V. ACIT 25(30, MUMBAI

ITA 1321/MUM/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62187 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Retrospective amendment
• Section: 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI N.K. BILLAIY A(A.M) ITA NO. 1321/MUM/2009(A.Y. 2005-06) SHRI PIYUSH C. MEHTA, 701/702, RADHIKA APTS, ASHA NAGAR, BEHIND SAIDHAM, KANIVALI (E), MUMBAI 400 101. PAN:AACPM 6771K (APPELLANT) VS. THE ACIT 25(3), MUMBAI. (RESPONDENT) APPELLANT BY : SHRI PRAKASH K. JOTWANI RESPONDENT BY : SHRI PITAMBAR DAS DATE OF HEARING : 29/03/2012 DATE OF PRONOUNCEMENT : 11 /04/2012 ORDER PER N.V.VASUDEVAN, J.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 28/11/2008 OF CIT(A) -25, MUMBAI RELATING TO ASSESSMENT YEAR 2 005-06. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW: 1(A) THE LEARNED COMMISSIONER OF INCOME-TAX ERRED I N CONFIRMING DISALLOWANCE U/S.40(A)(IA) ON PAYMENTS MADE TO THE FOLLOWING SUBCONTRACTORS: (I) VAIBHAV ENTERPRISES RS. 1,12,38,889/ - (II) RAPID INEXCI SERVICES P.LTD. RS. 7,42,155/- CIT(A) TOOK FIGURE AT 7,50,000/-) (III)VIJAYYADAV RS. 5,07,625/- (IV) PARSHURAM RS. 7, 16,232/- (V) TEJUALI SHAIKH RS. 4,85,401/- (VI) GANESH RAMSINGH RS. 2,39,762/- (B) THE LEARNED CIT(A) FAILED TO CONSIDER THAT PAYM ENTS MADE BY THE APPELLANT WERE ADVANCES AND TREATED AS BILLS FOR PA YMENT ON THE LAST ITA NO. 1321/MUM/2009(A.Y. 2005-06) 2 DAY OF THE ACCOUNTING YEAR, WHEN TAX DEDUCTION HAS TAKEN PLACE AND THUS THERE WAS NO VIOLATION OF PROVISIONS OF SEC. 1 94C. (C) THE LEARNED CIT(A) FAILED TO CONSIDER THE AMEND ED PROVISIONS OF SEC.40(A)(IA) W.E.F. FROM 1.4.2005 WHICH HELD THAT IF TAX DEDUCTED HAS BEEN PAID BEFORE THE DUE DATE OF RETURN U/S. 139(1) , NO DISALLOWANCE CAN BE MADE. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR CANCEL ANY GROUND OR GROUNDS BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF BUILDING REPAIRS, LABOUR & CONSTRUCTION WORKS CONTRACTS AS P ROP. CONSTRUCTIVE CONCRETE CONSTRUCTIONS. IN THE COURSE OF ASSESSME NT PROCEEDINGS FOR AY 05-06, THE AO ON GOING THROUGH THE DETAILS FILED NO TICED THAT THE ASSESSEE HAS NOT PAID THE TDS DEDUCTED ON THE LABOUR CHARGES / ADVANCES PAID TO M/S VAIBHAV ENTERPRISES WITHIN THE TIME STIPULATED U/S 200(1). THE ASSESSES HAD MADE PAYMENTS / ADVANCES TO VAIBHAV ENTERPRISES THR OUGHOUT THE YEAR BUT HAS DEPOSITED THE TDS ONLY ON 31.5.05 I.E., BEYOND THE STIPULATED TIME. THE ASSESSEE SUBMITTED THAT VAIBHAV ENTERPRISES WAS WOR KING AS A LIAISON PARTNER CUM SUBCONTRACTOR FOR THE ASSESSEE FOR HIS CONSTRUCTION PROJECT OF BHOPAL. THE AMOUNTS WERE SENT ON ACCOUNT TO M/S VAI BHV FOR ORGANIZING WORK AND PAYMENT TO SMALL CONTRACTORS AT BHOPAL BE CAUSE OF THEIR LOCAL CONTACTS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE W AS RESIDING AT MUMBAI & WAS EXECUTING A PROJECT AT MUMBAI. HENCE HAVING A LIAISON PARTNER AT BHOPAL WAS TO HIS ADVANTAGE. SINCE THE FINAL BILL WAS SUBMITTED BY M/S VAIBHAV ENTERPRISES IN MAY 2005, THE AMOUNTS SENT T O THEM WERE SHOWN AS LOANS AND ADVANCES. 