M/s Mitra Guha Builders (India) Co., Kolkata V. D.C.I.T., Circle-33, Kolkata, Kolkata

ITA 1557/KOL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100259 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 24-07-2014
• Court: TRIBUNAL
• Department Lawyers: AMITAV BHATTACHARJEE
• Assessee Lawyers: J M THARD
• Keywords: Business income; Business expenditure; Opportunity of being heard; Retrospective amendment
• Section: 43B; 201(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC, KOLKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM] ITA NO.1557/KOL/2014 ASSESSMENT YEAR : 2008-09 M/S. MITRA GUHA BUILDERS (INDIA)CO. -VERSUS- D.C.I .T., CIRCLE-33, KOLKATA KOLKATA (PAN:AAFFM 2988 Q) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI J.M.THARD, ADVOCATE FOR THE RESPONDENT : SHRI AMITAV BHATTACHARJEE, J CIT, SR.DR DATE OF HEARING : 30.11.2015. DATE OF PRONOUNCEMENT : 09.12.2015. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAIN ST THE ORDER DATED 20.05.2014 OF CIT(A)-XIX, KOLKATA RELATING TO A.Y.2008-09. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF CARRYING OUT CIVIL CONTRACTORS. WHILE CONCLUDING THE ASSESSMENT PROCEE DINGS THE AO MADE ADDITION OF RS.19,78,986.19 BY INVOKING THE PROVISION OF SECTIO N 40(A)(IA) OF THE ACT. THE EXPENDITURE IN RESPECT OF WHICH DISALLOWANCE U/S 40 (A)(IA) OF THE ACT WAS MADE BY THE AO ARE AS FOLLOWS :- DISALLOWED U/S 40(A)(IA) CARRIAGE INWARD - RS.7,07,510.00 JAIPUR OKARA FREIGHT CARRIER AFRPS4226C RS. 2,35,451.00 DEVESH GOLDEN TRANSPORT CO. RS. 1,00,81 0.00 KRISHNA JHAWAR RS. 80,906.00 P.S. GOLDEN CARRIER RS. 1,10,283.00 R. K. GOLDEN ROAD CARRIER ALHPM6826E RS. 1,80,060.00 SITE SECURITY EXPENSES - RS.8,75,660.19 JAI HANUMAN SECURITY SERVICE AIKPB9487G RS. 7,2 7,895.72 RANA SECURITY SERVICES RS. 89,980.47 M/S DHARVINDER SECURITY SERVICES RS. 57,78 4.00 ITA NO.1557/KOL/2014 M/S.MITRA GUHA BUILDERS (INDIA)CO. A.YR.2008-09 2 HIRE CHARGES - RS.3,95,816.00 H. K. EARTH MOVERS RS. 2,35,816.00 MANAJIT SINGH RS. 1,60,000.00 RS.19,78,986.19 3. THE ORDER OF THE AO WAS CONFIRMED BY CIT(A). BEF ORE ME THE LIMITED SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE RECIPIENTS OF THE PAYMENT FROM THE ASSESSEE ARE ALL INCOME TAX ASSESSES AND H AVE DULY DECLARED THE RECEIPTS FROM THE ASSESSEE IN THEIR RETURN OF INCOME AND HAVE PAI D TAXES ON THE SAME. HE RELIED ON THE DECISION OF ITAT, KOLKATA BENCH IN THE CASE OF SANTOSH KUMAR KEDIA VS ITO IN ITA NO.1905/KOL/2014 FOR A.Y.2007-08 ORDER DATED 04 .03.2015 WHEREIN THE HONBLE BENCH TOOK A VIEW THAT THE INSERTION OF PROVISO TO SECTION 40(A)(IA) OF THE ACT BY THE FINANCE ACT 2012 WAS RETROSPECTIVE IN OPERATION. THE LEARNED COUNSEL THEREFORE PRAYED THAT THE ISSUE OF DISALLOWANCE U/S.40(A)(IA) OF THE ACT MAY BE SET ASIDE AND REMANDED TO THE AO FOR FRESH CONSIDERATION WITH LIB ERTY TO THE ASSESSEE TO ESTABLISH THE FACTUM OF PAYMENT OF TAXES BY THE RECIPIENT OF COMMISSION FROM THE ASSESSEE. 