Lexicon Commercial Enterprises Limited, Kolkata V. ITO, WD-1(4), KOLKATA, Kolkata

ITA 1399/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9146 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 29-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT KR KUREEL J
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Principle of natural justice; Proportionate interest; Retrospective amendment; Corroborative evidences; Revenue expenditure; Capital expenditure
• Section: 201(1)

Judgement Text

ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE HONBLE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA. NO. 1399/KOL/2016 ASSESSMENT YEAR : 2010-11 LUXICON COMMERCIAL ENTERPRISES LTD, 40B, PRINCEP STREET, KOLKATA-700072. PANNO.:AAACL5025 H V/S . I.T.O., WARD-1(4), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI MANOJ KATARUKA, ADVOCATE /BY RESPONDENT SHRI RAJAT KR. KUREEL JCIT-DR /DATE OF HEARING 20.01.2017 /DATE OF PRONOUNCEMENT 17.03.2017 / O R D E R PER WASEEM AHMED, AM THIS APPEAL BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, KOLKATA DAT ED 10.05.2016. ASSESSMENT WAS FRAMED BY I.T.O., WARD-1(4), KOLKATA U/S143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 04.03.2013 FOR ASSESSMENT YEAR 2010-11. SHRI MANOJ KATARUKA, LD. ADVOCATE APPEARED ON BEHAL F OF ASSESSEE AND SHRI RAJAT KUMAR KUREEL, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN GR OUND NO. 1 AND 2 IS THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF AO BY SUSTAI NING THE DISALLOWANCE OF RS.5,79,837 BEING AN AMOUNT OF INTEREST PAID TO BAN K IN CASH CREDIT ACCOUNT. ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 2 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN T HE PRESENT CASE IS A LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF SALE AND SERVICING OF VEHICLES AS WELL AS SALE OF SPARE PARTS AND ACCESSORIES. THE ASSESSE E, IN THE YEAR UNDER CONSIDERATION HAS MADE AN INVESTMENT OF RS.3,15,00, 023/- WHICH WAS SHOWN UNDER THE HEAD CAPITAL WORK-IN-PROGRESS. IT MEAN S THE EXPENDITURE INCURRED ON THE INVESTMENT WAS CAPITALIZED BY THE ASSESSEE. IT WAS ALSO OBSERVED THAT THE ASSESSEE HAS TAKEN A LOAN FROM SBI A/C NO.308719388 04 FOR THE PURPOSE OF INVESTMENT AS DISCUSSED ABOVE. THE ASSESSEE CLAIMED INTEREST EXPENSES ON SUCH LOAN FOR RS.15,93,440.006/- WHICH WAS ALSO CAP ITALIZED AND INCLUDED IN THE AFORESAID CAPITAL WORK IN PROGRESS. HOWEVER, THE AO OBSERVED THAT A SUM OF RS.62.50 LAKHS DATED 28.08.2009 HAS ALSO BEEN WITHD RAWN FROM THE CASH CREDIT A/C NO. 30187727041 OF SBI WHICH WAS ALSO INVESTED IN THE SAME CAPITAL WORK-IN- PROGRESS. BUT THE INTEREST PAID ON SUCH LOAN (CC LO AN) HAS BEEN CLAIMED AS EXPENDITURE IN PROFIT AND LOSS ACCOUNT AND THE SAME WAS NOT CAPITALIZED. THEREFORE, THE AO CALLED UPON THE ASSESSEE TO EXPLA IN THE REASONS FOR NON CAPITALIZATION OF INTEREST OF CASH CREDIT ACCOUNT I N PROPORTIONATE TO RS.62.50 