3. THE AO HOWEVER CONCLUDED THAT THE ASSESSEE HAS PAID AMOUNTS TO THE ATO M/S.VAIBHAV ENTERPRISES FOR ORGANIZING WORK AND PAY MENTS FOR EXECUTION OF ITS CONTRACT TO M/S. VAIBHAV ENTERPRISES WHO IS SUB CONTRACTOR OF THE ASSESSEE. HE HELD THAT IN TERMS OF PROVISIONS OF S EC. 200(1) THE ASSESSEE WAS REQUIRED TO DEDUCT TDS FROM THE ADVANCES / PAYMENTS MADE ON ACCOUNT ON ITA NO. 1321/MUM/2009(A.Y. 2005-06) 3 THE DATES THE PAYMENTS WERE MADE. SINCE THAT WAS N OT, HE HELD THAT IN TERMS OF PROVISIONS OF SEC. 40(A)(IA) THE PAYMENTS OF RS. 1,12,38,889/- PAID TO VAIBHAV ENTERPRISES (WHICH THOUGH IN THE NATURE OF SUB-CONTRACTUAL PAYMENTS / ADVANCES TOWARDS CONTRACT HAVE BEEN SHOW N AS LOANS AND ADVANCES GIVEN BY THE ASSESSE) WERE DISALLOWED AND ADDED BACK TO THE ASSESSEES TOTAL INCOME. 4. SIMILARLY IN THE CASE OF LABOUR CHARGED PAID / PAYABLE TO M/S. RAPID INEXCI SERVICES P LTD. OF RS.7,42,155/- WHICH WERE SHOWN AS CREDITED ON 31/3/05, THE AO NOTICED THAT THE ASSESSEE HAS BEEN MAKING PAYMENTS TO THE SAID COMPANY FROM SEPT. 04 ONWARDS UPTO FEB. 05 TOWARDS THE LABOUR CHARGES AND ON 31//3/05 IN FACT THERE WAS A DEBIT B ALANCE OF RS. 25,247/-. HENCE THOUGH THE LABOUR CHARGES HAVE BEEN PAID DURI NG THE YEAR, THE ACCOUNT HAS BEEN CREDITED ONLY ON 31/3/05. IN TERM S OF PROVISIONS OF SEC. 200(1) THE ASSESSEE WAS REQUIRED TO DEDUCT TDS FROM THE ADVANCES / PAYMENTS MADE ON ACCOUNT ON THE DATES THE PAYMENTS WERE MADE. THE AMOUNTS WERE DEPOSITED TO THE CREDIT OF THE GOVERNM ENT ONLY ON 31.5.2005. HOWEVER, THIS HAS NOT BEEN DONE SON. HENCE IN TERM S OF PROVISIONS OF SEC. 40(A)(IA) THE ADVANCE PAYMENTS OF RS. 7,42,155/- P AID TO RAPID INEXI P. LTD. WHICH THOUGH IN THE NATURE OF SUB-CONTRACTUAL PAYME NTS / ADVANCES TOWARDS CONTRACT SHOWN AS LOANS AND ADVANCES GIVEN BY THE ASSESSEE WERE DISALLOWED AND ADDED BACK TO THE ASSESSEES TOTAL I NCOME. 5. SIMILARLY IN RESPECT OF SUBCONTRACTUAL PAYMENTS TO VIJAY YADAV, PARSHURAM, TEJUALI SHAIK, THE AO NOTICED THAT THE ASSESEE HAS MADE PAYMENTS THROUGH OUT THE YEAR, BUT HAS CREDITED THE CONCERNED PERSONS ONLY ON 31/3/2005 AND HAS DEDUCTED TAX ON 31/3/05 AND D EPOSITED THE SAME ON 31/5/05. IN TERMS OF PROVISIONS OF SEC. 200(1) THE ASSESSEE WAS REQUIRED TO DEDUCT TDS FROM THE ADVANCES / PAYMENTS MADE ON ACCOUNT ON THE DATES THE PAYMENTS WERE MADE. HOWEVER THIS HAS NOT BEEN DONE SO. HENCE, IN TERMS OF PROVISIONS OF SEC. 40(A)(IA) THE ADVANCE P AYMENTS OF RS. 5,02,500/- ITA NO. 1321/MUM/2009(A.Y. 2005-06) 4 PAID TO VIJAY YADAV, RS.6,89,000 PAID TO PARSHURAM RS. 4,80,500 PAID TO TEJULI SHAIKH RS.2,50,000 PAID TO KHATRI RS. 2,37,0 00/- PAID TO GANESH SINGH, WHICH THOUGH IN THE NATURE OF SUB-CONTRACTUA L PAYMENTS / ADVANCES TOWARDS CONTRACT HAVE BEEN SHOWN AS LOANS AND ADVAN CES GIVEN BY THE ASSESSEE WERE DISALLOWED AND ADDED BACK TO THE ASSE SSEES TOTAL INCOME. 