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COU NSEL OF THE ASSESSEE. THE FOLLOWING SECOND PROVISO WAS INSERTED IN SUB-CLAUSE ( IA) OF CLAUSE ( A ) OF SECTION 40 BY THE FINANCE ACT, 2012, W.E.F. 1-4-2013 : PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER TH E FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVI SO. 5. SINCE PROVISIONS OF SECTION 40(A)(IA) AS AMENDE D BY FINANCE ACT, 2012 IS LINKED TO SECTION 201 OF THE ACT, IN WHICH A PROVISO WAS INSE RTED, IT IS NECESSARY TO LOOK INTO THOSE PROVISIONS WHICH READ THUS: SEC.201: (1) WHERE ANY PERSON, INCLUDING THE PRINCI PAL 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 DEDUCTING FAIL S TO PAY, THE WHOLE OR ANY PART ITA NO.1557/KOL/2014 M/S.MITRA GUHA BUILDERS (INDIA)CO. A.YR.2008-09 3 OF THE TAX , AS REQUIRED BY OR UNDER THIS ACT, THEN, SUCH PERSON , SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY IN CUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX: PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE 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 SE CTION 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTIN G INCOME 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 T HIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED: 6. MEMORANDUM EXPLAINING THE PROVISIONS WHILE INTR ODUCING FINANCE BILL, 2012 PROVIDES THE JUSTIFICATION OF THE AMENDMENT TO SECT ION 40(A)(IA) IN THE FOLLOWING WORDS:- IN ORDER TO RATIONALISE THE PROVISIONS OF DISALLOW ANCE ON ACCOUNT OF NON- DEDUCTION OF TAX FROM THE PAYMENTS MADE TO A RESIDE NT PAYEE, IT IS PROPOSED TO AMEND SECTION 40(A)(IA) TO PROVIDE THAT WHERE AN AS SESSEE MAKES PAYMENT OF THE NATURE SPECIFIED IN THE SAID SECTION TO A RESIDENT PAYEE WITHOUT DEDUCTION OF TAX AND IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDE R SECTION 201(1) ON ACCOUNT OF PAYMENT OF TAXES BY THE PAYEE, THEN, FOR THE PURPOS E OF ALLOWING DEDUCTION OF SUCH SUM, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INC OME BY THE RESIDENT PAYEE. 7. THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT ARE MEANT TO ENSURE THAT THE ASSESSEES PERFORM THEIR OBLIGATION TO DEDUCT TAX AT SOURCE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SUCH COMPLIANCE WILL ENSURE REVENUE COLLE CTION WITHOUT MUCH HASSLE. WHEN THE OBJECT SOUGHT TO BE ACHIEVED BY THOSE PROVISION S ARE FOUND TO BE ACHIEVED, IT WOULD BE UNJUST TO DISALLOWANCE LEGITIMATE BUSINESS EXPENSES OF AN ASSESSEE. DESPITE DUE COLLECTION OF TAXES DUE, IF DISALLOWANCE OF GEN UINE BUSINESS EXPENSES ARE MADE THAN THAT WOULD BE UNJUST ENRICHMENT ON THE PAR T OF THE GOVERNMENT AS THE PAYEE