LAKHS WHICH WAS INVESTED IN THE IMPUGNED CAPITAL WORK-IN- PROGRESS. THE ASSESSEE IN COMPLIANCE THERETO SUBMITTED THAT NO FUND FROM THE BANK HAS BEEN USED IN MAKING THE INVESTMENT IN THE AFORESAID CAPITAL WORK -IN-PROGRESS. IN FACT A SUM OF RS.35 LAKHS WAS INVESTED BY ITS DIRECTORS IN THE AF ORESAID CAPITAL WORK-IN- PROGRESS. HOWEVER, THE AO DISAGREED WITH THE SUBMIS SION OF THE ASSESSEE AND HELD THAT A SUM OF RS.62.50 LAKHS HAS BEEN WITHDRAW N FROM CASH CREDIT ACCOUNT AND THEREFORE PROPORTIONATE INTEREST AMOUNTING TO R S.5,79,837/- IS TREATED AS CAPITAL EXPENDITURE WHICH WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). BEFORE LD. CIT(A) THE ASSESSEE SUBMITTED THAT THE AO HAS MISUN DERSTOOD THE CURRENT ACCOUNT MAINTAINED WITH STATE BANK OF INDIA AS CASH CREDIT ACCOUNT. IN FACT THE CASH CREDIT ACCOUNT NO.30187727041 IS THE CURRENT A CCOUNT OF THE ASSESSEE AND ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 3 THEREFORE THE INTEREST IS NOT REQUIRED TO BE DISALL OWED. FURTHER, THE LD. CIT(A) DISREGARDED THE CLAIM OF THE ASSESSEE BY CONFIRMING THE ORDER OF AO BY OBSERVING AS UNDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND MAT ERIAL ON RECORD. IT IS OBSERVED THAT THE ARGUMENT TAKEN BY THE APPELLANT THAT THE T RANSACTIONS PERTAINING TO INVESTMENT OF RS.62,50,000/- IN CAPITAL WIP WERE NO T FROM CC A/C. NO.30187727041 AS PER THE AO'S FINDING WERE FUNDED FROM ITS CURRENT A/C. WITH SBI IS FOUND TO BE IN THE NATURE OF AN ALTERNATIVE PLEA . HOWEVER, NO SUPPORTING EVIDENCE WAS FURNISHED BY THE APPELLANT'S AR EITHER IN THE A SSESSMENT OR DURING THE APPELLATE PROCEEDINGS IN SUPPORT OF THE PLEA NOW BE ING TAKEN. IN THIS REGARD IT IS WELL SETTLED THAT THE ONUS LIES UPON THE ASSESSEE T O SUBSTANTIATE THE GENUINENESS OF ITS CLAIM WITH SUPPORTING EVIDENCE. IN VIEW OF T HE ABOVE DISCUSSION, IT IS FOUND THAT THERE IS NO INFIRMITY IN THE FINDING OF THE AO AND THEREFORE, THE DISALLOWANCE INTEREST OF PROPORTIONATE INTEREST OF RS.5,79,837/- AS CAPITAL EXPENDITURE IS CONFIRMED. THESE GROUND ARE NOT ALLOWED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) THE ASSE SSEE IS IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS OF APPEAL:- 1.FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF RS. 579837/- BEING THE PROPORTIONAT E AMOUNT OF INTEREST PAID TO BANK IN CASH CREDIT ALC. AS CAPITAL EXPENDITURE AS AGAINST REVENUE EXPENDITURE IS ARBITRARILY BAD IN LAW AS WELL AS ON FACTS. 2. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE LD. ASSESSING OFFICER FAILED TO UNDERSTAND AND APPRECIA TE THE SUBMISSION MADE REGARDING UTILIZATION OF FUNDS FOR ACQUIRING THE LA ND & BUILDING FOR THE WORKSHOP OF THE COMPANY AND THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER ON MERE SURMISE SUPPOSITION AND HYPOTHETICAL REASONS WHICH IS NOT JUSTIFIED AND THE ADDITIONS NEEDS TO BE DELETED IN FULL. 5. THE LD. AR BEFORE US REITERATED THE SUBMISSIO NS MADE BEFORE LD. CIT(A) AND SUBMITTED PAPER BOOK WHICH IS RUNNING PAGES 1 TO 52 AND COPY OF THE BANK STATEMENT OF SBI A/C NO.30187727041 TO JUSTIFY THAT IT WAS NOT CASH CREDIT ACCOUNT. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO TH E DIVERSION OF FUNDS FROM THE CASH CREDIT ACCOUNT MAINTAINED WITH SBI TOWARDS CAP ITAL WORK IN PROGRESS OF RS.62.50 LAKHS AND THE CAPITAL WORK-IN-PROGRESS WAS CATEGORIZED UNDER THE HEAD INVESTMENT IN THE BALANCE SHEET AND THEREFORE ANY INTEREST PAID ON ANY LOAN IN CONNECTION WITH THIS CAPITAL WORKING PROGRESS IS TO BE CAPITALIZED. AS SUCH, THE INTEREST ON SUCH LOAN CANNOT BE CLAIMED AS REVENUE EXPENDITURE. HOWEVER, BOTH THE LOWER AUTHORITIES FOUND THAT THERE IS A DIVERSI ON OF FUNDS FROM THE CASH CREDIT ACCOUNT WHEREAS THE ASSESSEE CLAIMED THAT THERE IS NO DIVERSION OF FUNDS AS OBSERVED BY THE LOWER AUTHORITIES. ON EXAMINATION O F THE RECORDS, IT WAS FOUND THAT THE ACCOUNT WHICH THE LOWER AUTHORITIES TREATE D AS CASH CREDIT ACCOUNT IS IN FACT THE CURRENT ACCOUNT OF THE ASSESSEE. THEREFORE , THE OBSERVATIONS MADE BY THE LD. COUNSEL IN THEIR RESPECTIVE YEARS ARE BASEL ESS. THE LD. AR BEFORE US HAS SUBMITTED THE BANK STATEMENT FROM WHERE THE FUND WA S INVESTED IN THE CAPITAL WORK-IN-PROGRESS. ON PERUSAL OF THE BANK STATEMENT, WE FIND THAT THIS IS THE CURRENT ACCOUNT OF THE ASSESSEE AND NOT THE CASH CR EDIT ACCOUNT AS HELD BY THE LOWER AUTHORITIES. THEREFORE, WE ARE IN AGREEMENT W ITH THE SUBMISSIONS OF THE LD. AR. THE LD. AR IN SUPPORT OF HIS CLAIM HAS SUBMITTE D THE BANK BOOK OF THE ASSESSEE WHICH IS PLACED ON PAGES 42 TO 45 OF THE P APER BOOK. THE LD. AR ALSO SUBMITTED THAT THE CURRENT ACCOUNT OF THE ASSESSEE WAS CLASSIFIED UNDER THE HEAD CURRENT ASSETS IN THE AUDITED FINANCIAL STATEMENT , WHICH ARE PLACED AT PAGES 5 TO 30 OF THE PAPER BOOK. HOWEVER, ON PERUSAL OF THE RE CORDS WE FIND THAT THE BANK STATEMENT WAS NOT SUBMITTED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. NOW THE ASSESSEE BEFORE US HAS SUBMITTED COPIES OF THE BANK STATEMENT WHICH IS ADDITIONAL DOCUMENT AND NEEDS TO BE VERIFIED BY THE AO. THEREFORE, WE ARE INCLINED TO RESTORE THIS ISSUE TO THE FILE OF THE A O FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AND IN THE LIGHT OF THE ABOVE S TATED DISCUSSION THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 5 7. THE SECOND ISSUE RAISED BY THE ASSESSEE IN TH IS APPEAL IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING T HE DISALLOWANCE OF RS.3 LAKHS UNDER THE PROVISION OF SECTION 40(A)(IA) OF THE ACT . 8. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS DEBITED AN EXPENDITURE OF RS.3 LAKHS UNDER THE NOMENCLATURE OF QUALITY CAR E EXPENSES. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT SUCH EXPEN SES IS IN THE NATURE OF FEES FOR PROFESSIONAL AND TECHNICAL SERVICES AND TH E SAME HAS BEEN CLAIMED WITHOUT DEDUCTING TDS U/S 194J OF THE ACT. ACCORDIN GLY THE AO CALLED UPON THE ASSESSEE FOR THE CLARIFICATION ON THE NON DEDUCTION OF TDS. THE ASSESSEE IN COMPLIANCE THERETO SUBMITTED THAT THE SAID AMOUNT W AS DISCHARGED BY WAY OF DEBIT NOTE AND THE SAME DOES NOT REPRESENT THE PROF ESSIONAL SERVICES. THEREFORE, THERE IS NO QUESTION OF DEDUCTING TDS ON THE AFORES AID AMOUNT. HOWEVER, THE AO OBSERVED THAT THE EXPENSES HAS BEEN CLAIMED IN THE BOOKS OF ACCOUNTS AND WHETHER IT WAS CLAIMED BY WAY OF DEBIT NOTE OR ANY OTHER REASON BUT THE SAME WAS LIABLE FOR THE TDS PROVISION WHICH THE ASSESSEE HAS FAILED TO COMPLY. THEREFORE, THE SAME WAS DISALLOWED UNDER THE PROVIS ION OF SECTION 40(A)(IA) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESS EE. 9. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE P ARTY M/S FORD INDIA LTD HAS DEBITED TO THE ASSESSEE FOR THE AFORESAID AMOUNT WH ICH REPRESENTS THE ACTIVITIES OF QUALITY CARE SERVICES TO DEALERS. AS SUCH, IT IS NOT A FEE IN THE NATURE OF PROFESSIONAL SERVICES AND THEREFORE NOT LIABLE FOR TDS DEDUCTION. HOWEVER, THE LD. CIT(A) DISREGARDED THE CONTENTION OF THE ASSESSEE A ND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER :- HENCE, BASED UPON A PLAIN READING OF SECTION 194J READ WITH EXPLANATION 9(1 )(VII) CLEARLY SHOWS THAT THE EXPRESSION 'FEES FOR TECHNICAL SERVI CES INCLUDES RENDERING ANY MANAGERIAL SERVICES ALSO. IN THE PRESENT CASE, THE APPELLANT COMPANY MADE THE PAYMENT TO A RESIDENT COMPANY I.E. FOUR INDIA LTD. IN CONNE CTION WITH PROVIDING THE ' QUALITY CARE SERVICES ' WHICH ARE IN THE NATURE OF PROFESSIONAL OR TECHNI CAL SERVICES. IT HAS BEEN ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 6 STIPULATED IN THE PROVISION OF SECTION 194J THAT TH E DEDUCTION OF TDS HAS TO BE MADE AT THE TIME OF CREDIT IN ANY ACCOUNT IN THE BOOKS OF ACCOU NTS OF THE ASSESSEE OR AT THE TIME OF PAYMENT, WHICHEVER IS EARLIER. THEREFORE, THE APPEL LANT'S CLAIM THAT THERE WAS NO LIABILITY TO DEDUCT TDS AS THE SUM OF RS.3,00,000/- WAS DIRECTLY DEBITED BY THE RECIPIENT COMPANY IS NOT TENABLE AS THE LIABILITY TO DEDUCT HAD ARISEN A T THE TIME OF CREDIT IN THE APPELLANT'S BOOKS OF ACCOUNTS. IN VIEW THEREOF, IT IS FOUND THAT THER E IS NO INFIRMITY IN THE FINDING OF THE A.O. AND PROVISIONS OF SECTION 40(A)(IA) WERE CORRECTLY INVOKED FOR NON DEDUCTION OF TDS U/S.194J. HENCE, THE DISALLOWANCE OF RS.3,00,000/- U/S.40(A)(IA) IS CONFIRMED. HENCE, THESE GROUNDS ARE NOT ALLOWED. BEING AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS OF APPEAL : 3. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE AS SESSING OFFICER IN RESPECT OF DISALLOWANCE OF RS. 300000/- PAID TO FORD INDIA LTD BY INVOKING PROVISION OF SECTION 40(A)(1A) OF THE IT ACT, 1961 FOR ALLEGED N ON DEDUCTION OF TDS U/S. 194J OF THE IT ACT, 1961. 10. THE LD.AR BEFORE US REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND DREW OUR ATTENTION ON PAGES 48 TO 50 OF THE PAP ER BOOK WHERE THE ADJUSTMENT OF RS.3 LAKHS WAS MADE BY WAY OF DEBIT N OTE. THE LD. AR HOWEVER REQUESTED EVEN IF IT IS TREATED AS PROFESSIONAL SER VICES THEN ALSO THE AFORESAID PAYMENT IS NOT LIABLE TO BE DISALLOWED IN THE LIGHT OF THE AMENDED PROVISION OF THE FINANCE ACT 2012 IN SECTION 40(A)(IA) OF THE ACT. F OR THIS PURPOSES, THE LD. AR REQUESTED TO RESTORE THE ISSUE FOR FRESH ADJUDICATI ON. ON THE OTHER HAND, THE LD. DR PRESENT WAS DULY HEAR D. HE FAIRLY SUBMITTED THAT THE MATTER NEEDS TO BE RESTORED BY THE ASSESSING OF FICER FOR FRESH CONSIDERATION. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THIS INSTANT CASE RELATES TO T HE EXPENSES CLAIMED BY THE ASSESSEE WITHOUT DEDUCTING TDS. THE LD. AR BEFORE U S INTER-ALIA SUBMITTED THAT THERE IS AN AMENDMENT BY THE FINANCE ACT 2012 WHICH PROVIDES NO DISALLOWANCE IF THE RECIPIENT HAS INCLUDED THE PAYMENT BY THE AS SESSEE IN ITS TURNOVER AND HAS ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 7 PAID THE TAXES THEREON. IN THIS REGARD WE FIND FORC E IN THE ALTERNATIVE ARGUMENTS OF THE LD. AR. 11.1 AT THE OUTSET WE FIND THAT THERE IS AMENDMENT IN THE 1 ST PROVISO TO SEC. 201, WHEREIN, IF ANY PAYEE HAS PAID THE TAXES BY OF FERING / DISCLOSING THE SAID RECEIPT IN ITS RETURN OF INCOME, THEN THE PAYER (TH E ASSESSEE HEREIN) SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT. THE SAID PROVISO RE ADS AS UNDER : CONSEQUENCES OF FAILURE TO DEDUCT OR PAY 201. (1) WHERE ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192, BEING AN EMPLOYER, DOES NOT DEDUCT, OR DOES NOT PAY, OR AFTER SO DEDUC TING FAILS TO PAY, THE WHOLE OR ANY PART OF THE TAX, AS REQUIRED BY OR UNDER THIS A CT, THEN, SUCH PERSON, SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH H E MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX: [ 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 ACCOR DANCE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID TO A RESIDENT OR ON TH E SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTIO N 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED B Y 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:] THE SAID PROVISO THOUGH INSERTED BY THE FINANCE ACT 2012 W.E.F. 1-4-2013 HAS BEEN HELD TO BE RETROSPECTIVE IN OPERATION BY RECEN T DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD. (2015) 61 TAXMANN.COM 45 (DEL) WHEREIN THE QUESTION RAISED BE FORE THE COURT AND THE DECISION RENDERED THEREON IS REPRODUCED HEREIN BELO W FOR THE SAKE OF CLARITY:- QUESTION : WHETHER THE SECOND PROVISO TO SECTION 40(A)(IA) ( INSERTED BY THE FINANCE ACT, 2012), WHICH STATES THAT TDS SHALL BE DEEMED TO BE DEDUCTED AND PAID BY A DEDUCTOR IF RESIDENT RECIPIE NT HAS DISCLOSED THE ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 8 AMOUNT IN HIS RETURN OF INCOME AND PAID TAX THEREON , IS RETROSPECTIVE IN NATURE OR NOT? HELD : SECTION 40(A)(IA) WAS INTRODUCED BY THE FINANCE ( NO.2) ACT, 2004 TO ENSURE THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION WHERE INCOME EM BEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOL DING LAPSES BY THE ASSESSEE. HENCE , SECTION 40(A)(IA) IS NOT A PENALTY PROVISION FOR TAX WITHHOLDING LAPSE BUT IT IS A PROVISION INTRODUCED TO COMPENSATE ANY LOSS TO THE REVENUE IN CASES WHERE DEDUCTOR HASNT DEDUCTED TDS AN AMOUNT PAID TO DEDUCTEE AND, IN TURN, DEDUCTEE ALSO HASNT OFFERED TO TAX I NCOME EMBEDDED IN SUCH AMOUNT THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEP ARATELY PROVIDED UNDER SECTION 271C AND, THEREFORE, SECTION 40(A)(I) ISNT ATTRACTED TO THE SAME. HENCE, AN ASSESSEE COULD NOT BE PENALIZED UNDER SEC TION 40(A)(IA) WHEN THERE WAS NO LOSS TO REVENUE. THE AGRA TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWAL-VS-ACIT [2014] 45 TAXMANN.COM 555 (AGRA TRIB) HAD HELD THAT THE SEC OND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NA TURE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB- CLAUSE (IA) OF SECTION 40(8) WAS INSERTED BY THE FI NANCE NO.(2) ACT, 2004, EVEN THOUGH THE FINANCE ACT, 2012 HAD NOT SPECIFICA LLY STATED THAT PROVISO IS RETROSPECTIVE IN NATURE. THE HIGH COURT AFFIRMED THE RATIO LAID DOWN BY THE AGRA TRIBUNAL AND HELD THAT SAID PROVISOS IS DECLARATORY AND CURATIVE IN N ATURE AND HA RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD. , (SUPRA) WE DEEM IT FIT AND APPROPRIATE IN THE INTEREST OF NATURAL JUSTICE AND FAIR PLAY TO SET ASIDE THIS ISSUE TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH IN THE LI GHT OF THE AFORESAID JUDGMENT. ACCORDINGLY, WE DIRECT THE AO TO VERIFY WHETHER THE PAYEES HAVE INCLUDED THE SUBJECT-MENTIONED RECEIPTS IN THEIR RESPECTIVE RETU RNS AND PAID TAXES THEREON OR NOT. IF THAT IS SO, THEN THE ASSESSEE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT ITA NO.1399/KOL/2016-LUXICON COMMERCIAL ENTERPRISES LIMITED A.Y.2010-11 9 U/S. 201(1) OF THE ACT. WE ALSO FIND FROM THE SUBMI SSION OF LD. AR THAT THERE WERE CERTAIN TRANSACTIONS FOR THE PURCHASE OF THE GOODS AND THE SAME HAS BEEN DISALLOWED FOR NON DEDUCTION OF TDS. IN OUR CONSIDE RED VIEW, SUCH TRANSACTIONS OF PURCHASES ARE OUTSIDE THE PURVIEW OF TDS. THEREF ORE, THE AO ALSO DIRECTED TO CHECK WHETHER THE TRANSACTIONS REPRESENTS THE PURCH ASE OF THE GOODS OR NOT AND ADJUDICATED THE MATTER IN TERMS OF ABOVE DIRECTION. ACCORDINGLY, ASSESSEES GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT 1 7/03/2017 SD/- SD/- ( !') ( !') (S.S.VISWANETHRA RAVI) (WASEE M AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *RG.SR.PS/DKP* $!% &- 17/03 //201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-LEXICON COMMERCIAL ENTERPRISES LTD. 84/1 A, TOPSIA ROAD (S), KOLKATA-46 2. /RESPONDENT-ITO, WARD-1(4), AAYKAR BHAWAN, P-7, CHO WRINGHEE SQUARE, KOLKAA-69 3. %.%/0 1 1 2 / CONCERNED CIT 4. 1 1 2- / CIT (A) 5. 567 /0, 1 /0 , KOLKATA / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,