6. ACCORDINGLY TOTAL DISALLOWANCE OUT OF THE SUB-C ONTRACTUAL PAYMENTS IN TERMS OF PROVISIONS OF SEC. 40(A)(IA) WAS RS. 1,41, 40,044/- (RS. 1,12,38,889/- + 7,42,155 + 5,02,500 + 6,89,000 + 4,80,500 + 2,50, 000 + 2,37,000). 7. ON APPEAL BY THE ASSESSEE AGAINST THE AFORESAID DISALLOWANCES, THE CIT(A) CONFIRMED THE ORDER OF THE AO, GIVING RAISE TO THE PRESENT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEGIS LATIVE HISTORY OF THE PROVISIONS OF SEC.40(A)9IA) OF THE ACT HAVE TO BE F IRST SEEN. SECTION 40 HAS CERTAIN CLAUSES PROVIDING FOR THE AMOUNTS WHICH ARE NOT DEDUCTIBLE. SUB- CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 WAS INSERTE D BY THE FINANCE (NO.2) ACT, 2004 WITH EFFECT FROM 1ST APRIL, 2005 READING AS UN DER:- 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SE CTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTED THE INCOME CHARGEABLE UNDER THE HEAD `PROFITS AND GAINS OF BUS INESS OR PROFESSION. .. (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FO R PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON OR, AFTER DED UCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSE QUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200 : PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN D EDUCTED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSEQUENT YEAR A FTER THE ITA NO. 1321/MUM/2009(A.Y. 2005-06) 5 EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN CO MPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID. EXPLANATION. FOR THE PURPOSES OF THIS SUB-CLAUSE, - (I)COMMISSION OR BROKERAGE SHALL HAVE THE SAME ME ANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; (II)FEES FOR TECHNICAL SERVICES SHALL HAVE THE SA ME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9; (III)PROFESSIONAL SERVICES SHALL HAVE THE SAME ME ANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV)WORK SHALL HAVE THE SAME MEANING AS IN EXPLAN ATION III TO SECTION 194C; 9. THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL EXPLAINED THE RATIONALE OF THE INSERTION OF THE NEW PROVISION IN FOLLOWING WORDS :- WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISION S, IT IS PROPOSED TO EXTEND THE PROVISIONS OF SECTION 40(A)(I) TO PAY MENTS OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERV ICES OR FEES FOR TECHNICAL SERVICES TO RESIDENTS, AND PAYMENTS TO A RESIDENT CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK (INCLUD ING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION, HAS NOT BEEN PAID BEFORE THE EX PIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200 AND IN ACCORDANCE WITH THE OTHER PROVISIONS OF CHAPTER XVII-B. IT IS ALSO PROPOSED TO PROVIDE THAT WHERE IN RESPECT OF PAYMENT OF ANY SUM, TAX HA S BEEN DEDUCTED UNDER CHAPTER XVII-B OR PAID IN ANY SUBSEQUENT YEAR , THE SUM OF PAYMENT SHALL BE ALLOWED IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1ST DA Y OF APRIL, 2005 AND WILL, ACCORDINGLY, APPLY IN RELATION TO TH E ASSESSMENT YEAR 2005- 2006 AND SUBSEQUENT YEARS. [CLAUSE 11] 10. THEREAFTER