WOULD HAVE ALSO PAID THE TAXES ON SUCH INCOME. IN O RDER TO REMOVE THIS ANOMALY, THIS AMENDMENT HAS BEEN INTRODUCED. IN CASE OF PAYMENT T O NON RESIDENT, THE GOVERNMENT DOES NOT HAVE ANY OTHER MECHANISM TO RECOVER THE DU E TAXES. HENCE, NO AMENDMENT ITA NO.1557/KOL/2014 M/S.MITRA GUHA BUILDERS (INDIA)CO. A.YR.2008-09 4 WAS MADE IN SECTION 40(A)(I). THE LEGISLATURE HAS NOT GIVEN BLANKET DEDUCTION UNDER SECTION 40(A)(IA). THE DEDUCTION AS PER AMENDED SEC TION WILL BE ALLOWED ONLY IF THE - (I) PAYEE HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139; (II) PAYEE HAS TAKEN INTO ACCOUNT SUCH SUM FOR COM PUTING INCOME IN SUCH RETURN OF INCOME; AND (III) PAYEE HAS PAID THE TAX DUE ON THE INCOME DEC LARED BY HIM IN SUCH RETURN OF INCOME, AND THE PAYER FURNISHES A CERTIFICATE TO THIS EFFEC T FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. 8. THE QUESTION IS AS TO WHETHER THE AMENDMENT MAD E AS ABOVE IS PROSPECTIVE OR RETROSPECTIVE W.E.F. 1.4.2005 WHEN THE PROVISIONS O F SEC.40(A)(IA) WERE INTRODUCED. KEEPING IN VIEW THE PURPOSE BEHIND THE PROVISO INS ERTED BY THE FINANCE ACT, 2012 IN SECTION 40(A)(IA) OF THE ACT, IT CAN BE SAID TO BE DECLARATORY AND CURATIVE IN NATURE AND THEREFORE, SHOULD BE GIVEN RETROSPECTIVE EFFECT FRO M 1ST APRIL, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INS ERTED BY THE FINANCE (NO. 2) ACT, 2004. IN CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 (SC) , THE HONBLE SUPREME COURT HAD TO DEAL WITH THE QUESTION, WHETHER OMISSION (DE LETION) OF THE SECOND PROVISO TO S. 43B OF THE IT ACT, 1961, BY THE FINANCE ACT, 2003, OPERATED W.E.F. 1ST APRIL, 2004, OR WHETHER IT OPERATED RETROSPECTIVELY W.E.F. 1ST APRI L, 1988? PRIOR TO FINANCE ACT, 2003, THE SECOND PROVISO TO S. 43B OF THE IT ACT, 1961 (F OR SHORT, 'THE ACT') RESTRICTED THE DEDUCTION IN RESPECT OF ANY SUM PAYABLE BY AN EMPLO YER BY WAY OF CONTRIBUTION TO PROVIDENT FUND/SUPERANNUATION FUND OR ANY OTHER FUN D FOR THE WELFARE OF EMPLOYEES, UNLESS IT STOOD PAID WITHIN THE SPECIFIED DUE DATE. ACCORDING TO THE SECOND PROVISO, THE PAYMENT MADE BY THE EMPLOYER TOWARDS CONTRIBUTION T O PROVIDENT FUND OR ANY OTHER WELFARE FUND WAS ALLOWABLE AS DEDUCTION, IF PAID BE FORE THE DATE FOR FILING THE RETURN OF INCOME AND NECESSARY EVIDENCE OF SUCH PAYMENT WAS E NCLOSED WITH THE RETURN OF INCOME. IN OTHER WORDS, IF CONTRIBUTION STOOD PAID AFTER THE DATE FOR FILING OF THE RETURN, IT STOOD DISALLOWED. THIS RESULTED IN GREAT HARDSHI P TO THE EMPLOYERS. THEY REPRESENTED TO THE GOVERNMENT ABOUT THEIR HARDSHIP AND, CONSEQU ENTLY, PURSUANT TO THE REPORT OF THE KELKAR COMMITTEE, THE GOVERNMENT INTRODUCED FIN ANCE ACT, 2003, BY WHICH THE ITA NO.1557/KOL/2014 M/S.MITRA GUHA BUILDERS (INDIA)CO. A.YR.2008-09 5 SECOND PROVISO STOOD DELETED W.E.F. 1ST APRIL, 2004 , AND CERTAIN CHANGES WERE ALSO MADE IN THE FIRST PROVISO BY WHICH UNIFORMITY WAS B ROUGHT ABOUT BETWEEN PAYMENT OF FEES, TAXES, CESS, ETC., ON ONE HAND AND CONTRIBUTI ON MADE TO EMPLOYEES' PROVIDENT FUND, ETC., ON THE OTHER. ACCORDING TO THE DEPARTMENT, THE OMISSION OF THE SE COND PROVISO GIVING RELIEF TO THE ASSESSEE(S) [EMPLOYER( S)] OPERATED ONLY W.E.F. 1ST APRIL, 2004, WHEREAS, ACCORDING TO THE ASSESSEE(S)-EMPLOYE R(S), THE SAID FINANCE ACT, 2003, TO THE EXTENT INDICATED ABOVE, OPERATED W.E.F. 1ST APRIL, 1988 (RETROSPECTIVELY). THE HONBLE SUPREME COURT HELD THAT THE DELETION OF THE SECOND PROVISO WAS RETROSPECTIVE W.E.F.1.4.2004. THE COURT CONSIDERED THE SCHEME OF THE ACT AND THE HISTORICAL BACKGROUND AND THE OBJECT OF INTRODUCTION OF THE PR OVISIONS OF S. 43B. THE COURT ALSO REFERRED TO THE EARLIER AMENDMENTS MADE IN 1988 WIT H INTRODUCTION OF THE FIRST AND SECOND PROVISOS. THE COURT ALSO NOTED FURTHER AMEND MENT MADE IN 1989 IN THE SECOND PROVISO DEALING WITH THE ITEMS COVERED IN S. 43B(B) ( I.E., CONTRIBUTION TO EMPLOYEES WELFARE FUNDS). AFTER CONSIDERING THE SAME, THE COU RT WAS OF THE VIEW THAT IT WAS CLEAR THAT PRIOR TO THE AMENDMENT OF 2003, THE EMPLOYER W AS ENTITLED TO DEDUCTION ONLY IF THE CONTRIBUTION STANDS CREDITED ON OR BEFORE THE D UE DATE GIVEN IN THE PROVIDENT FUND ACT ON ACCOUNT OF SECOND PROVISO TO S. 43B. THE SIT UATION CREATED FURTHER DIFFICULTIES AND AS A RESULT OF REPRESENTATIONS MADE BY THE INDU STRY, THE AMENDMENT OF 2003 WAS CARRIED OUT WHICH DELETED THE SECOND PROVISO AND AL SO MADE FIRST PROVISO APPLICABLE TO CONTRIBUTION TO EMPLOYEES WELFARE FUNDS REFERRED TO IN S. 43B(B). 15. WE FIND NO MERIT IN THESE CIVIL APPEALS FILED BY TH E DEPARTMENT FOR THE FOLLOWING REASONS : FIRSTLY, AS STATED ABOVE, S. 43B (MAIN SE CTION), WHICH STOOD INSERTED BY FINANCE ACT, 1983, W.E.F. 1ST APRIL, 1984, EXPRESSL Y COMMENCES WITH A NON OBSTANTE CLAUSE, THE UNDERLYING OBJECT BEING TO DISALLOW DED UCTIONS CLAIMED MERELY BY MAKING A BOOK ENTRY BASED ON MERCANTILE SYSTEM OF ACCOUNTI NG. AT THE SAME TIME, S. 43B (MAIN SECTION) MADE IT MANDATORY FOR THE DEPARTMENT TO GRANT DEDUCTION IN COMPUTING THE INCOME UNDER S. 28 IN THE YEAR IN WHICH TAX, DU TY, CESS, ETC., IS ACTUALLY PAID. HOWEVER, PARLIAMENT TOOK COGNIZANCE OF THE FACT THA T ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TALLY WITH THE DUE DATES UNDER THE P ROVIDENT FUND ACT, MUNICIPAL CORPORATION ACT (OCTROI) AND OTHER TAX LAWS. THEREF ORE, BY WAY OF FIRST PROVISO, AN INCENTIVE/RELAXATION WAS SOUGHT TO BE GIVEN IN RESP ECT OF TAX, DUTY, CESS OR FEE BY EXPLICITLY STATING THAT IF SUCH TAX, DUTY, CESS OR FEE IS PAID BEFORE THE DATE OF FILING OF THE RETURN UNDER THE IT ACT (DUE DATE), THE ASSESSE E(S) THEN WOULD BE ENTITLED TO DEDUCTION. HOWEVER, THIS RELAXATION/INCENTIVE WAS R ESTRICTED ONLY TO TAX, DUTY, CESS AND FEE. IT DID NOT APPLY TO CONTRIBUTIONS TO LABOU R WELFARE FUNDS. THE REASON APPEARS TO BE THAT THE EMPLOYER(S) SHOULD NOT SIT ON THE CO LLECTED CONTRIBUTIONS AND DEPRIVE THE WORKMEN OF THE RIGHTFUL BENEFITS UNDER SOCIAL WELFA RE LEGISLATIONS BY DELAYING ITA NO.1557/KOL/2014 M/S.MITRA GUHA BUILDERS (INDIA)CO. A.YR.2008-09 6 PAYMENT OF CONTRIBUTIONS TO THE WELFARE FUNDS. HOWE VER, AS STATED ABOVE, THE SECOND PROVISO RESULTED IN IMPLEMENTATION PROBLEMS, WHICH HAVE BEEN MENTIONED HEREINABOVE, AND WHICH RESULTED IN THE ENACTMENT OF FINANCE ACT, 2003, DELETING THE SECOND PROVISO AND BRINGING ABOUT UNIFORMITY IN THE FIRST PROVISO BY EQUATING TAX, DUTY, CESS AND FEE WITH CONTRIBUTIONS TO WELFARE FU NDS. ONCE THIS UNIFORMITY IS BROUGHT ABOUT IN THE FIRST PROVISO, THEN, IN OUR VIEW, THE FINANCE ACT, 2003, WHICH IS MADE APPLICABLE BY THE PARLIAMENT ONLY W.E.F. 1ST APRIL, 2004, WOULD BECOME CURATIVE IN NATURE, HENCE, IT WOULD APPLY RETROSPECTIVELY W.E.F . 1ST APRIL, 1988. SECONDLY, IT MAY BE NOTED THAT, IN THE CASE OF ALLIED MOTORS (P) LTD . ETC. VS. CIT (1997) 139 CTR (SC) 364 : (1997) 224 ITR 677 (SC), THE SCHEME OF S. 43B OF THE ACT CAME TO BE EXAMINED. IN THAT CASE, THE QUESTION WHICH AROSE FOR DETERMIN ATION WAS, WHETHER SALES-TAX COLLECTED BY THE ASSESSEE AND PAID AFTER THE END OF THE RELEVANT PREVIOUS YEAR BUT WITHIN THE TIME ALLOWED UNDER THE RELEVANT SALES-TA X LAW SHOULD BE DISALLOWED UNDER S. 43B OF THE ACT WHILE COMPUTING THE BUSINESS INCOME OF THE PREVIOUS YEAR ? THAT WAS A CASE WHICH RELATED TO ASST. YR. 1984-85. THE RELEVA NT ACCOUNTING PERIOD ENDED ON 30TH JUNE, 1983. THE ITO DISALLOWED THE DEDUCTION CLAIME D BY THE ASSESSEE WHICH WAS ON ACCOUNT OF SALES-TAX COLLECTED BY THE ASSESSEE FOR THE LAST QUARTER OF THE RELEVANT ACCOUNTING YEAR. THE DEDUCTION WAS DISALLOWED UNDER S. 43B WHICH, AS STATED ABOVE, WAS INSERTED W.E.F. 1ST APRIL, 1984. IT IS ALSO REL EVANT TO NOTE THAT THE FIRST PROVISO WHICH CAME INTO FORCE W.E.F. 1ST APRIL, 1988 WAS NO T ON THE STATUTE BOOK WHEN THE ASSESSMENTS WERE MADE IN THE CASE OF ALLIED MOTORS (P) LTD. ETC. (SUPRA). HOWEVER, THE ASSESSEE CONTENDED THAT EVEN THOUGH THE FIRST P ROVISO CAME TO BE INSERTED W.E.F. 1ST APRIL, 1988, IT WAS ENTITLED TO THE BENEFIT OF THAT PROVISO BECAUSE IT OPERATED RETROSPECTIVELY FROM 1ST APRIL, 1984, WHEN S. 43B S TOOD INSERTED. THIS IS HOW THE QUESTION OF RETROSPECTIVITY AROSE IN ALLIED MOTORS (P) LTD. ETC. (SUPRA). THIS COURT, IN ALLIED MOTORS (P) LTD. ETC. (SUPRA) HELD THAT WHEN A PROVISO IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE SECTION WOR KABLE, A PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION IN THE SECTION AND WHICH PROVIS O IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SECTION A REASONABLE INTERPRETA TION, IT COULD BE READ RETROSPECTIVE IN OPERATION, PARTICULARLY TO GIVE EFFECT TO THE SE CTION AS A WHOLE. ACCORDINGLY, THIS COURT, IN ALLIED MOTORS (P) LTD. ETC. (SUPRA), HELD THAT THE FIRST PROVISO WAS CURATIVE IN NATURE, HENCE, RETROSPECTIVE IN OPERATION W.E.F. 1ST APRIL, 1988. IT IS IMPORTANT TO NOTE ONCE AGAIN THAT, BY FINANCE ACT, 2003, NOT ONL Y THE SECOND PROVISO IS DELETED BUT EVEN THE FIRST PROVISO IS SOUGHT TO BE AMENDED BY B RINGING ABOUT AN UNIFORMITY IN TAX, DUTY, CESS AND FEE ON THE ONE HAND VIS-A-VIS CONTRI BUTIONS TO WELFARE FUNDS OF EMPLOYEE(S) ON THE OTHER. THIS IS ONE MORE REASON W HY WE HOLD THAT THE FINANCE ACT, 2003, IS RETROSPECTIVE IN OPERATION. MOREOVER, THE JUDGMENT IN ALLIED MOTORS (P) LTD. ETC. (SUPRA) IS DELIVERED BY A BENCH OF THREE LEARN ED JUDGES, WHICH IS BINDING ON US. ACCORDINGLY, WE HOLD THAT FINANCE ACT, 2003, WILL O PERATE RETROSPECTIVELY W.E.F. 1ST APRIL, 1988 (WHEN THE FIRST PROVISO STOOD INSERTED) . LASTLY, WE MAY POINT OUT THE HARDSHIP AND THE INVIDIOUS DISCRIMINATION WHICH WOU LD BE CAUSED TO THE ASSESSEE(S) IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED THAT FINANCE ACT, 2003, TO THE ABOVE EXTENT, OPERATED PROSPECTIVELY. TAKE AN EXAMP LEIN THE PRESENT CASE, THE RESPONDENTS HAVE DEPOSITED THE CONTRIBUTIONS WITH T HE R.P.F.C. AFTER 31ST MARCH (END OF ACCOUNTING YEAR) BUT BEFORE FILING OF THE RETURN S UNDER THE IT ACT AND THE DATE OF PAYMENT FALLS AFTER THE DUE DATE UNDER THE EMPLOYEE S' PROVIDENT FUND ACT, THEY WILL BE DENIED DEDUCTION FOR ALL TIMES. IN VIEW OF THE S ECOND PROVISO, WHICH STOOD ON THE STATUTE BOOK AT THE RELEVANT TIME, EACH OF SUCH ASS ESSEE(S) WOULD NOT BE ENTITLED TO DEDUCTION UNDER S. 43B OF THE ACT FOR ALL TIMES. TH EY WOULD LOSE THE BENEFIT OF DEDUCTION EVEN IN THE YEAR OF ACCOUNT IN WHICH THEY PAY THE CONTRIBUTIONS TO THE ITA NO.1557/KOL/2014 M/S.MITRA GUHA BUILDERS (INDIA)CO. A.YR.2008-09 7 WELFARE FUNDS, WHEREAS A DEFAULTER, WHO FAILS TO PA Y THE CONTRIBUTION TO THE WELFARE FUND RIGHT UPTO 1ST APRIL, 2004, AND WHO PAYS THE C ONTRIBUTION AFTER 1ST APRIL, 2004, WOULD GET THE BENEFIT OF DEDUCTION UNDER S. 43B OF THE ACT. IN OUR VIEW, THEREFORE, FINANCE ACT, 2003, TO THE EXTENT INDICATED ABOVE, S HOULD BE READ AS RETROSPECTIVE. IT WOULD, THEREFORE, OPERATE FROM 1ST APRIL, 1988, WHE N THE FIRST PROVISO WAS INTRODUCED. IT IS TRUE THAT THE PARLIAMENT HAS EXPLICITLY STATE D THAT FINANCE ACT, 2003, WILL OPERATE W.E.F. 1ST APRIL, 2004. HOWEVER, THE MATTER BEFORE US INVOLVES THE PRINCIPLE OF CONSTRUCTION TO BE PLACED ON THE PROVISIONS OF FINA NCE ACT, 2003. 16. BEFORE CONCLUDING, WE EXTRACT HEREINBELOW THE RELEV ANT OBSERVATIONS OF THIS COURT IN THE CASE OF CIT VS. J.H. GOTLA (1985) 48 C TR (SC) 363 : (1985) 156 ITR 323 (SC), WHICH READS AS UNDER : 'WE SHOULD FIND OUT THE INTENTION FROM THE LANGUAGE USED BY THE LEGISLATURE AND IF STRICT LITERAL CONSTRUCTION LEAD S TO AN ABSURD RESULT, I.E., A RESULT NOT INTENDED TO BE SUBSERVED BY THE OBJECT OF THE LEGISLATION FOUND IN THE MANNER INDICATED BEFORE, T HEN IF ANOTHER CONSTRUCTION IS POSSIBLE APART FROM STRICT LITERAL CONSTRUCTION, THEN THAT CONSTRUCTION SHOULD BE PREFERRED TO THE STRICT LITERAL CONSTRUCTION. THOUGH EQUITY AND TAXATION ARE OFTEN STRANGERS, ATT EMPTS SHOULD BE MADE THAT THESE DO NOT REMAIN ALWAYS SO AND IF A CO NSTRUCTION RESULTS IN EQUITY RATHER THAN IN INJUSTICE, THEN SUCH CONST RUCTION SHOULD BE PREFERRED TO THE LITERAL CONSTRUCTION.' 17. FOR THE AFORESTATED REASONS, WE HOLD THAT FINANCE A CT, 2003, TO THE EXTENT INDICATED ABOVE, IS CURATIVE IN NATURE, HENCE, IT I S RETROSPECTIVE AND IT WOULD OPERATE W.E.F. 1ST APRIL, 1988 (WHEN THE FIRST PROV ISO CAME TO BE INSERTED). FOR THE ABOVE REASONS, WE FIND NO MERIT IN THIS BATCH OF CI VIL APPEALS FILED BY THE DEPARTMENT WHICH ARE HEREBY DISMISSED WITH NO ORDER AS TO COSTS. 9. I AM OF THE VIEW THAT THE REASONING OF THE HON BLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD(SUPRA) WILL EQUALLY TO THE AMEN DMENT TO SEC.40(A)(IA) OF THE ACT WHEREBY A SECOND PROVISO WAS INSERTED IN SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 BY THE FINANCE ACT, 2012, W.E.F. 1-4-2013. THE PRO VISIONS ARE INTENDED TO REMOVE HARDSHIP. IT WAS ARGUED ON BEHALF OF THE REVENUE T HAT THE EXISTING PROVISIONS ALLOW DEDUCTION IN THE YEAR OF PAYMENT AND TO THAT EXTENT THERE IS NO HARDSHIP. WE ARE OF THE VIEW THAT THE HARDSHIP IN SUCH AN EVENT WOULD BE TA XING AN ASSESSEE ON A HIGHER INCOME IN ONE YEAR AND TAXING HIM ON LOWER INCOME I N A SUBSEQUENT YEAR. TO THE EXTENT THE ASSESSEE IS MADE TO PAY TAX ON A HIGHER INCOME IN ONE YEAR, THERE WOULD STILL BE HARDSHIP. ITA NO.1557/KOL/2014 M/S.MITRA GUHA BUILDERS (INDIA)CO. A.YR.2008-09 8 10. I AM OF THE VIEW THAT THE ORDER OF CIT(A) ON T HE ISSUE CHALLENGED IN THIS APPEAL SHOULD BE SET ASIDE AND THE MATTER BE REMANDED TO T HE AO FOR FRESH CONSIDERATION FOR THE LIMITED PURPOSE OF THE RECEIPTS FROM THE ASSESS EE AFTER DECLARING THE SAME RECEIVED FROM THE ASSESSEE IN THEIR RETURN OF INCOME. THE PL EA OF THE ASSESSEE IS SUPPORTED BY THE DECISION REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE. AO SHALL AFFORD ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 09.12.2015. SD/- [N.V.VASUDEVAN] JUDICIAL MEMBER DATE: 09.12.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S. MITRA GUHA BUILDERS (INDIA)CO., 8/2, KIRON SHANKAR ROY ROAD, KOLKATA700001. 2 THE D.C.I.T., CIRCLE-33, KOLKATA.. 3. THE CIT-XI, KOLKATA. 4 . THE CIT(A)-XIX, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES