Vinaya Vikrant Patil, Pune V. Additional Commissioner of Income-tax,

ITA 183/PUN/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0276 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 23-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P L KUREEL
• Keywords: Retrospective amendment
• Section: 143(3); 201(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , ! ' # , % & BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.183/PUN/2015 ! ( ( / ASSESSMENT YEAR : 2011-12 VINAYA VIKRANT PATIL , MZSK & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE 411 001. PAN NO.AHVPP0966A. . / APPELLANT V/S ADDL. COMMISSIONER OF INCOME - TAX RANGE-III, PUNE. . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI P.L. KUREEL ) / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL OF THE ASSESSEE IS EMANATING OUT OF THE OR DER OF COMMISSIONER OF INCOME TAX- (A) 3, PUNE, DATED 30.12.2014 FOR ASSESSMENT YEAR 2011-12. / DATE OF HEARING : 01.12.2016 / DATE OF PRONOUNCEMENT: 28.12.2016 2 ITA NO.183/PUN/2015 A.Y. 2011-12 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- 2.1 THE ASSESSEE IS AN INDIVIDUAL AND STATED TO BE PROPR IETOR OF M/S. SYSTEM CONSULTANT WHICH IS ENGAGED IN THE BUSINESS O F TRAINING IN TECHNICAL, BEHAVIOURAL, PROJECT MANAGEMENT, ETC. TO CORPORATES. ASSESSEE FILED HER RETURN OF INCOME FOR A.Y. 2 011-12 ON 30.09.2011 DECLARING TOTAL INCOME OF RS.89,24,590/-. THE C ASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DT.31.01.2014 AND THE TOTAL INCOME W AS DETERMINED AT RS.5,52,59,130/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT, WHO VIDE ORDE R DT.30.12.2014 (IN APPEAL NO.PIN/CIT(A)-3/ADDL.CIT/R- 3/644/2013-14) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AG GRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFOR E US AND HAS RAISED THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES PREVAILIN G IN THE CASE AND AS PER PROVISIONS & SCHEME OF THE ACT IT BE HELD THAT, THE DISALLOWANCE OF INTEREST PAYMENTS OF RS.48,37,653 MADE BY THE AO U/S 40(A)(IA) OF THE AC T AND NOT CONFIRMED BY THE 1 ST APPELLATE AUTHORITY IS UNWARRANTED, UNJUSTIFIED, AND CONTRARY TO THE PROVISIONS AND SCHEME OF THE ACT. IT BE HELD THAT N O SUCH DISALLOWANCE IS WARRANTED AND JUSTIFIED ON FAC TS OF THE CASE. THE DISALLOWANCE SO MADE BE DELETED. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 3. ON THE DATE OF HEARING NONE APPEARED ON BEHALF OF ASS ESSEE AND NOR ANY ADJOURNMENT APPLICATION WAS FILED ON HER BEHA LF THOUGH AS PER THE RECORDS, THE NOTICE FOR HEARING WAS IS SUED TO THE ASSESSEE. WE THEREFORE PROCEED TO DISPOSE OF THE APPEA L EX-PARTE QUA THE ASSESSEE. 3 ITA NO.183/PUN/2015 A.Y. 2011-12 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS.1,02,79,103/- U NDER THE HEAD FINANCIAL CHARGES. AO ON FURTHER PERUSING THE DETAILS FILED BY THE ASSESSEE, NOTICED THAT ASSESSEE HAS PAID INTE REST ON LOANS BORROWED AND PROCESSING FEES FOR LOANS TO VARIOUS N BFCS AND THE AGGREGATE OF SUCH PAYMENT WAS RS.48,37,653/- BU T HAD NOT DEDUCTED TDS WHILE MAKING THE PAYMENTS OF INTEREST A ND PROCESSING FEES (THE DETAILS AND PARTICULARS OF SUCH PAYMEN TS ARE LISTED AT PAGE 3 OF THE ASSESSMENT ORDER). AO WAS OF TH E VIEW THAT THE PROVISIONS OF SEC.40(A)(IA) ARE ATTRACTED ON ACCOUNT OF N ON- DEDUCTION OF TDS WHILE MAKING THE PAYMENT. HE ACCORDINGLY DISALLOWED THE PAYMENT OF RS.48,37,653/- U/S 40(A)(IA) OF THE A CT. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED THE MATT ER BEFORE LD. CIT(A) WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER :- 3.3 DURING THE APPELLATE PROCEEDINGS THE LD COUNSEL OF THE APPELLANT HAS SUBMITTED THAT AN AMOUNT OF RS.48,37,653/- WAS PAID ON ACCOUNT OF INTEREST ON L OANS TO NBFCS WITHOUT DEDUCTING TAX AT SOURCE AND HAS CONTE NDED THAT A PROVISO TO SUB SECTION 1 OF SEC 201 WAS INSE RTED BY THE FINANCE ACT 2012 W.E.F 1-7-2012 WHICH PROVIDES THAT; IF THE DEDUCTOR FAILS TO DEDUCT WHOLE OR ANY PART OF T AX IN ACCORDANCE WITH CHAPTER XVII OF THE ACT ON THE SUM PAID THEN SUCH DEDUCTOR SHALL NOT BE DEEMED TO BE AN ASS ESSEE IN DEFAULT IN RESPECT OF THE TDS IF THE RESIDENT PA YEE HAS FURNISHED HIS RETURN OF INCOME U/S 139 AND HAS TAKE N INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME AND HAS PAID THE TAX DUE ON INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME AND ALSO THE DEDUCTOR HAS TO FURNISH A CERTIFICATE TO THIS EFFECT FROM A CHARTERED ACCOUNTANT IN THE PRESCRIBE D FORM. THE LD COUNSEL HAS FURTHER STATED THAT THE FINANCE ACT 2012 HAS ALSO INSERTED FURTHER PROVISO TO CLAUSE (I A) OF SUB- SECTION (A) OF SEC 40 W.E.F. 1.4.2013 WHICH PROVIDE S THAT WHERE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE AND NOT TREATED AS AN ASSESSEE IN DEFAULT UNDER FIRST PROVI SO TO SEE 201(1) THEN FOR THE PURPOSE OF SEC 40(A)(IA), IT SH ALL 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 AND DEDUCTION OF SUCH EXPENDITUR E SHALL BE ALLOWED. THE APPELLANT HAS ALSO DRAWN ATTENTION TO THE JUDGMENT OF THE DECISION IN THE CASE OF GUJARAT PIP AVAV PORT LTD VS DCIT RAJKOT, ITA NOS.614 & 615/RJT/2012 DATE D 23- 08-2013 WHEREIN THE ITAT HELD THAT THE AMENDMENTS M ADE 4 ITA NO.183/PUN/2015 A.Y. 2011-12 IN SEC 201(1) BY WAY OF INSERTING PROVISOS BE CONSI DERED RETROSPECTIVE. IT HAS BEEN CONTENDED BY THE APPELLA NT THAT THE AMENDMENT MADE TO THE SAID SECTION ARE NOT ONLY FOR RATIONALIZATION OF PROVISION BUT IS ALSO BENEFICIAL TO THE ASSESSEE SUCH THAT THE INTEREST OF REVENUE IS NOT COMPROMISED AND IN THE INSTANT CASE INTEREST PAID O N LOANS WITHOUT TDS IS NOT DETRIMENTAL TO THE BENEFIT OF RE VENUE AND THUS THE ASSESSEE MAY NOT BE CONSIDERED AS ASSESSEE IN DEFAULT AND DEDUCTION MAY BE GRANTED. THE LD COUNSE L OF THE APPELLANT ON WITHOUT PREJUDICE HAS SUBMITTED TH AT IN CASE THE VIEW OF THE ASSESSING OFFICER IS UPHELD TH E APPELLANT HAS DRAWN ATTENTION TO THE DECISION BY TH E SPECIAL BENCH IN THE CASE OF MERLYN SHIPPING & TRANSPORTS V S ACIT (2012) 146 TTJ (VISAKHA) (SB) 1, WHEREIN IT HAS BEE N HELD THAT THE WORD 'PAYABLE' USED IN SEE 40(A)(IA) OF TH E ACT IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH AND CANNOT BE INVOKED TO DISALLOW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE PREVIOUS YE AR WITHOUT DEDUCTING TAX AT SOURCE AND AS NOTHING IS P AYABLE AS ON 31 ST MARCH, DEDUCTION BE GRANTED. THE APPELLANT HAS FILED THE COPY OF THE DECISION OF ITAT MUMBAI IN TH E CASE OF ARCADIA SHARE & STOCK BROKERS PVT. LTD VS. DCIT (SU PRA) WHEREIN IT HAS BEEN HELD THAT THE RATIO OF THE JUDG EMENT WITH RESPECT TO DISALLOWANCE U/S. 40(A)(IA) IN