THE FINANCE ACT, 2008 MADE AMENDMEN T TO CLAUSE (A) IN SUB- CLAUSE (IA) IN SECTION 40 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005. THE SECTION AS AMENDED BY THE FINANCE ACT, 2008 READ AS UNDER:- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPP LY OF LABOUR FOR ITA NO. 1321/MUM/2009(A.Y. 2005-06) 6 CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX 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 B EFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 ; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST D AY OF THE PREVIOUS YEAR. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED- (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 YEA R BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE AL LOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID. ; 11. THE FINANCE ACT, 2008 BROUGHT OUT AMENDMENT TO SECTION 40(A)(IA) W.R.E.F. 1.4.2005 BY RELAXING EARLIER POSITION TO S OME EXTENT. IT MADE TWO CATEGORIES OF DEFAULTS CAUSING DISALLOWANCE ON THE BASIS OF THE PERIOD OF THE PREVIOUS YEAR IN WHICH TAX WAS DEDUCTIBLE. THE FIRS T CATEGORY OF DISALLOWANCES INCLUDED THE CASES IN WHICH TAX WAS D EDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT THERE WAS FAILURE TO PAY SUCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 OF THE ACT. IN OTHER WORDS, IF ANY AMOUNT ON WH ICH TAX WAS DEDUCTIBLE DURING LAST MONTH OF THE PREVIOUS YEAR, THAT IS MAR CH 2005, BUT WAS PAID BEFORE 31ST OCTOBER, 2005, BEING THE DUE DATE U/S 1 39(1), THE DEDUCTIBILITY OF THE AMOUNT WAS KEPT INTACT. THE SECOND CATEGORY INC LUDED CASES OTHER THAN THOSE GIVEN IN CATEGORY FIRST. TO PUT IT SIMPLY, IF TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE FIRST ELEVEN MONTHS OF THE P REVIOUS YEAR, THAT IS, UP TO FEBRUARY, 2005, THE DISALLOWANCE WAS TO BE MADE IF THE ASSESSEE FAILED TO PAY IT BEFORE 31ST MARCH, 2005. ITA NO. 1321/MUM/2009(A.Y. 2005-06) 7 12. THEN CAME THE AMENDMENT TO SECTION 40(A)(IA) B Y THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2010. THE PROVISION SO AMENDED, NOW READS AS UNDER :- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPP LY 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 O R; AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE D ATE 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 DEDUCT ED 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 DEDUCTI ON IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX H AS BEEN PAID. 13. FROM THE ABOVE PROVISION AS AMENDED BY THE FIN ANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2010 IT CAN BE SEEN THAT THE ONLY DIFFERENCE WHICH THIS AMENDMENT HAS MADE IS DISPENS ING WITH THE EARLIER TWO CATEGORIES OF DEFAULTS AS PER THE FINANCE ACT, 2008, AS DISCUSSED IN THE EARLIER PARA, CAUSING DISALLOWANCE ON THE BASIS OF THE PERIOD OF THE PREVIOUS YEAR DURING WHICH TAX WAS DEDUCTIBLE. THE FIRST CAT EGORY OF DISALLOWANCES INCLUDED THE CASES IN WHICH TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT THERE WAS F AILURE TO PAY SUCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139. THE FINANCE ACT, 2010 HAS NOT TINKERED WITH THIS POSITI ON. THE SECOND CATEGORY OF THE FINANCE ACT, 2008 WHICH REQUIRED THE DEPOSIT OF TAX BEFORE THE CLOSE OF THE PREVIOUS YEAR IN CASE OF DEDUCTION DURING THE F IRST ELEVEN MONTHS, AS A PRE-CONDITION FOR THE GRANT OF DEDUCTION IN THE YEA R OF INCURRING EXPENDITURE, HAS BEEN ALTERED. THE HITHERTO REQUIREMENT OF THE A SSESSEE DEDUCTING TAX AT SOURCE DURING THE FIRST ELEVEN MONTHS OF THE PREVIO US YEAR AND PAYING IT BEFORE THE CLOSE OF THE PREVIOUS YEAR UP TO 3 1ST M ARCH OF THE PREVIOUS YEAR AS A REQUIREMENT FOR GRANT OF DEDUCTION IN THE YEAR OF INCURRING SUCH EXPENDITURE, HAS BEEN EASED TO EXTEND SUCH TIME FOR PAYMENT OF TAX UP TO ITA NO. 1321/MUM/2009(A.Y. 2005-06) 8 DUE DATE U/S 139(1) OF THE ACT. AS PER THE NEW AMEN DMENT, THE DISALLOWANCE WILL BE MADE IF AFTER DEDUCTING TAX AT SOURCE, THE ASSESSEE FAILS TO PAY THE AMOUNT OF TAX ON OR BEFORE THE DUE DATE SPECIFIED I N SUB-SECTION (1) OF SECTION 139 OF THE ACT. THE EFFECT OF THIS AMENDMENT IS THA T NOW THE ASSESSEE DEDUCTING TAX EITHER IN THE LAST MONTH OF THE PREVI OUS YEAR OR FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR SHALL BE ENTITLED TO DE DUCTION OF THE EXPENDITURE IN THE YEAR OF INCURRING IT, IF THE TAX SO DEDUCTED AT SOURCE IS PAID ON OR BEFORE THE DUE DATE U/S 139(1). THIS IS THE ONLY DI FFERENCE WHICH HAS BEEN MADE BY THE FINANCE ACT, 2010. 14. THE QUESTION AS TO WHETHER THE AMENDMENT BY TH E FINANCE ACT, 2010 AS AFORESAID IS PROSPECTIVE OR RETROSPECTIVE FROM 1.4. 2005 CAME UP FOR CONSIDERATION BEFORE THE MUMBAI SPECIAL BENCH ITAT IN THE CASE OF BHARATI SHIPYARD LTD. BEFORE THE SPECIAL BENCH IT WAS ARGU ED THAT THE AMENDMENT WAS MADE WITH A VIEW TO REMOVE THE UNNECESSARY HARD SHIP CAUSED TO THE ASSESSEE BY THE EARLIER PROVISION. THE SPECIAL BENC H BY ITS ORDER DATED 9.9.2011 HOWEVER HELD THAT THE AMENDMENT CARRIED OU T BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM ASSESSMENT YEAR 2010- 2011 CANNOT BE HELD TO BE RETROSPECTIVE FROM ASSESSMENT YEAR 2005- 2006. THE SPECIAL BENCH HELD THAT THE AMENDMENT BROUGHT OUT BY THE FI NANCE ACT, 2010 TO SECTION 40(A)(IA) W.E.F. 01.04.2010, IS NOT REMEDIA L AND CURATIVE IN NATURE. 15. PRIOR TO THE DECISION OF THE SPECIAL BENCH, ID ENTICAL ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE ITAT KOLKATA BENCH IN THE CASE OF VIRGIN CREATIONS VS. ITO, WARD 32(4), KOLKATA ITA NO. 267/ KOL/2009 FOR AY 05-06 THE ISSUE THAT AROSE FOR CONSIDERATION WAS DISALLOW ANCE OF EXPENSES U/S.40(A)(IA)CLAIMED AS DEDUCTION WHILE COMPUTING I NCOME FROM BUSINESS BEING EMBROIDERY CHARGES, DYEING CHARGES, INTEREST ON LOAN AND FREIGHT CHARGES WITHOUT DEDUCTING TAX AT SOURCE. THE EMBRO IDERY CHARGES WERE PAID BETWEEN 22ND MAY, 2004 TO 30.11.2004. TAX HAD BEEN DEDUCTED AT SOURCE BUT WERE PAID TO THE GOVERNMENT ONLY ON 28.10.2005 AND NOT WITHIN THE ITA NO. 1321/MUM/2009(A.Y. 2005-06) 9 TIME CONTEMPLATED BY SECTION 200(1) OF THE ACT. TH E DYEING CHARGES WERE PAID BETWEEN 5.4.2004 TO 20.8.2004. TAX WAS DEDUCT ED AT SOURCE BUT WAS PAID TO THE GOVERNMENT ONLY ON 28.10.2005. FREIGHT OUTWARD CHARGES WERE PAID WITHOUT DEDUCTION OF TAX AT SOURCE. INTEREST ON LOANS WERE CREDITED TO THE CREDITORS ACCOUNT ON 31.3.2005 TO THE EXTENT TH EY WERE PAID AFTER THE DUE DATE FOR FILING RETURN OF INCOME U/S.139(1) OF THE ACT, THE DISALLOWANCE WAS MADE U/S.40(A)(IA) OF THE ACT. BEFORE THE TRIBUNAL , THE ASSESSEE CONTENTED THAT THE AMENDMENT BY THE FINANCE ACT, 2010 WITH RE TROSPECTIVE EFFECT FROM 1ST APRIL, 2010 WHEREBY AMOUNT OF TAX DEDUCTED AT T HE TIME OF MAKING PAYMENT IN RESPECT OF EXPENDITURE REFERRED TO IN SE C.40(A)(IA) OF THE ACT, IF PAID TO THE GOVERNMENT ON OR BEFORE THE DUE DATE FO R FILING THE RETURN OF INCOME DUE DATE U/S 139(1) OF THE ACT SHOULD BE ALL OWED AS A DEDUCTION. IN OTHER WORDS IT WAS ARGUED THAT THE AMENDMENT BY THE FINANCE ACT, 2010 TO THE PROVISIONS OF SEC.40(A)(IA) HAS TO BE HELD TO B E RETROSPECTIVE W.E.F. 1-4- 2005. THE ITAT KOLKATA BENCH BY ITS ORDER DATED 15 .12.2010, HELD AS FOLLOWS: 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAR EFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF T HE FACT THAT THOUGH THE LD.D.R. SUBMITTED THAT THE DECISIONS OF THE COO RDINATE BENCHES ARE NOT BINDING AND THE KOLKATA BENCHES MAY TAKE A DIFFERENT VIEW, SINCE MUMBAI BENCH AFTER ANALYZING THE PROVISIONS O F SEC.40(A)9IA) SINCE ITS INCEPTION AND VARIOUS AMENDMENTS MADE TO THE SAME INCLUDING THE SUGGESTION MADE BY THE INDUSTRY IN TH E FORM OF REPRESENTATION IN THEIR PRE-BUDGET MEMORANDUM TO TH E HONBLE FINANCE MINISTER AND BY APPLYING THE DECISION OF TH E HONBLE APEX COURT IN THE CASE OF ALOM EXTRUSIONS LTD., HAS OBSE RVED THAT THE PROVISIONS OF SECTION 40(A)(IA) AS STOOD PRIOR TO T HE AMENDMENTS MADE BY THE FINANCE ACT 2010 THUS WERE RESULTING INTO UN INTENDED CONSEQUENCES AND CAUSING GRAVE AND GENUINE HARDSHIP S TO THE ASSESSES WHO HAD SUBSTANTIALLY COMPLIED WITH THE RE LEVANT TDS PROVISIONS BY DEDUCTING THE TAXES AT SOURCE AND BY PAYING THE SAME TO THE CREDIT OF THE GOVERNMENT BEFORE THE DUE DATE OF FILING OF THEIR RETURNS U/S.139(1). IN ORDER TO REMEDY THIS POSITI ON AND TO REMOVE THE HARDSHIPS WHICH WAS BEING CAUSED TO THE ASSESSEE BE LONGING TO SUCH CATEGORY, AMENDMENTS HAVE BEEN MADE IN THE PROVISIO NS OF SECTION 40(A)(IA) BY THE FINANCE ACT, 2010. THE SAID AMEND MENTS, IN OUR ITA NO. 1321/MUM/2009(A.Y. 2005-06) 10 OPINION, THUS ARE CLEARLY REMEDIAL/CURATIVE IN NATU RE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ALLIED MOTORS PVT.LTD. (SUPRA) AND MOM EXTRUSIONS LTD. (SUPRA) AND THE SAME THEREF ORE WOULD APPLY RETROSPECTIVELY W.E.F. 1ST APRIL, 2005. IN THE CAS E OF R.B.JODHA MAL KUTHIALA 82 ITR 570, IT WAS HELD BY THE HONBLE SUP REME COURT THAT A PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONS EQUENCES AND TO MAKE