THE CASE OF MERILYN SHIPPING HAS THE BINDING EFFECT IN VIEW OF THE SLP DISMISSED BY THE APEX COURT IN THE CASE OF VECTOR S HIPPING (P) LTD VS. CIT. 3.4 I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND PERUSED MATERIAL ON RECORD. THE ISSUE CONTESTED BY THE APPELLANT RELATES TO THE DISALLOWANCE OF RS. 48,37, 653/- U/S 40(A)(IA). THE SAID DISALLOWANCE WAS MADE BY THE AS SESSING OFFICER AS THE APPELLANT HAD NOT DEDUCTED TAX ON TH E INTEREST PAID TO THE NBFCS ON THE LOANS TAKEN FROM THEM. THE APPLICABILITY OF SECTION 194A(3) WITH RESPECT TO TH E PAYMENT OF INTEREST BY THE APPELLANT IS CLEARLY ATTRACTED A S PER THE EXPRESS PROVISIONS OF THE ACT. THE APPELLANT HAS AL SO NOT DISPUTED THE ABOVE FACT OF THE TDS HAVING NOT BEEN DEDUCTED ON THE PAYMENT OF INTEREST U/S 194A. THE APPELLANT HAS, HOWEVER, CONTENDED AND BROUGHT TO NO TICE THE INSERTION OF THE PROVISO TO SUB-SECTION 1 OF SE C 201 BY THE FINANCE ACT 2012, WHICH IS EFFECTIVE W.E.F. 1-7-201 2 AND ALSO TO THE PROVISO TO CLAUSE (IA) OF SUB SECTION ( A) OF SEC 40 W.E.F. 1-4-2013 AND HAS RELIED UPON THE DECISION OF THE ITAT RAJKOT IN GUJRAT PIPAVAV PORT LTD VS DCIT FOR THE P ROPOSITION THAT THE TRIBUNAL HELD THE AFORESAID AMENDMENT MADE TO SEC 201 (1) BY WAY OF INSERTING PROVISO TO BE CONSIDERE D RETROSPECTIVELY. THE TRIBUNAL REFERRING TO THE DECI SION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS CHANDULAL VENICHAND ARRIVED AT THE AFORESAID CONCLUSION. THE TRIBUNAL, THEREFORE, SET ASIDE THE MATTER TO THE ASSESSING OF FICER TO EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF T HE SAID PROVISIONS AND TO PASS THE ORDER IN CONFORMITY WITH LAW, THE AFORESAID AMENDMENT TO SEC 40(A)(IA) AND SEC 201(1) ARE APPLICABLE PROSPECTIVELY W.E.F. 2013-14 AND HEN CE, PRIMA FACIE NOT APPLICABLE TO THE PRESENT CASE AS I T RELATES TO A.Y. 2010-11. IT IS SETTLED LAW THAT NO RETROSPECTI VITY IS APPLICABLE UNLESS EXPRESSLY STATED OR CLEARLY IMPLI ED AS HELD BY THE APEX COURT IN GEM GRANITES VS. CIT (SC) 271 ITR 322. SO FAR AS THE CONTENTION RAISED BY THE APPELLANT TH AT THE AMENDMENT MADE TO THE SAID SECTION ARE NOT ONLY FOR RATIONALIZATION OF PROVISIONS BUT IS ALSO BENEFICIA L FOR THE 5 ITA NO.183/PUN/2015 A.Y. 2011-12 ASSESSEE SUCH THAT THE INTEREST OF REVENUE IS NOT COMPROMISED. IN THIS REGARD THE MADRAS HIGH COURT I N CIT VS POOSHYA EXPORTS (P) LTD, 262 ITR 417 AND CWT VS RELIANCE MOTOR CO. LTD, 260 ITR 571 HAS HELD THAT B ENEFICIAL PROVISION DOES NOT NECESSARILY IMPLY THAT THE AMEND MENT IS TO BE GIVEN RETROSPECTIVE EFFECT UNLESS SPECIFICALL Y MADE IT AS RETROSPECTIVE IN OPERATION. RETROSPECTIVITY IS NOT TO BE LIGHTLY INFERRED UNLESS IT IS SPECIFICALLY STATED TO BE RET ROSPECTIVE. 3.4.1 IT IS SETTLED RULE OF CONSTRUCTION THAT EVERY STATUTE IS PRIMA FACIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR B Y NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OP ERATION. ORDINARILY THE COURTS ARE REQUIRED TO GATHER THE IN TENTION OF THE LEGISLATURE FROM THE OVERT LANGUAGE OF THE PROV ISION AS TO WHETHER IT HAS BEEN MADE PROSPECTIVE OR RETROSPECTIVE, THE INTENTION OF THE LEGISLATURE WHILE INTRODUCING THE PROVISION IS GATHERED, INTER ALIA, FROM THE FINANCE BILL, MEMORA NDUM EXPLAINING THE PROVISION OF THE FINANCE BILL. THE H ON. SUPREME COURT IN THE CASE OF RELIANCE JUTE & INDUST RIES LTD VS CIT 20 ITR 921 (SC) HAS HELD THAT LAW TO BE APPL IED IS THAT IN FORCE IN THE ASSESSMENT YEAR UNLESS OTHERWI SE PROVIDED EXPRESSLY OR BY NECESSARY IMPLICATIONS, IN A NUMBER OF CASES OF THE HON. SUPREME COURT IT HAS BE EN HELD THAT THERE IS NO RETROSPECTIVITY UNLESS EXPRESSLY S TATED OR CLEARLY IMPLIED. 3.4.2 IN THIS REGARD IT IS RELEVANT TO POINT OUT TH E SPECIAL BENCH DECISION IN THE CASE OF BHARATI SHIPYARD LTD VS DCIT (2011) 141 TT J (MUMBAI) SB 129 WHICH AFTER TAKING INTO CONSIDERATION THE CASES OF ALLIED MOTORS PVT LTD AN D ALOM EXTRUSION AS RELIED UPON IN THE CASE OF THE GUJARAT HIGH COURT AND ALSO OTHER CASES ON THE ISSUE OF RETROSPE CTIVE APPLICATION OF THE AMENDED SEC.40(A)(IA) BY FIN ACT 2010 HELD THAT THE AMENDMENT TO SEC.40(A)(IA) MADE BY TH E FIN ACT WITH RETROSPECTIVE EFFECT FROM 1-4-2010 EXTENDI NG THE TIME LIMIT FOR DEPOSIT OF TDS IS NEITHER AIMED AT RE MOVING ANY UNINTENDED HARDSHIP TO THE ASSESSEE NOR IS IT C URATIVE OR DECLARATORY OF THE PREVIOUS LAW AND, THEREFORE, IT CANNOT BE GIVEN RETROSPECTIVE EFFECT. THE SPECIAL BENCH HA S PASSED A VERY ELABORATE AND DETAILED ORDER ON THE LEGAL IS SUE OF RETROSPECTIVITY AFTER TAKING INTO ACCOUNT THE CASES OF THE APEX COURT AS RELIED UPON BY THE GUJARAT HIGH COURT . THE ORDER OF THE GUJARAT HIGH COURT AND RAJKOT ITAT BEI NG NON- JURISDICTIONAL MAY NOT HAVE THAT BINDING EFFECT THA N THAT OF THE SPECIAL BENCH OF BOMBAY AS IT HAS MORE PERSUASI VE VALUE AND BINDING EFFECT AND WHICH HAS ALSO BEEN FO LLOWED BY OTHER BENCHES OF ITAT. THE SPECIAL BENCH ALSO HE LD AS UNDER: '35. FROM THE ABOVE DISCUSSION IT IS CRYSTAL CLEAR THAT RETROSPECTIVE EFFECT TO A PROVISION CANNOT BE ORDIN ARILY GIVEN BY JUDICIAL OR QUASI JUDICIAL AUTHORITIES UNL ESS IT IS EXPRESSLY GIVEN BY THE LEGISLATURE. THERE MAY BE CE RTAIN SITUATIONS REQUIRING THE GIVING OF RETROSPECTIVE EF FECT. THE SCOPE FOR THE COURTS TO VALIDLY GIVE RETROSPECTIVE EFFECT TO A PROVISION, DESPITE NOT BEING CLEARLY GIVEN SO BY THE LEGISLATURE, IS LIMITED. IT EXTENDS TO CASES WHERE T HE LEGISLATIVE INTENT HAS LATER BEEN MADE EXPLICIT WHI CH WAS EARLIER IMPLICIT IN THE PROVISION OR THE EXISTING P ROVISION LED TO THE UNINTENDED CONSEQUENCES AND MADE THE INTENTION OF THE LEGISLATURE UNWORKABLE. ANY AMENDM ENT WHICH HAS NOT BEEN GIVEN RETROSPECTIVE EFFECT BY TH E LEGISLATURE, CAN'T BE CONSTRUED AS RETROSPECTIVE ON THE 6 ITA NO.183/PUN/2015 A.Y. 2011-12 SOLITARY GROUND THAT THE ORIGINAL PROVISION CAUSED SOME HARDSHIP TO THE ASSESSEES. THE RELEVANT CRITERIA TO BE TAKEN INTO CONSIDERATION FOR ARRIVING AT THE DECIS ION ABOUT THE RETROSPECTIVE OR PROSPECTIVE EFFECT OF A LATER PROVISION, IS TO UNEARTH THE INTENTION OF THE LEGIS LATURE AT THE TIME OF INTRODUCING THE ORIGINAL PROVISION AND NOT WHETHER IT CAUSED HARDSHIP TO THE TAXPAYERS. IF IT WAS VERY WELL KNOWN AT THE TIME OF INSERTING THE ORIGIN AL PROVISION THAT IT IS GOING TO BE HARSH, THEN ANY SUBSEQUENT RELAXATION IN IT WILL NOT BE RETROSPECTI VE UNLESS EXPRESSLY STATED. THE REASON FOR NOT HOLDING SUCH LATER AMENDMENT AS RETROSPECTIVE IS MANIFEST THAT THE LEGISLATURE IN ITS WISDOM INTENDED TO IMPOSE A HARSH LEVY. IN SUCH A CASE THE JUDICIAL OR QUASI JUDICIAL AUTHORITIES CANNOT HELP THE SITUATION BY GRABBING T HE LEGISLATIVE POWER IN HOLDING SUCH LATER RELAXATION AS RETROSPECTIVE, WHEN THE LEGISLATURE HAS ITSELF MADE IT PROSPECTIVE. 36. IN OUR CONSIDERED OPINION THE BORDER LINE BETWE EN A SUBSTANTIVE PROVISION HAVING RETROSPECTIVE OR PROSP ECTIVE EFFECT, IS QUITE PROMINENT. ONE NEEDS TO APPRECIATE THE NATURE OF THE ORIGINAL PROVISION IN CONJUNCTION WIT H THE AMENDMENT. ONCE A PROVISION HAS BEEN GIVEN RETROSPECTIVE EFFECT BY THE LEGISLATURE, IT SHALL C ONTINUE TO BE RETROSPECTIVE. IF ON THE OTHER HAND IF THE STATU TE DOES NOT AMEND RETROSPECTIVELY, THEN ONE HAS TO DIG OUT THE INTENTION OF THE PARLIAMENT AT THE TIME WHEN THE OR IGINAL PROVISION WAS INCORPORATED AND ALSO THE NEW AMENDMENT. IF THE LATER AMENDMENT SIMPLY CLARIFIES ITS INTENTION OF THE ORIGINAL PROVISION, IT WILL ALWAYS BE CONSIDERED AS RETROSPECTIVE. LIKE THE CASE OF GOLD COIN HEALTH FOOD (P.) LTD. (SUPRA) IN WHICH THE HON'BLE SUPREME COURT HELD THAT THE AMENDMENT TO EXPLANATIO N 4 TO SECTION 271(1) (C)(III) SIMPLY CLARIFIED THE POSITION WHICH WAS EXISTING SINCE INCEPTION OF THE PROVISION THAT FILE PENALTY IS LEVIABLE ON CONCEALMENT IRRESPECTIV E OF THE FACT WHETHER ULTIMATELY ASSESSED INCOME IS POSITIVE OR NEGATIVE. SIMILARLY IN THE CASE OF KANJI SHIVJI & CO. (SUPRA), THE HON'BLE SUPREME COURT HELD THAT THE PURPOSE OF EXPLANATION 2 T O SECTION 40(B) WAS SIMPLY TO CLARIFY THAT THE INCOME-TAX ACT RECOGNIZES INDIVIDU AL STATUTES OF A PERSON AS DIFFERENT FROM HIS REPRESENTATIVE CAPACITY. THIS EXPLANATION DID NOT BRING IN A NEW PROVISION BUT CLARIFIED THAT THE POSITION WAS SO SINCE THE INTRODUCTION OF THE PROVISION ITSELF. IN THIS CATEGORY OF CLARIFICATORY OR EXPLANATORY AMENDMENTS TO THE SUBSTANTIVE PROVISIONS, THE OBJECT IS ALWAYS TO CLA RIFY THE INTENTION OF THE LEGISLATURE AS IT WAS THERE AT THE TIME OF INSERTION OF THE ORIGINAL PROVISION. THAT IS THE REASON FOR WHICH THE CLARIFICATORY AMENDMENTS ARE ALWAYS RETROSPECTIVE IRRESPECTIVE OF THE DATE FROM WHICH EFFECT HAS BEEN GIVEN TO THEM BY THE LEGISLATURE. 37. THE SECOND CATEGORY INCLUDES THE CASES IN WHICH THERE WAS NO AMBIGUITY IN THE LANGUAGE OF THE PROVI SION AT THE TIME OF ITS INTRODUCTION AND THE OBJECT SOUG HT WAS FULLY ATTAINABLE. BUT WHILE MAKING THE PROVISION WORKABLE, BESIDES THE DESIRED RESULTS, CERTAIN UNINTENDED CONSEQUENCES ALSO CROP UP. IN OTHER WOR DS, THE SECTION WAS INTRODUCED ORIGINALLY WITH A PARTIC ULAR PURPOSE BUT WHILE GIVING EFFECT TO THE PROVISION IN THE ATTAINMENT OF THAT PURPOSE, CERTAIN OUTCOMES WHICH WERE NEVER DESIRED OR INTENDED BY THE LEGISLATURE, ALSO FOLLOW. ANY AMENDMENT TO REMOVE SUCH UNINTENDED EFFECTS, IS ALSO ALWAYS CONSIDERED TO BE RETROSPECT IVE FROM THE DATE OF THE INSERTION OF THE MAIN PROVISIO N. 7 ITA NO.183/PUN/2015 A.Y. 2011-12 3.4.3 THE AMENDMENTS AS POINTED OUT BY THE APPELLANT HAVE BEEN BROUGHT WITH PROSPECTIVE EFFECT AND THERE IS N O INDICATION WHATSOEVER TO SUGGEST THAT THESE RESTRIC TIONS NEED TO BE APPLIED WITH RETROSPECTIVE EFFECT. THE A MENDMENT SEEKS TO GIVE RELIEF TO THE ASSESSEE BUT RESTRICTS THE REMEDY WITH EFFECT FROM A PROSPECTIVE DATE. THE LAW IS VER Y CLEAR THAT UNLESS PROVIDED IN THE STATUTE, THE LAW IS ALW AYS PRESUMED TO BE PROSPECTIVE IN NATURE. IT WILL, THER EFORE, BE CONTRARY TO THE SCHEME OF LAW TO PROCEED ON ITS BAS IS. IT WILL BE UNREASONABLE TO PROCEED ON THE BASIS THAT LEGISL ATIVE AMENDMENT WAS INFRUCTUOUS OR UNCALLED FOR PARTICULA RLY AS THE AMENDMENT IS NOT EVEN STATED TO BE 'FOR REMOVAL OF DOUBTS' ON THE CONTRARY, THIS AMENDMENT SHOWS THAT NO SUCH ELIGIBILITY CONDITION COULD BE READ INTO PRE-A MENDMENT LEGAL POSITION. THE CONTENTION THUS RAISED IN THIS REGARD IS NOT FOUND TO BE TENABLE. THE APPELLANT HAS ALSO PLA CED RELIANCE ON THE DECISION OF THE MERILYN SHIPPING & TRANSPORTS VS ACIT (CITED SUPRA). IN THIS CASE THE TRIBUNAL HELD THAT DISALLOWANCE U/S 40(A)(IA) IS APPLICABLE TO EXPENDITURE PAYABLE ON 31 ST MARCH EVERY YEAR AND NOT APPLICABLE TO THOSE EXPENSES PAID WITHOUT DEDUCTION OF TDS. IN THIS REGARD IT IS RELEVANT TO POINT OUT THAT THE AFORESAID DECISION CITED BY THE APPELLANT OF THE SPECIAL BENC H WAS CHALLENGED BEFORE THE HIGH COURT OF ANDHRA PRADESH, WHO IN ITS ORDER DATED 08.10.2012 DIRECTED 'INTERIM SUSPENS ION' OF THE SPECIAL BENCH'S VERDICT, HENCE THE RELIANCE PLA CED BY THE APPELLANT IS NOT TENABLE BEING STAYED BY THE ANDHRA PRADESH HIGH . MOREOVER, IN SUBSEQUENT DECISIONS' THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS CRESCENT EXPORT SYNDICATE & OTHERS, (2013) 216 TAXMAN 258 (CAL) AND GUJARAT HIGH COURT IN THE CASE OF CIT VS SIKANDAR K HAN N. TUNVAR (2013), 259 CTR (GUJ) 57 HELD THAT SECTION 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH A RE PAYABLE AT THE END OF THE PREVIOUS YEAR BUT ALSO W HICH ARE PAYABLE AT ANY TIME DURING THE YEAR. THE HON'BLE HI GH COURT HAVE FURTHER HELD THAT THE INTENTION OF THE LEGISLA TION WAS TO DISALLOW CERTAIN TYPES OF EXPENSE, SUBJECT TO PROVI SIONS OF CHAPTER XVII-B, WHICH ARE PAYABLE AT ANY TIME DURIN G THE YEAR BUT NO TAX WAS DEDUCTED AT SOURCE OR IF DEDUCTED WAS NOT PAID WITHIN THE STIPULATED TIME, THERE IS NO SU CH CONDITION THAT AMOUNT SHOULD REMAIN PAYABLE AT THE END OF THE YEAR. 3.4.4 THE CBDT IN ITS CIRCULAR DATED 16.12.2013 HAS GIVEN THE FOLLOWING CLARIFICATION DUE TO THE CONFLICTING INTERPRETATIONS BY JUDICIAL AUTHORITIES REGARDING T HE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA ) OF THE INCOME TAX ACT, 1961. '4. AFTER CAREFUL EXAMINATION OF THE ISSUE, THE BOA RD IS OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 4 0(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH A RE PAYABLE AS ON 31 ST MARCH OF A PREVIOUS YEAR BUT ALSO AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YE AR. THE STATUTORY PROVISIONS ARE AMPLY CLEAR AND IN THE CONTEXT OF SECTION 40( A)(IA) OF THE ACT THE TERM 'PAYABLE WOULD INCLUDE 'AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR' 3.4.5 IN THAT CONTEXT THE DECISION OF THE SPECIAL BENCH O F THE TRIBUNAL OF VISHAKAPATNAM IN THE CASE OF MERYLIN SH IPPING 8 ITA NO.183/PUN/2015 A.Y. 2011-12 & TRANSPORT VS ADDL CIT SUPRA, DOES NOT LAY CORRECT LAW. HOWEVER, THE HON'BLE ALLAHABAD HIGH COURT IN CIT V. VECTOR SHIPPING SERVICE (P) LTD (2013) 85 CCH 201 (ALL) HA S AFFIRMED THE DECISION OF THE SPECIAL BENCH IN MERIL YN SHIPPING THAT FOR DISALLOWANCE UNDER SECTION 40(A)( IA) OF THE ACT, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID DURING THE YEAR. HOWEVER, IN THE CASE OF ACIT VS RISHTI STOCK AND SHARES PVT. LTD. IN ITA NO. 112/MUM/2012, HON'BLE ITAT, MUMBAI IN ITS ORDER DATED 02-08-2013 HAS EXAMINED THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT (SUPRA) AS REGARDS TO SECTION 40(A)(IA) OF THE ACT AND CONCLUDED THAT THE SAME WAS AN 'ORBITER DICTA' WHIL E THE DECISIONS OF THE HON'BLE GUJARAT AND CALCUTTA HIGH COURTS (SUPRA) WERE 'RATIO DECIDENDI'. THE ITAT ACCORDINGL Y APPLIED THE VIEW TAKEN BY THE HON'BLE GUJARAT AND CALCUTTA HIGH COURT AS RATIO 'DECIDENDI' PREVAILS OVER AN 'ORBITE R DICTA'. THE APPELLANT HAS HOWEVER, NOW BROUGHT TO NOTICE THE DE CISION OF THE APEX COURT WHEREIN THE SLP FILED BY THE DEPA RTMENT IN THE CASE OF VECTOR SHIPPING SERVICE (P) LTD. HAS BE EN DISMISSED. THE APPELLANT HAS SUBMITTED THAT THE SUP REME COURT HAS APPROVED THE DECISION OF THE ALLAHABAD HI GH COURT IN THE AFORESAID C ASE AND HENCE THE DISALLOWANCE U/S, 40(A)(IA) APPLIES ONLY LO AMOUNT PAYABLE AND NOT TO AN AMOUNT ALREADY PAID DURING THE YEAR. IN THIS REGARD IT IS NOTICED THAT HON'BLE SUPREME COURT HAS DISMISSED TH E SLP FILED BY THE DEPARTMENT, HOWEVER, THE ISSUE HAS NOT BEEN DEALT WITH IN THE ORDER AND THE GROUNDS RAISED NOT DELIBERATED UPON EXCEPT FOR THE FACT THAT THE SLP HAS BEEN DISMISSED. IN SUCH A SITUATION AND GIVEN FACTS THE SUPREME COURT IN CIT VS. SHREE MANJUNATHESWAR PACKING PROD UCTS & CAMPHOR WORKS 231 ITR 53 HAS HELD THAT REJECTION OF SLP DOES NOT MEAN THAT THE DECISION OF THE HIGH COURT H AS BEEN APPROVED. IN VIEW OF THE ABOVE FACTS THE CONTENTION RAISED BY THE APPELLANT IS NOT TENABLE UNDER FACTS AND LAW . 3.4.6 IN VIEW OF THE ABOVE FACTS, THE RATIO OF THE JUDICIAL DECISIONS AND THE CLARIFICATION IN THIS REGARD BY T HE CBDT VIDE CIRCULAR (SUPRA), THE DISALLOWANCE OF RS. 48,3 7,653/- MADE BY THE ASSESSING OFFICER IS LIABLE TO BE UPHEL D AND THE GROUND OF APPEAL NO.1 RAISED BY THE APPELLANT IS DI SMISSED. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF LOWER AUTHORITIES. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH REFERENCE T O DISALLOWANCE U/S 40(A)(IA) ON ACCOUNT OF NON-DEDUCTION OF TDS WHILE MAKING INTEREST PAYMENT AND THE PROCESSING CHARGES TO NBFCS. ON PERUSING THE ORDER OF LD. CIT(A), IT IS SEEN THAT LD. CIT(A) HAS UPHELD THE ORDER OF AO BY HOLDING THAT AMENDME NT TO SEC.40(A)(IA) AND SEC.201(1) ARE APPLICABLE PROSPECTIVELY W.E.F A.Y . 2013-14 AND HENCE NOT APPLICABLE TO THE YEAR UNDER CON SIDERATION. 9 ITA NO.183/PUN/2015 A.Y. 2011-12 ON THE ISSUE AS TO WHETHER THE AMENDMENT TO S. 40(A)(IA) AND S.201(1) IS PROSPECTIVE OR RETROSPECTIVE, WE FIND THE HONBLE DELHI HIGH COURT CASE IN CIT VS. ANSAL LAND MARK TOWNSHIP P. LTD., REPORTED IN (2015) 377 ITR 635 (DELHI) HAS HELD THAT THE INS ERTION OF SECOND PROVISO TO SEC.40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 01.04.2005 BEIN G THE DATE FROM WHICH SUB-CLAUSE (IA) OF SEC.40(A) WAS INSERTED BY FINANCE ACT 2004. IT FURTHER HELD THAT FIRST PROVISO TO S EC.201(1) OF THE ACT HAS BEEN INSERTED TO BENEFIT THE ASSESSEE. THE RELEVANT CONCLUSION OF THE HBLE HIGH COURT IS AS UNDER: SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATIO N IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAI NED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESS EE. IT IS NOT A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT I S A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GO ING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE INSERTIO N OF THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM APRIL 1, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO..2) ACT, 2004 . THE FIRST PROVISO TO SECTION 201(1) OF THE ACT HAS BEEN INSERTED TO BENEFIT THE ASSESSEE. IT ALSO STATES THAT WHERE A P ERSON FAILS TO DEDUCT TAX AT SOURCE ON THE SUM PAID TO A RESIDE NT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT, SUCH PERSON SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT HAS FURNISHED HIS RETU RN OF INCOME UNDER SECTION 139. WHAT IS COMMON TO BOTH PR OVISOS TO SECTIONS 40(A)(IA) AND 201(1) OF THE ACT IS THA T AS LONG AS THE PAYEE OR RESIDENT HAS FILED ITS RETURN OF INCOM E DISCLOSING THE PAYMENT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS ALSO PAID TAX ON S UCH INCOME, THE ASSESSEE WOULD NOT BE TREATED AS A PERS ON IN DEFAULT. HELD, DISMISSING THE APPEAL, THAT THE PAYEES HAD FI LED RETURNS AND OFFERED THE SUMS RECEIVED TO TAX. NO DISALLOWANCE COULD MADE UNDER SECTION 40(A)(IA). WE FURTHER FIND THAT BEFORE LD. CIT(A), ASSESSEE HAD SUBMITTE D THAT ONE OF THE PARTY (ICICI HOME FINANCE LTD.) TO WHOM THE A SSESSEE HAD PAID INTEREST HAD VIDE THEIR CONFIRMATION LETTER CONFIRME D THE RECEIPT OF PAYMENTS FROM ASSESSEE AND THE SAME BEING OFFE RED TO 10 ITA NO.183/PUN/2015 A.Y. 2011-12 TAX BY THEM. IT WAS ALSO SUBMITTED THAT OTHER PARTIES TO WHOM THE ASSESSEE HAD PAID THE INTEREST AND PROCESSING CHARGES WOULD HAVE ALSO OFFERED THE PAYMENTS RECEIVED FROM ASSESSEE AS THEIR INCOMES. WE FIND THAT AFORESAID SUBMISSION HAVE NOT BEEN CONTROVER TED BY REVENUE AND AT THE SAME TIME THERE IS NO FINDING OF LD. CIT(A) ON IT. IN THE LIGHT OF THE AFORESAID DECISION AND IN THE PRESENT FACTS SINCE THERE IS NO FINDINGS BY THE LOWER AUTHORITIES OR ANY EVIDEN CE BY THE ASSESSEE THAT THE PAYEES HAVE CONSIDERED THE AMOUNT PAID BY THE ASSESSEE AS THEIR INCOME, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, THE ISSUE OF DISALLOWANCE U/S 40(A)(IA) NEEDS TO BE RE- EXAMINED AT THE END OF THE AO IN THE LIGHT OF THE AFORESAID DECISION OF HBLE DELHI HIGH COURT. WE THEREFORE RESTORE THE ISSUE TO THE FILE OF AO TO VERIFY THE CONTENTION OF ASSESSEE THAT THE RECIP IENTS HAVING OFFERED THE AMOUNTS RECEIVED FROM ASSESSEE AS THEIR INCOM ES IN THE LIGHT OF THE AFORESAID DECISION AND THEREAFTER DECIDE THE IS SUE IN ACCORDANCE WITH THE LAW. NEEDLESS TO STATE THAT AO SH ALL GRANT ADEQUATE OPPORTUNITY OF HEARING THE ASSESSEE. ASSESSEE IS ALSO DIRECTED TO PROMPTLY FURNISH ALL THE REQUIRED DETAILS CALLED FOR BY AO. THUS THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 28 TH DAY OF DECEMBER, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER % / ACCOUNTANT MEMBER PUNE; ! DATED : 28 TH DECEMBER, 2016. YAMINI 11 ITA NO.183/PUN/2015 A.Y. 2011-12 ) * +',- .-' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT - II, PUNE 4. 5. #$% &&'( , * '( , B / DR, ITAT, B PUNE; %+, - / GUARD FILE. // / TRUE COPY / / /TRUE )! / BY ORDER , ///// // // ///// //////////// /////// // // TRUE COPY // ./0 &1 '2 / SR. PRIVATE SECRETARY * '( , / ITAT, PUNE 12 ITA NO.183/PUN/2015 A.Y. 2011-12 5. AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US. BEFORE US LD. DR SUPPORTED THE ORDER OF LD. CIT(A).