THE PROVISION WORKABLE, REQUIRES TO BE TREATED AS RETROSPECTIVE IN OPERATION SO THAT A REASONABLE INTERPRETATION CAN B E GIVEN TO THE SECTION AS A WHOLE. IN THE PRESENT CASE, THE AMOUN T OF TAX DEDUCTED AT SOURCE FROM THE FREIGHT CHARGES DURING THE PERIOD 0 1/04/2005 TO 28/02/2006 WAS PAID BY THE ASSESSEE IN THE MONTH O F JULY AND AUGUST 2006 I.E., WELL BEFORE THE DUE DATE OF FILIN G OF ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THIS BEIN G THE UNDISPUTED POSITION, WE HOLD THAT THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF FREIG HT CHARGES BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) IS NOT SUSTAINABLE AS PER THE AMENDMENTS MADE IN THE SAID PROVISIONS BY THE F INANCE ACT, 2010 WHICH, BEING REMEDIAL/CURATIVE IN NATURE, HAVE RETR OSPECTIVE APPLICATION, WE FIND NO REASON TO DEVIATE FROM THE DECISIONS OF THE ITATS MUMBAI BENCH AND AHMEDABAD BENCH, IN THE ABS ENCE OF A CONTRARY VIEW, EXCEPT THE OTHER BENCHES DECISIONS O R ANY OTHER HIGH COURT. THEREFORE, RESPECTFULLY FOLLOWING THE DECIS ION OF THE COORDINATE BENCHES (SUPRA), WE ALLOW THE GROUND NOS. I TO 3 OF THE ASSESSEES APPEAL. 16. AS AGAINST THE AFORESAID DECISION THE REVENUE PREFERRED APPEAL BEFORE THE HONBLE CALCUTTA HIGH COURT. THE HONBLE CALCU TTA HIGH COURT IN ITA NO. 302 OF 2011 GA 3200/2011 DECIDED ON 23.11.201 1, HELD AS FOLLOWS: WE HAVE HEARD MR. NIZAMUDDIN AND GONE THROUGH THE IMPUGNED JUDGMENT AND ORDER. WE HAVE ALSO EXAMINED THE POINT FORMULATED FOR WHICH THE PRESENT APPEAL IS SOUGHT TO BE ADMITTED. IT IS ARGUED BY MR. NIZAMUDDIN THAT THIS COURT NEEDS TO TAKE DECISION A S TO WHETHER SECTION 40(A)(IA) IS HAVING RETROSPECTIVE OPERATION OR NOT. THE LEARNED TRIBUNAL ON FACT FOUND THAT THE ASSESSE E HAD DEDUCTED TAX AT SOURCE FROM THE PAID CHARGES BETWEEN THE PERIOD APRIL 1, 2005 AND APRIL 28, 2006 AND THE SAME WERE PAID BY THE ASSESS EE IN JULY AND AUGUST 2006, I.E. WELL BEFORE THE DUE DATE OF FILIN G OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THIS FACTU AL POSITION WAS UNDISPUTED. MOREOVER, THE SUPREME COURT, AS HAS BEE N RECORDED BY THE LEARNED TRIBUNAL, IN THE CASE OF ALLIED MOTORS PVT. LTD. AND ALSO IN THE CASE OF ALOM EXTRUSIONS LTD., HAS ALREADY DECID ED THAT THE AFORESAID PROVISION HAS RETROSPECTIVE APPLICATION. AGAIN, IN THE CASE REPORTED IN 82 ITR 570, THE SUPREME COURT HELD THAT THE PROVISION, WHICH HAS INSERTED THE REMEDY TO MAKE THE PROVISION WORKABLE, ITA NO. 1321/MUM/2009(A.Y. 2005-06) 11 REQUIRES TO BE TREATED WITH RETROSPECTIVE OPERATION SO THAT REASONABLE DEDUCTION CAN BE GIVEN TO THE SECTION AS WELL. IN V IEW OF THE AUTHORITATIVE PRONOUNCEMENT OF THE SUPREME COURT, T HIS COURT CANNOT DECIDE OTHERWISE. HENCE WE DISMISS THE APPEAL WITHO UT ANY ORDER AS TO COSTS. 17. IT CAN BE SEEN FROM THE ABOVE DECISION OF THE HONBLE CALCUTTA HIGH COURT THAT AMENDMENT TO THE PROVISIONS OF SEC.40(A) (IA) OF THE ACT, BY THE FINANCE ACT, 2010 AS AFORESAID WAS HELD TO BE RETRO SPECTIVE FROM 1.4.2005. IF THE AMENDMENT IS CONSIDERED AS RETROSPECTIVE FRO M 1.4.2005, THE EFFECT WILL BE THAT PAYMENTS OF TDS TO THE CREDIT OF THE GOVERN MENT ON OR BEFORE THE LAST DATE FOR FILING RETURN OF INCOME U/S.139(1) OF THE ACT FOR THE RELEVANT AY HAVE TO BE ALLOWED AS DEDUCTION. ADMITTEDLY IN T HE CASE OF THE ASSESSEE PAYMENTS WERE SO MADE BEFORE THE SAID DUE DATE AND IN TERMS OF THE DECISION OF THE HONBLE CALCUTTA HIGH COURT NO DISALLOWANCE COULD BE MADE BY THE AO U/S. 40(A)(IA) OF THE ACT. 18. THE QUESTION NOW IS AS TO WHETHER TO FOLLOW TH E DECISION OF THE HONBLE SPECIAL BENCH WHICH HAS TAKEN THE VIEW THAT AMENDME NT BY THE FINANCE ACT, 2010 TO THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT IS PROSPECTIVE AND NOT RETROSPECTIVE FROM 1.4.2005 OR THE DECISION OF THE HONBLE CALCUTTA HIGH COURT TAKING A CONTRARY VIEW. ON THE ABOVE QUESTIO N, THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISION OF THE ITAT DELHI IN THE CASE OF TEJ INTERNATIONAL (P) LTD. V. DY. CIT (2000) 69 TTJ (DEL) 650, WHEREIN IT WAS HELD THAT IN THE HIERARCHICAL JUDICIAL SYSTEM T HAT WE HAVE IN INDIA, THE WISDOM OF THE COURT BELOW HAS TO YIELD TO THE HIGHE R WISDOM OF THE COURT ABOVE, AND THEREFORE, ONCE AN AUTHORITY HIGHER THAN THIS TRIBUNAL HAS EXPRESSED ITS ESTEEMED VIEWS ON A AN ISSUE, NORMALL Y, THE DECISION OF THE HIGHER JUDICIAL AUTHORITY IS TO BE FOLLOWED. THE BE NCH HAS FURTHER HELD THAT THE FACT THAT THE JUDGMENT OF THE HIGHER JUDICIAL F ORUM IS FROM A NON- JURISDICTIONAL HIGH COURT DOES NOT REALLY ALTER THI S POSITION, AS LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GODAVARIDEVI SARAF 113 ITR 589(BOM). ITA NO. 1321/MUM/2009(A.Y. 2005-06) 12 19. IN VIEW OF THE ABOVE, WE HOLD FOLLOWING THE DE CISION OF THE HONBLE CALCUTTA HIGH COURT THAT AMENDMENT TO THE PROVISIO NS OF SEC.40(A)(IA) OF THE ACT, BY THE FINANCE ACT, 2010 IS RETROSPECTIVE FROM 1.4.2005. CONSEQUENTLY, ANY PAYMENT OF TAX DEDUCTED AT SOURCE DURING PREVIO US YEARS RELEVANT TO AND FROM AY 05-06 CAN BE MADE TO THE GOVERNMENT ON OR B EFORE THE DUE DATE FOR FILING RETURN OF INCOME U/S.139(1) OF THE ACT. IF PAYMENTS ARE MADE AS AFORESAID, THEN NO DEDUCTION U/S.40(A)(IA) OF THE A CT CAN BE MADE. ADMITTEDLY IN THE PRESENT CASE THE ASSESSEE HAD DEP OSITED THE TAX DEDUCTED AT SOURCE ON OR BEFORE THE DUE DATE FOR FILING RETU RN OF INCOME U/S.139(1) OF THE ACT AND THEREFORE THE IMPUGNED DISALLOWANCE DES ERVES TO BE DELETED. WE ORDER ACCORDINGLY AND ALLOW THE APPEAL BY THE ASSES SEE. 20. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH DAY OF APRIL 2012 SD/- SD/- (N.K.BILLAIYA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 11 TH APRIL 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RA BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO. 1321/MUM/2009(A.Y. 2005-06) 13 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 29/02/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 01/03/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER